Asian Exporters Feel U.S. Pain
Wednesday, February 6, 2008
SHANGHAI -- Sun Xiaoqing, owner of the Fenghua Hengsheng Knitting Factory, isn't quite sure what deadbeat mortgage holders in the United States have to do with his exporting business, but he knows it's bad.
Orders for his company's cotton shirts plunged at the end of last year, and U.S. customers balked when he tried to raise prices. He finished 2007 in the red by $70,000.
"We gradually had to shut down machinery," Sun said. "In total, we've had to lay off 50 to 60 employees out of a total of a bit over 100."
The effects of a shaky U.S. economy are beginning to spread to the rest of the world, and Asian economies that were booming a year ago are feeling the downturn.
The Hong Kong monetary authority said this month that economic growth, dragged down by lower profits at banks exposed to the subprime mortgage problem, is likely to slow this year. The trade-dependent Singapore economy shrank for the first time since 2003 in the most recent quarter. The stock prices of several South Korean companies -- including Daewoo Shipbuilding and Hyundai Engineering -- have plummeted recently on fears that they may be unable to meet revenue targets because the purchase orders expected from the United States have not materialized.
Much of the concern is focused on exports to the United States. While America is less dominant than it was five to 10 years ago, the world economy still relies heavily on the buying power of U.S. consumers. Without that driving force, there's a danger that growth everywhere will slow.
The latest U.S. foreign trade data, from November, shows growth in imports from nearly every part of the world except for Southeast Asia; year-over-year shipments from Thailand, Malaysia and Indonesia declined in dollar terms.
Statistics from exporting countries in other parts of Asia show a sharp slowdown that may be too recent to register in data collected by the United States. In Japan, exports to the United States fell in each of the last four months of 2007. In India, seafood exports dropped almost 20 percent from April to October because of lower sales to the United States. And in China, there was a decline in the most recent quarter for exports of textiles and base metals.
"The slowdown of the U.S. economy has greatly affected China's exports. . . . It's not only resource-based industries like steel, but manufacturing is also affected," said Shen Minggao, chief economist for Citigroup China.
The International Monetary Fund estimates that for every percentage-point decline in U.S. economic growth, there can be a half to a full percentage-point decline in Asian growth.
Japan may already have fallen into a recession, according to the investment firm Goldman Sachs. While the country's problems are mostly domestic, falling consumer demand from the United States is also affecting the export-led economy.
Japan's Finance Ministry said a December decline in exports to the United States mainly affected motorcycles (down 40 percent), construction and mining machinery (down 31 percent ) and auto parts (down 10 percent). At Kubota, a tractor-maker in Osaka, for example, U.S. orders for lawnmowers fell 5 percent last year from 2006. Japanese officials say that that any decline is offset by demand in Europe and emerging economies, including China.