China is proving to be the powerhouse behind the Far East revival

Asia: Asia is booming. Whichever way you cut the numbers - and, as ever, the economists have plenty of different ways of doing this - it is clear that the many and extremely varied economies of the region are once again growing.

In some cases the expansion is accelerating extremely rapidly. Forecasts for 2004 are being revised up and some are beginning to wonder whether Asia is simply sharing in a global boom or is, in fact, leading one. Cause and effect in an extremely interdependent world economy are hard to identify. But while it is obvious that rapid growth in the US has been an important catalyst for global growth, what is happening in Asia is increasingly intra-region and, hence, has a much more autonomous - and perhaps self-sustaining - feel to it.

A decade ago, any analysis of the Asian economy would have started with Japan. Nowadays, all eyes are on China, the source of much of the region's dynamism. Indeed, Japan might be dragging itself out of its near 15-year slump thanks in no small part to its links with China. If the success of the Chinese economy is now a well-rehearsed story, less well known is how - or when - it started.

Reforms that were initiated some 25 years ago sowed the seeds for today's booming economy, reforms that have been carefully widened and deepened over the ensuing years in ways that some people believe could never have happened in a democracy.

More generally, the debate over democracy and its relationship with economic development is as intense as ever. The Asian crisis of the late 1990s scuppered the arguments of those who argued the region's style of crony capitalism was key to its success.

However, the political response that followed September 11th and terrorist attacks in Bali and elsewhere, far from strengthening the hand of the democratic reformers, has often ushered in more repressive laws. Many people believe that Western-style liberal, capitalist democracy brings only chaos to ethnically divided countries - or ones that have other deep divisions.

It is doubtful that any Western democracy could contemplate announcing a campaign to "migrate 100 million farmers from the west of the country to supply cheap labour for the prosperous east", as did the Chinese authorities in the past few days.

That China is now the region's economic powerhouse - in terms of growth at least - cannot be in doubt. Statistics on the Chinese economy are notoriously unreliable. Growth is always close to 8 per cent, which is usually the government's target and is what most people expect for 2004.

There are stories that suggest the current published numbers are being deliberately pushed downwards by a government keen to head off any talk of overheating and to avoid giving any ammunition to those who would push the yuan upwards. If they are being massaged downwards, it would be interesting to see the real numbers. Officially, factory output is currently growing at an 18 per cent rate compared with 2002 (itself a boom year); domestic car and mobile phone production are up 72 per cent and 25 per cent respectively; exports are growing at a 34 per cent rate; imports close to 30 per cent.

It is clear that the Chinese are determined to keep the peg with dollar for as long as possible. Equally clear is the simple fact that there will have to be a revaluation of the Chinese currency, sooner or later. Everyone in Asia knows that many Chinese financial institutions are now quietly preparing for this via their hedging activities in the currency and bond markets. China's trade surplus with the US is simply exploding - growing from just under $60 billion in 1998 to around $120 billion in 2003. The timing of the revaluation is entirely in the hands of the authorities - perhaps the first step will come in 2004 with a widening of the permissible trading bands.

Not nearly as visible as the currency issue is an important legal change that will see property rights enshrined in the Chinese constitution. This seemingly arcane measure may well be the single most important reform introduced so far. One of the key reasons why many countries remain poor is a simple lack of legal backing to any claim over real estate and other assets.

The currency question is important for the whole region - and also for Europe. Because of China's inconvertible and fixed dollar link, pressure from a weakening dollar has mostly been felt by the euro and the yen. Many of Asia's currencies have some form of peg with the dollar, if only an informal one in the eyes of market participants. Those currencies that have sunk with the dollar have seen a huge boost to competitiveness. It is hardly surprising that exports from Asia to the rest of the world are booming.

Malaysia is typical of much of South East Asia. Industrial output is growing at an 11 per cent clip, inflation is under 2 per cent, consumer and business sentiment indicators are up and the balance of payments is in healthy surplus.

The next big story looks like being India. In some ways the Indians have looked at the Chinese economic miracle and copied it, particularly when it comes to the establishment of Special Economic Zones (SEZs). India's big difference, of course, is that it is a democracy so its success, or otherwise, will help determine the outcome of that democracy and economic growth debate.

So far the omens are very good. Growth is up and many Western companies are outsourcing high and low-end activities. But a SEZ often means looser labour laws, something less easy to carry off in a democracy; the opposition can promise alternatives and get themselves elected. And 2004 is election year in India. But India is not just about copying China. An experiment in a fascinating form of socialised medicine is uniquely Indian, is spreading to other countries and merits close examination - and success.

Technology is ubiquitous in Asia. Globally, Singapore is ranked second only to the US in a recently published survey of global technological advancement. South Korea leads the world in the implementation of broadband technology, Taiwan has more mobile phone use per capita than anyone else and the Japanese are the most innovative designers of those phones.

The region's most "Western" economy, Australia, has a central bank fretting about consumer debt in a way that British, American and Irish homeowners will find familiar. Equally familiar is a booming property market. There must be something about long periods of economic expansion and rising house prices. The New Year will see the 13th year of uninterrupted Australian economic growth. There will also be imports of 140,000 people, helping to alleviate Australia's problems with an ageing population - Europe and Japan take note.

Hong Kong's economy surprises many visitors, not least because it is not sharing in its neighbour's explosive growth. Mr Andy Xie, the chief Asian economist at Morgan Stanley, believes that all this Asian growth is ephemeral and just another US-inspired bubble. Perhaps that's because he sits in Hong Kong with its unique problem of a too-successful parent. For what it's worth, I think talk of another bubble is a much exaggerated risk.

One thing is for sure: there is a lot more growth here than I expected to find. What is refreshing, coming from Europe, is to find people who realise that policies to promote growth are actually quite a good idea.