The 17.5% year-over-year decline in China’s exports in January brings it closer to alignment with other major Asian exporters. Meanwhile, its huge drop in imports that month and its declining power usage together suggest that its economy may now be shrinking. Asian emerging markets are economically underperforming the West; this is both a mystery and a major concern.
Click here for breakingviews.com
January exports from China, Taiwan (down 42%) South Korea (down 33%) and India (merchandise exports down 22%) and December’s export figures from Japan (down 35%) suggest Asian economies have serious problems. All five countries’ export declines are sharper than the 14.7% decline in December’s US imports, let alone the relatively modest 8.4% decline in US exports.
Chinese exports dropped 17.5% in January compared with January 2008, while imports dropped 43.1%. Imports of copper products fell 19% in January. Taiwan’s exports fell 44% in January while South Korea’s exports fell 33% and India’s merchandise exports fell 22%. Japan’s exports fell 35% in December.
Power plants in China burned 1.69 million tonnes of coal, 17% less than in January 2008. Coal stockpiles at power plants more than doubled from January 2008 to 36.4 million tonnes. Electricity generation fell 6.7% in the first half of January from January 2008. US exports in December were down 8.4% from December 2007 while imports were down 14.7%.
Economically, Asian countries are suffering recessions generally more severe than in the West. The Chinese authorities claim gross domestic product grew 6.5% in the fourth quarter. However the 43% decline in China’s January imports, the 17% decline in coal consumption, the 19% decline in copper imports and the 6.7% decline in electricity generation in the first half of the month all suggest a sharp decline now. Equivalent statistics from Japan, Korea and Taiwan also indicate severe downturns, although India’s position is still unclear.
The severe Asian economic decline shows that the Western financial services industry is no longer the sole driver of the global downturn. None of the Asian economies concerned had significant exposure to US or European housing, and their financial services businesses have suffered only moderately. Furthermore, with the exception of Japan and India, their fiscal positions are strong.
It thus appears likely that the supply-chain so firmly established in the last decade between Asian manufacturers and Western consumers has a high degree of operating leverage. A modest decline in Western consumption produces severe problems among Asian suppliers, both direct and subcontracting.
The sharp decline in trade and its consequent damage to the global supply chain should take its place alongside Western banks’ bad debt problem among policymakers’ major economic concerns. It deserves attention at April’s G-20 meeting, if not before.