hello and welcome to the last edition of "asia biz forecast" for 2010. i'm shery ahn. in this special year-end program we'll look at asia's top economic stories during the past year and what's in store for the region in 2011.

helping us out is asian development bank president haruhiko kuroda who recently joined us for an exclusive interview. let's look at our top stories this week. japanese carmakers are looking for a new survival strategies amid the country's flagging economy and shrinking auto market. one strategy is to join hands with the competition. rival firms nissan moat and mitsubishi motors for example recently announced a wide range of partnership that includes developing mini vehicles, a promising new market automakers are eager to tap into. >> we think the key car market in japan is continue to grow. in order to provide and support the strong offering key car, we think we need to join forces with a partner, who is very competent in this segment of the market. >> translator: the two partners will bring together their strengths for higher synergy effects.

we aim to introduce attractive, competitively priced vehicles. >> the carmakers plan to jointly develop mini vehicles for the domestic market and roll out a new model within two years. domestic sales have been falling, but demand for mini cars is expected to stay firm thanks to improvements in fuel efficiency and affordable prices. two other firms, daihassu and suzuki have strong foot holds in this market. street giant toyota announced plans to enter the mini vehicle field. nissan and mitsubishi hope that through the tie-up, they'll be able to secure a share of this increasingly competitive market. they're also looking at high growth economies overseas. global automakers are rushing to open new factories to supply emerging markets. but demand for mini cars is

rising at a faster pace than production. nissan's factory in thailand is manufacturing its march compact at full capacity to a point where production of other models is suffering. nissan is looking to borrow mitsubishi's production facilities there to produce these models. mitsubishi is also looking forward to the deal which will make full use of its manufacturing capacity. >> we're pleased to announce a cooperation agreement that will increase the competitiveness of nissan and mitsubishi in asia. >> translator: only those who can adapt fast can survive. now let's check our weekly update. standing by are jaymee ng in hong kong and nemo kim in seoul. first, jaymee, now that the year is almost over, can you give us

a sense of what we can expect for china's economy in 2011? >> hi, shery. china is targeting economic growth of around 8% in 2011, the same level as this year. the goal was reported by state media on wednesday, citing the top economic planning agency, the national development and reform commission. amid concern about inflation, the government raised its target for consumer price increases next year to about 4%, 4 percentage points higher than this year. china's consumer price index january through november rose 3.2% from the same period last year, exceeding the government's target. a bank based in china's the city of chongqing has been listed in hong kong to raise foreign capital. they became the first chinese regional bank to be listed in hong kong. the bank's chairman attended a

ceremony to mark the initial public offering which raised about $1.5 billion. japan's largest brokerage, nomura holdings, was the lead and the writer. other regional chinese banks are expected to follow suit by being listed in hong kong. that's our report for this week. now let's go to nemo kim in seoul. >> thank you, jaymee. in this economic outlook for 2011 announced tuesday that south korean government said it expects the nation's economy to grow about 5% in 2011. mainly due to increased exports. the government forecasted exports will grow 10% in 2011, amid the global economy's steady recovery. it says auto exports expected to increase. lastly due to free trade

agreement with the european union that takes effect in july. the government also projects a rise in semiconductor exports amid strong global sales of mobile phones. and what were this year's hit products? on wednesday, the economic research institute announced its list of products that captured the hearts and wallets of south koreans this year. smartphon smartphones were south korea's number one hit product in 2011. up from number five last year. number two was tv program "superstar k2," a local version of "american idol." rounding out the top five were the south korean women's national soccer team, social networking services, and tablet pcs. the list also included kia motor's k-series vehicles, the movie "avatar," blueberries, yes, the fruit and heat-generating clothing. a local soap opera about a bakery also made the list.

smartphone sales are forecast to reach 7 million units for 2011, when a mobile big bang saw south korea become one of the world's fastest growing smartphone markets. and that's our report from seoul. happy holidays. >> thank you, nemo. now time for weekly japan. for the first time in 21 months, business confidence among major manufacturers here in japan has worsened. this is according to the bank of japan's quarterly survey of 11,000 firms released on wednesday. the index for large manufacturers stood at plus five, down 3 points from the previous quarter. indexes for auto and electronics dropped by more than ten points as government subsidies come to an end. looking ahead, large manufacturers expect the index to drop seven points to minus two next quarter, due mainly to the strong yen. japan could become a more attractive destination for foreign nationals seeking

medical care. the government will issue six-month visas for overseas patients doubled the current length of stay. the new medical visa will be introduced in january. current immigration rule allow patients to stay only for three months, leading to complaints that this is not long enough for advanced treatments. the government hopes the new visa will help increase the number of people coming to japan for medical purposes. affluent patients from china and russia are among those expected to benefit. and now other top news from across asia. >> indian prime minister manhoman singh and wen jiabao have agreed to increase bilateral trade to nearly $100 billion a year by 2015. the announcement came thursday in new delhi, during wen's three-day visit there. the leaders also agreed that chinese firms would help develop indian infrastructure with a total value of around $1 trillion.

sri lanka is having a banner year in tourism. officials from its tourism industry reported last tuesday that the island nation reached its target of 600,000 visitors for 2011. more than 72,000 tourists came in november alone, up 63% from the same period last year. and the highest monthly figure since 1966. qatar has become the top producer of liquefied natural gas or lng with output of 77 million tons per year. officials marked the milestone early last week by hosting 1200 power industry officials from 23 countries. the middle eastern country began producing lng 14 years ago and today produces 28% of world supplies. the lng industry has significantly contributed to qatar's economic growth, which

averaged around 14% a year over the past decade. and as we promised we'll now take you back through 2011 and take a look at asia's economic prospects for the new year. asian economies grew rapidly in 2010. china, singapore and thailand, for example, saw one or more quarters in which gdp rose by more than 10%. the robust growth was boosted by exports, with shipments up by at least 30% from last year. >> three, two, one, go! >> one of the key reasons for brisk exports was free trade. tariffs between china and the

association of southeast asian nations were repealed in january, creating a huge free trade zone with a population of 1.9 billion. also, powering growth was the domestic demand. in india, work is under way to improve infrastructure, including the construction of highways and expansion of ports. indonesia is bustling with new projects such as shopping centers and telecom infrastructure. automakers are among the businesses wrapping up production capacity there. this month, the asian development bank raised its 2011 growth estimate for the region from 8.4 to 8.8%. but rapid growth has also given rise to inflationary pressures. capital inflows have pushed up asset prices, some economies are

moving to control such inflows and tighten regulation on property transactions. with steel fragile infrastructure, some are saddled with problems like electricity shortages. asian development bank haruhiko kuroda recently shared his views on the region's economy with us. joining me in the studio is haruhiko kuroda, president of the asian development bank, a well known asian economist, he served as professor of economics in japan and a special adviser to the cabinet of former prime minister junichiro koizumi. mr. kuroda, good to see you again. thank you for joining us. well, the last time we spoke, you were actually giving me a forecast for the asian economy this year.

>> yeah. >> as i recall your rather optimistic. >> yeah. >> have your expectations been met? >> yeah, i think the asian economy has performed quite well. our focus is something like 8.2% growth this year and 7.3% growth next year. and the asian economy is basically following this trend. so i'm very happy that the asian economy, particularly those emerging economies, are performing quite well. and some of them appear to be somewhat overheated. so already many emerging economies have started to tighten monetary policy and exit

from the huge fiscal stimulus measure measures they introduced after the global financial crisis. >> from early this year, the bank has been saying that for asia, i think the two biggest risks would be asset price bubbles as well as volatile capital inflows. >> yes. >> how serious are these two factors right now? >> some asian countries, real estate prices went up so much, creating some element of a set bubble. and when the real estate bubble burst, it would inevitably result in banking sector problem as you can see in the u.s. and europe. so i'm a little bit concerned

about the real estate bubble in some countries. on the other hand, capital inflow, that is a problem. china, india, yes, they are subject to large capital inflows, but they have extensive comprehensive capital controls so that their banking sector, the economy has not been so much affected. on the other hand, more so southeast asian economies, including indonesia, the philippines, thailand, they have no capital controls. and they are affected by large inflows. >> currencies -- >> currencies have appreciated substantially. nearly 12% vis-a-vis the dollar in this year alone, on top of

the appreciation made the last year. so some currencies have appreciated substantially while some others are not. so this is a kind of imbalance between emerging currencies in asia. >> do you think this trend will continue into 2011? >> i think the trend would basically continue. however, one thing, that is the u.s. economy recovery which is very strong and better than many economies expected, this means that capital from the u.s. would be contained and subdued. that means that although capital inflow to emerging asia may continue, but may not soar so

much in coming months. >> the chinese economy grew at a great speed this year. they're likely to become the second largest economy with gdp growing at close to 10% a year. the financial crisis following the 2008 collapse of lehman brothers slowed china's growth to 8.7%. but government stimulus spending totalling more than 580 billion u.s. dollars put the economy back on track. helped by the government's stimulus, auto sales grew to 18 million units a year. china is now the world's biggest auto market. the government's 12th five-year plan sets a goal of raising annual output of automobiles to 25 million units within five years. spending on infrastructure like

highways and railroads revitalized not only coastal cities, but inland provinces, spurring growth across the country. china is now leading the global economic recovery. once called the factory of the world, china has emerged as a market of the world. earlier this month, the asian development bank raised its estimate for china's economic growth this year from 9.6 to 10.1%. china's surplus and foreign reserves of $2 trillion are prompting ever louder calls for beijing to let the yuan appreciate more. its rapid growth is causing problems at home and abroad. rising consumer and property prices, income disparity and rising greenhouse gas emissions. economic success it seems comes at a price.

as the economy grows, china faces so many challenges. we are seeing social unrest, very big gap in the income. what is your take on all of those challenges china faces and what can be done to overcome them? >> i think this kind of challenge is faced by not only china, but also by many emerging economies in asia. i mean, economies have been growing very rapidly, but at the same time income gap between the rich and the poor has been widening. this creates a problem. so this widening gap must be narrowed down. if you provide the appropriate education, health care services,

infrastructure and so on to all people, then people, including poor people, can have great opportunity. and such sort of inclusive growth would make the -- the gap not widening so much. >> and one of the key issues in the global economy this year has been no doubt the value of the yuan. do you think the chinese currency is significantly undervalued as some countries claim? >> i think as many people, including the people at the imf argue, the chinese currency is probably undervalued. and it needs to appreciate in

coming months and years. but i think more important point is not how much at this moment the chinese currencies are undervalued. that is not so important. mostly important is how to smoothly adjust the currency in coming years, because chinese economy will continue to grow very rapidly. if not 10%, 8% or 9%. which means that the chinese economy's annual productivity gain is very substantial, far larger than productivity gains in the other economies, u.s., europe and japan. that means that whether or not the currencies at this moment are undervalued, the currency anyway has to adjust year after

year, vis-a-vis reduced currencies. >> china argues that letting the yuan strengthen as much as its trade partners want would greatly hurt its economy. do you agree? >> from 2005 to 2008, actually the chinese yuan appreciated i think about 20% against the dollar. without creating any problems in the chinese economy. so although large fluctuations would damage the economy, but steady and gradual appreciation vis-a-vis the currencies would not hurt economic growth or economic development in china.

>> mr. kuroda, let's focus on the asian development bank. what were the key projects of the adb this year and how did the efforts reflect the needs of developing nations in the region? >> last year was the year of crisis response. so we provided quite a lot of emerging numbers, fast zperti dispersing loans to assist the government to make targeted support for the poor, or assisted the government to introduce fiscal stimulus measures, to counter the impact coming from the global recession and so on and so forth. but this year, that element is

much smaller. and more emphasis is put on medium and long-term development of economies. so quite a lot of infrastructure projects. we have been supporting. >> the asian development bank seems to be strategically positioned so it can promote greater regional integration through projects such as greater mekong subregion. tell us more about that. >> particularly important is regional infrastructure because if you look at ten asean countries, each country is very small except -- unless the economies are integrated, they can't provide big market. they cannot provide big production bases. so from the outset, asean tried

to integrate with this. particularly the five asean countries in the greater mekong region. thailand, vietnam, cambodia, so on and so forth. they forecast improvement of regional collectivity by investing in transport energy and water infrastructure. and this has already resulted in accelerated growth, substantial poverty reduction, and if you look at greater mekong subregion, the region is one of the fastest growing subregions in entire asia. >> and speaking of regional integration, there has been a lot of talk about a free trade zone within asia.

>> yeah, yeah. >> how beneficial would that be? >> i think it would be definitely beneficial for all members of the free trade. as you know, there are hundreds of free trade agreements already in asia. but many of them, bilateral, small. that is, of course, good for the members, but may not be so good for nonmembers. but if you expand to include many more countries, and also many more sectors, the benefit for members would be much greater. and also members would not suffer. nonmembers, even nonmembers could benefit from what economists call trade creation effect. so i think big -- east asia or a

apec is definitely good for asia and good for the world. >> mr. kuroda, thank you so much for joining us today. it was good to see you again. >> thank you. and that wraps up the final edition of "asia biz forecast" for 2010. i'm shery ahn. thanks for being with us throughout the year. please tune in on january 10th for our first edition of 2011. until then, all of us at "asia biz forecast" wish you happy holidays and a safe and prosperous new year. and now we leave you with a typical japanese year-end scene. crowds gathered at the temple this week to buy ornament at battledores which are believed to bring good luck for the coming year.