Staggering falls in exports across Asia have shocked economic analysts and ended all claims that the global slump may be nearing its bottom. The IMF's growth forecast for Asia this year is just 2.7 percent�less than a third of the 9 percent growth rate of 2007. The prediction is a full percentage point less than during the 1997-98 Asian financial crisis.Asia Export Economy Details
IMA Asia analyst Richard Martin commented in the Australian: "It's a bit like watching a train wreck in slow motion. North Asia is suffering the biggest collapse in demand since World War II." Westpac bank's Richard Franulovich said that the "speed of the decline embedded in the latest Asia data is on par with the collapse in the US during the 1930s Depression."
- Japanese exports fell 35 percent in December from a year earlier. Industrial production plunged a record 9.6 percent, month on month, in December.
- Chinese exports declined for the third consecutive month in January, falling 17.5 percent from a year earlier, after a 2.8 percent decline in December. Imports plunged even further�43.1 percent, twice as much as December's 21.3 percent year-on-year drop.
- More than 20 million Chinese migrant workers have lost their jobs so far, with some analysts warning of 50 million more job losses if the economy deteriorates further.
- India exports fell 24 percent in January. According to official data, one million Indian workers in the export sector have lost their jobs since September. Another half a million workers are expected to lose their jobs by March.
- New Delhi's public debt stands at 75 percent of its GDP, compared to just 18.5 percent in China, leaving less room for large stimulus packages.
- South Korea's exports, the main driving force of the economy, plunged 32.8 percent in January. Finance minister Yoon Jeung-hyun warned on Tuesday that the fourth largest economy in Asia would shrink by about 2 percent this year. Credit Suisse has projected as much as a 7 percent contraction.
- Taiwan, the sixth largest Asian economy, saw its exports fall 44.1 percent in January from a year earlier�the biggest fall since records began in 1972. Imports plunged 56.5 percent in the same month. For an economy where exports account for 70 percent of GDP, the impact is devastating.
Protectionism On The Rise
In the wake of a worldwide recession that is strengthening, Europe Turns To Protectionism.
Statistics released Thursday by the European Union's Eurostat agency reveal that production plummeted across Europe at the end of 2008. The figures announced were far worse than analysts had anticipated. Industrial production declined across Europe by 2.6 percent in December compared to the previous month. On a year-to-year basis, European production has slumped 12 percent. The European Central Bank (ECB) also issued a warning that the recession gripping Europe will not be short-lived. Rather, it will be a "long-lasting and clear downturn," the ECB said.US Protectionism and Hillary's Asian Mission
The response of the individual European nations to the growing crisis has been to embrace a raft of protectionist measures. Italian Premier Silvio Berlusconi recently warned appliance maker Indesit SpA not to transfer production and jobs to Poland, and in Britain, trade unions and politicians are demanding "British jobs for British workers."
On Wednesday, the acting EU Council president, Czech Prime Minister Mirek Topolanek, appeared before the press in Brussels and warned of a "protectionist race" in Europe, while acknowledging that national economies in the European Union were being hit hard by the international crisis and losing ground with unanticipated speed.
Last Wednesday, the French automaker Peugeot announced it was shedding at least 11,000 jobs, and one day later, Renault announced its own plans to cut its workforce by 9,000. These job cuts have been agreed to by the French government and trade unions and are bound up with the announcement by French President Nicolas Sarkozy that he plans to subsidise domestic automakers with the sum of �6 billion.
Sarkozy declared that, in his opinion, it was irresponsible "to continue to manufacture French cars in the Czech Republic." He demanded a halt to the transfer of production to other countries. "If we give financial aid to the automotive industry," he said, "we do not want them to set up a factory in the Czech Republic again." He also urged the carmakers to support French industries involved in supplying parts and services to French auto companies.
Czech Prime Minister Topolanek reacted sharply to this openly protectionist policy and called for a special European summit to block it and similar policies.
The conflict between Berlin and Paris runs deep. In his role as EU Council president last year, Sarkozy repeatedly raised the demand for an "economic administration" for the eurozone. He made it quite clear that he regarded himself as best suited to head such an administration.
Backed by the country's business federations, the Merkel government is seeking to exploit the crisis to strengthen Germany's dominant role in Europe. Berlin is vehemently opposed to taking any responsibility for Europe's "weak states"�i.e., those countries that have thus far failed to implement drastic social and welfare cuts.
In view of increasing tensions, the EU presidency and the European Commission have announced plans for no fewer than three separate summits in the coming three months. Behind this summit frenzy are fears of a possible break-up of the European Union and an escalation of working class resistance to mass unemployment and growing poverty.
Please consider Clinton to Find China�s Economic Troubles Curb Its Leadership.
When Hillary Clinton arrives in East Asia next week on her first trip as secretary of state, she will discover there are limits to what the U.S. can expect of China, the region�s rising power.US Pot Calls Chinese Kettle Black
With policies under review and top advisers not yet in place, the greatest value of Clinton�s seven-day trip to Japan, Indonesia, South Korea and China will be symbolic.
As the world is dragged into a recession driven by a credit crisis in the U.S., policy makers point to China�s new clout: an economy now bigger than Germany�s and the largest foreign holder of U.S. Treasury bills, with $682 billion.
The two economies are interdependent as never before: China is the U.S.�s second-largest trading partner, buying $71.5 billion in U.S. exports last year as the U.S. took $337.8 billion in Chinese imports.
Following on the Bush administration�s policy, the Obama team wants China to allow its currency to appreciate or float freely and to avoid protectionism.
Treasury Secretary Timothy Geithner said this week that the U.S. will look at the broad global picture in the coming months and judge �carefully� whether China is manipulating its currency. Geithner upset China by saying it is �manipulating� the yuan in a written answer last month to the Senate Finance Committee. Officials said Geithner merely repeated comments Obama made as a candidate and wasn�t stating official policy.
�The Chinese are in no position to help anyone,� says Derek Scissors, Asia economics fellow at the Heritage Foundation in Washington. The most they can be expected to do is to avoid protectionism and export promotion, keep their currency stable, and stimulate demand through expanded consumer lending, he says.
Geithner put his foot in his big mouth in more ways than one. Someone better give him a lesson in diplomacy along with the lesson he needs in economics. Giethner is easily the worst of Obama's cabinet picks.
China is no more manipulating the Renminbi than the US is the dollar. What else do you call micromanaging interest rates, guaranteeing bank debt, engaging is currency swaps with Swiss Banks, and giving trillions of dollars to banks? Everyone of those things impacts the dollar. Moreover, there is no talk from this administration about Japan's open threat to intervene in the Yen, or the Russian intervention in the Rouble.
I am not in favor of any of this of course, I am just pointing out the US pot is calling the Chinese kettle black. And when it comes to free trade, the US and the EU are among the world's biggest hypocrites.
Moreover, Obama and Geithner better be careful of what they ask. China has already lost 20 million jobs, and it may easily lose 50 million more. Currencies of export based economies like Australia and Canada have been smashed. If China floated the Renminbi like we are asking, it could easily follow, and indeed I expect it would.
This is the worst possible time for protectionist policies. That means you can expect to see more of them, especially from free trade hypocrites in the US, UK, and EU.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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