MORNING BID: ASIA -A daily note from our Economics Editor

Reuters

HONG KONG, Oct 28 (Reuters) - Who has aught to fear in aworld of risk while the Fed keeps its dreaded taper at bay?

Few, it would seem. Asia's markets will be hanging this weekon whatever comes out of the FOMC meeting. If Mr. Bernankemurmurs even a word on U.S. economic growth that might warrant apullback in the Fed's asset purchase programme, the water willstart to drain all too quickly again from emerging Asia and headback to Wall Street, or north to Japan, Korea and Taiwan in avain search for an export boom that has yet to materialise.

The chances of Bernanke reviving the taper talk are slim,however. Sixteen days of Uncle Sam sitting on his hands can havea surprisingly numbing effect on economic growth, economistswarn. So the Fed should stay dour, which means money will searchfor relative performance in Asia.

Our gaze passes then to China, the second-largest economyand Asia's great hope for new demand. There, we find aleadership revving up iPhone-worthy pre-launch buzz over theirupcoming Party Plenum next month.

Will the Communist Party risk growth and stability tooverhaul a broken, bloated model that is literally spewingpoison? Or will it take the path of least resistance: cosmeticchange that leaves vested interests intact, plasters to agunshot wound?

Markets seem to be forcing Beijing's hand towards theformer. Since the great fiscal suicide attempt on Capitol Hill,money has been flooding into China -- ostensibly from companiesrepatriating dollars stashed offshore. They seem to have figuredout China's brand of financial repression doesn't work ifBeijing can't count on the issuer of its biggest reservecurrency.

In the past, China's central bank would just buy up allthose dollars at a fixed exchange rate and invest them in U.S.Treasuries. That doesn't seem like such a smart option anymore.Nor does selling all those yuan and letting them further inflateChina's credit bubble. So the People's Bank of China has beenletting a record-high yuan climb at its fastest pace since May.That alone could hasten China's efforts to rebalance away fromexports in favour of consumption. Power to the people.

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