Although the wealth of East Asia has grown substantially over the last ten years, people still need to be careful about new challenges, according to the World Bank's East Asia & Pacific report, published on April 5th.

The report finds that since 1997, when many Asian countries experienced a financial crisis, wealth in the East Asian region has increased after ten years of fast growth. With the sharp reduction of poverty in the region, East Asia has played an increasingly important role in the world. Aided by the strong engine of China, new economic entities in East Asia recorded a growth rate of 8.1% in 2006. GDP surpassed US$5 trillion, double the figure prior to the 1997 crash. People's real income has increased by 75%. In the 1970s and 1980s, East Asia was famous for its four little dragons - South Korea, Singapore, China's Taiwan and Hong Kong, and for its four little tigers - Malaysia, Thailand, Indonesia and the Philippines. The development in East Asia has been called a "post-industrialization economic miracle". Since the 1990s, economic development has accelerated. Statistics show that between 1990 and 2004, the average economic growth rate in East Asian countries was approximately 5 percent.

In 2005, the growth rate of new economic entities was 7.6% while in 2006 it reached 8.1%, the fastest year in recent history. This means that 25 million people have been lifted out of poverty, or that the number of people living on less that $2 per days has fallen to 550 million. It has enabled Vietnam to be reclassified as a 'mid-range income country'; it's GDP per capita is US$900. Today, 90% of East Asian people live in 'mid-range income countries'.

The report finds that high growth has enabled an accumulation of wealth, but has also created challenges, or what economists call the "middle income

trap".

History has shown that it is relatively easier to realize the change from low income to middle income than it is to make the transition from middle-income to high-income. Although Japan and South Korea have successfully done this, World Bank senior economist Milan Brahmbhatt believes that new economic entities in East Asia need to formulate new development strategies and implement more reforms if they want to avoid the "middle-income trap" and realize further high. No matter what name one gives it, the core issue is how to realize sustainable high growth. It is well-known that the East Asian economy is driven by exports. East Asia's dependency on exports is double that of any other region. Of particular concern is that a lot of countries' exports are in just a few special industries.

As for the prospects of the US economy this year, Federal Reserve Chairman Ben Bernanke believes that the change in 'attitude' - from confident to insecure - reflects uncertainties about US economic prospects. The Asian economy might feel the effects of this uncertainty too.

An old saying goes that it is better to be self-reliant than dependant on others. Although inter-dependency in the global economy continues to expand, East Asian countries should think about changing the growth pattern, improving productivity and relying more on domestic demand rather than on exports to drive economic development.