Asian exporters are already feeling the effects of a US economic downturn -- effects that may be magnified by a weak dollar, volatile world markets and fears that more bad loans may be ticking in the coffers of US companies.
Rather than waiting for things to get worse, companies from Chinese garment businesses to Japanese equipment manufacturers are changing how they operate.
The weakening US demand is clear. US orders for small tractors fell 5 percent last year at the Kubota Corp in Osaka, Japan, and are expected to fall further this year. Orders from the US have been weak for a year at Top Form, the Hong Kong company that is the world's largest bra manufacturer. And at Aigret Industries, a manufacturer of multiline phone systems and fax machines in Xiamen, China, orders from the US plunged 30 percent in the fourth quarter compared with a year ago.
In some Asian industries, the result has been deep gloom. At the Evergreen Knitting Co in Ningbo, China, orders from the US for T-shirts and sweaters abruptly dropped 20 percent this winter. The company expects some rival Chinese knitwear producers to shut down altogether.
"We anticipate that this year, 10 to 20 percent of the knitwear factories will have to close due to the inability to compete," said Sean Zhu, Evergreen's sales manager.
In response to the downturn, some companies are pursuing remedies that will affect economic output, like Aigret Industries, which has lengthened next month's Chinese New Year vacation for its workers to 20 days, instead of the usual 10.
Others are investing in more technological research and developing new models, like the Xigo Electric Co in Zhongshan, China, which manufactures air conditioners and liquid-crystal-display television sets.
"We really felt the impact of the slowdown in the US during the second half of 2007," said Stan He, a Xigo sales manager. "Orders were generally down by 10 to 20 percent relative to the same period a year ago."
Asian exporters lie at the center of the debate in financial markets over the extent to which Asia has decoupled from the US and can grow strongly even if the US economy slows significantly. The evidence so far is that the effects of a US slowdown will vary widely, depending on each country's reliance on exports and the extent to which each country's economy is currently overheating or stumbling.
China, which has struggled in recent months with rising inflation, has actually benefited from slower exports -- although a steeper decline could prove a problem. The Chinese government announced on Thursday that growth eased to 11.2 percent in the fourth quarter, from 11.5 percent in the third quarter and 11.9 percent in the second quarter.
The modest slowing, almost entirely because of less brisk growth in exports, helped reduce inflation to 6.5 percent last month from 6.9 percent in November, the government said.
But with fixed-asset investment still soaring in China, Xie Fuzhan, the director of the National Bureau of Statistics, warned at a press conference in Beijing that China was still worried that overall growth was too fast to be sustained without inflationary pressures.
For countries that were already struggling with weak growth and faced little if any inflation, like Japan, weak exports are proving a serious setback.
"Now we see `re-coupling,'" said Tetsufumi Yamakawa, chief economist in Tokyo for Goldman Sachs. "The economy of Japan is proving disappointingly fragile to external shocks."
China overtook Canada last year as the largest exporter to the US. But year-over-year growth in Chinese exports to the US slowed sharply last fall, posting a gain of just 7 percent in November from a year earlier. That was only slightly greater than the appreciation of the Chinese currency against the dollar over the same period, suggesting that the actual volume of Chinese goods headed to the US stagnated.
For Japan, Malaysia, Thailand, Australia, Bangladesh, Sri Lanka, Cambodia and Indonesia, exports to the US actually dropped in dollar terms in November.
Last Wednesday, Citigroup cut its average estimate for economic growth this year among Asian economies by four-tenths of a percent, while reducing its estimate for growth in the US by seven-tenths of a percent, to 1.6 percent.
The question across Asia is how much worse can it get.
Willie Fung, the chairman of Top Form, said that US stores were not oversupplied with bras after the Christmas season.
"Apparently it is not going from bad to worse. I hardly notice any changes over the past couple months as far as demand is concerned," he said.
A few exporters are even upbeat.
"I have not seen orders go down from the US or from Europe," said Alice Lam, a sales manager at the Shunde Growth Corp, which assembles bookcases and other furniture in Shunde, in southeastern China, from imported Taiwanese steel.
But many exporters are worried. Kubota is trying to increase sales of larger tractors and expand market share in Thailand, China and Europe to offset small tractor weakness in the US.
Fuji Heavy Industry, which makes Subaru cars, is also fretting.
"Our concern about the future of the US economy is becoming very strong, though our sales aren't declining now," said Shinichi Murata, a Fuji spokesman.
He said Subaru may offer incentives, like price cuts or better terms on car financing deals.
China's garment industry is particularly wary.
"Because of the subprime crisis in the US, the US economy is not as big as in years before -- a lot of Chinese textile companies are getting fewer and fewer orders from the US," said Cao Xinyu, the deputy director of the China Chamber of Commerce for the Import and Export of Textiles.
But executives at six different manufacturers said in separate telephone interviews this week that their biggest worries lay not in the US but at home.
The Chinese government is imposing stricter labor laws and tighter environmental regulations while cracking down on corporate tax evasion and making it harder for companies to claim large rebates of the value-added taxes that they pay.
Chinese officials have imposed export quotas on the number of garments shipped, forcing companies to make fewer but costlier products that compete with clothing from higher wage countries.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry