Press : “Asian trade in free fall as exports to West dry up”

Days pass… and the situation is worsening in Asia. The fantasy of “decoupling” seems long gone.

The Telegraph publishes a good article, from Ambrose Evans-Pritchard.

A few quotes.

Flemming Nielsen, from Danske Bank, said exports from Korea and Taiwan both shrank by over 20pc last month. “The numbers are terrible. Intra-Asian trade is in free-fall. Taiwan’s exports to mainland China in November were down a whopping 42pc.”

Fan Gang, a top adviser in Beijing, said China’s exports would also show a decline when data is released this week. “Things are not good: industrial growth will be around 5pc and export growth will be negative,” he said. Economic expansion of 5pc would be a major shock and entail recession in the Chinese context.

Japan’s economy shrank 0.5pc in the third quarter and risks sliding back into deflation and perma-slump. Exports fell 7.7pc in October on crumbling demand for cars and machinery.

Earlier rescue plans have already pushed Japan’s national debt to 170pc of GDP, the world’s highest. Private savings have collapsed from 14pc of GDP in the early 1990s to 2pc today. Japan goes into this downturn without a cushion.

When the biggest customers (Europe, USA, Japan, China) are going down… to imagine that Thailand could be “insulated” is nothing but a sweet dream (read here and there).

A contraction… of GDP can’t be discarded anymore…

“It is likely that the economy will mark negative growth this quarter compared with the previous one, due to a host of negative factors”.  Bangkok Bank executive chairman Kosit Panpiemras. (Nation)

6 Responses to “Press : “Asian trade in free fall as exports to West dry up””

  1. 1 James 13 December 2008 at 12:30 am

    I’ve been saying that all along. It was a big fantasy, the idea that the world could do find without the United States. Duh, the world did fine because of the drunken consumers in the United States buying everyone’s products. It’s just beginning to hit Asia, heads up. I bet Bangkok’s skyline will be littered with another 70 unfinished skyscrapers by 2010.

  2. 2 chinesethai 13 December 2008 at 4:33 am

    From my observation, businesses have been pondering about negative GDP growth for quite some time. The 1997 financial and current political crises to some extent have a positive effect on businesses and middleclass individuals, who have become more risk averse by taking less risk, deleveraging and hoarding more cash. The fact that factories in Asia are closing or laying off workers does not mean that they made huge losses or went belly up like their western counterparts but that they have foreseen the big storm and gone into shelters. They are ready to come back once the storm is over. However, people who are paying the price now are the laid off workers, many of whom are loaded with high personal debts.

  3. 3 thaioutsidein 13 December 2008 at 7:54 pm

    i think right now people are a bit overly pessimistic. just like back in 2006 when people were overly optimistic.

    recession is here. it WILL be deep, long and painful. but capitalism will still thrive 5 years down the road. u.s. economy will rebound. americans will start shopping again. stock market will correct itself to a reasonable level.

    thai economy won’t “boom” in the next 5-10 yrs because it lacks clear competitive advantage except for agriculture and automotive industries. but this crisis is far less severe than in 1997. a few drivers:

    – thai banks have been extremely responsible in lending / capital allocation practices (thanks to 1997 lessons), especially when comparing with western investment banks.
    – we have $100B of reserves….among top 15 countries in the world both in absolute term and per capita.
    -public / private debts are both managable.
    – low inflation means the new government / central banks have a more policy options to choose.

    even if new government cannot implement economic policies effectively, i think thai economy will still be in “decent” (/ mediocre) in the next 5 years. my guess is 2-5% growth on average.

    all credits to the hard working private sectors.

  4. 4 chinesethai 14 December 2008 at 5:32 am

    One of my Chinese friends in Shanghai suburb has closed his factory, which mainly exports to Germany, for just a week. He paid this is not because he made a big loss and went bankrupt. But it is to limit the loss. Also new regulations and incentives are forcing the manufacturing businesses to consider moving further inland. Factory workers were paid 3-month wages and returned to their farms, which are another form of social security. So the Chinese government is considering this a stimulus by upgrading their infrastructure and notorious healthcare system in poorer provinces. They have got huge FX reserve to mitigate the impact.

    So I agree with “thaioutsidein” that most reports in the media, particularly The Economist, about the fallout (e.g. political instability from big-time layoff) in Asia are pretty much overblown. Sometimes stats and numbers need to be considered in conjunction with people’s way of life and social structure to give us better picture of each country.

  5. 5 ThaiCrisis 14 December 2008 at 7:08 am

    CT : and what your friend will do… if he can’t find new markets, anywhere, for a longer time ? You’re talking here about one week -only- closure… Exactly like the french automakers who will stop their factories for 2 weeks at christmas… for the moment. This is light adaptation.
    The burning question is : will the car market improve in january ? In february ? In march ? And what about april ? Some don’t believe it, and then the adaptation would be much more painful.
    As for the move inland, great. They could reduce their costs. But to who they will sale their products ? Only a few factories could survive at this game. Therefore : many would die.

  6. 6 chinesethai 14 December 2008 at 8:14 am

    My friend made metal pipes catered to industrial and construction works in Germany only. He will be back again, slowly and slowly, in another location inland probably in mid-2009. His family is now vacationing in Germany. There is no rush.

    Hit by considerable loss of value of my inventory and slumping sales, I am also considering closing my business for the time being. Many of my customers, who are exporters, have reduced their employees, mostly on temporary contracts, or closed down their businesses.

    ThaiCrisis, there is an interesting story of a Thai-Chinese family, the Wanglees, who once owned Nakornthon Bank, now Standard Chartered Bank. 70 years ago they decided to close all of their main business (rice mills) for almost four years once the Great Depression and WWII struck Siam. They would be back to business later on.

    I am not an expert on Confucianism but I believe most Chinese (probably Japanese too) share a similar ideology of living life within one’s means, hoarding big savings for rainy days, taking extremely low degree of leverage. There were some who did not heed such ideology and died out in the 1997 devastation. Those who survived are enough of it.

    This may also hold true of the Chinese Government these days because they are still sitting on a huge amount of FX reserves, despite derided for low rate of return. They exercise stiff control of the country’s Capital Account. Their people may live in poverty and poor quality of life but most of them are debt-free. Sadly, most debt-laden Thai individuals did not heed the King’s advice on sufficiency economy. The King is not clean but his advice is not bad really.

    I believe that as long as humans must consume, work, rest and relax, so the recovery must come. The big storm cannot last forever but the best way to endure least damage or avoid total disaster is prepare for the worst in sunshine days.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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