Fri, Dec 26, 2008 - Page 9 News List

Asia can’t compensate for lost US spending

It’s not that Indian and Chinese shoppers aren’t eager, but how many Buicks, Barbie dolls and kiwi lip balms can they buy?

By Elaine Kurtenbach and Monika Mathur  /  AP , MUMBAI, INDIA

The two markets contribute about 5 percent of the company’s revenues, while the US accounts for half.

“It’s starting to have a meaningful impact on Dell’s results, but it’s not enough to offset what’s going on in the United States,” said Steve Felice, president of Dell Asia Pacific and Japan.

GM’s North American revenues fell US$4.1 billion in the third quarter to US$22.5 billion; the drop alone was almost as much as its total Asian sales of US$4.8 billion. Add in the US$1.3 billion slide in European sales, which totaled US$7.5 billion, and it is clear that Asia can’t save the company, teetering as it awaits federal assistance.

“We need to turn around our North American business. There is no choice,” GM president Fritz Henderson said in September, at the opening of a new factory in Pune, a growing Indian manufacturing hub outside Mumbai.

For Vodafone Group Plc, the world’s biggest mobile phone service provider by sales, India and China are “absolutely vital,” company spokesman Simon Gordon said. “That’s where the growth is.”

But more than 70 percent of Vodafone’s sales still come from Europe. In the first half of this fiscal year, India accounted for just 6 percent of the group’s US$29.3 billion in revenues and less than 1 percent of adjusted operating profits. Vodafone does not operate in China, though it owns a 3.21 percent stake in China Mobile.

During that period, the company posted a 35 percent fall in net profit, despite adding 10.5 million new customers in India and growing India revenues by 41 percent.

Now, the economies of India and China are themselves slowing.

Their stock markets have plunged, businesses and households are finding it harder to access credit and fears of job losses have shaken consumer confidence.

Lower export growth in China is spilling over into consumer spending, as workers fret about pay and job security.

Zhu, who works at an export company in Shanghai, has been trolling the Internet for shopping deals, because she is not getting a bonus this year.

“Companies that can’t manage to sell their export items are selling online at very low prices,” she said. “It doesn’t mean I don’t like shopping in stores, but I can’t afford that right now.”

Despite government efforts to spur domestic spending, many Chinese remain frugal, concerned about saving for health care and retirement.

“Consumer demand is not going to be the answer to disappearing exports,” said Robert Lawrence Kuhn, chairman of Kuhn Global Capital and a longtime adviser to the Chinese government.

“China’s domestic consumption is necessary but not sufficient to stabilize China, much less the world,” he said.

India relies less on exports. They account for about 20 percent of the Indian economy, versus 35 percent in China.

Still, the global financial crisis has hit the Indian stock market and sparked a nasty credit crunch. Many consumers are unable to get loan approvals or afford the high interest rates. That, plus lingering inflation, has hurt consumer confidence and crimped growth.

This story has been viewed 2128 times.
TOP top