When times were booming, Asia’s factories would sometimes struggle to keep pace with the global demand for cars, semiconductors and electronics goods.
But as the worldwide recession has taken hold, the region’s export-dependent economies have been hit especially hard — and they are now finding that domestic demand cannot possibly make up for the decline in sales overseas.
“This is a very unhealthy economic growth pattern that developed in the last more than 10 years,” said Chen Xingdong (陳興動), an economist with BNP Paribas bank in China.
“Asia’s economies all are quite heavily dependent on exports,” Chen said. “They must turn to domestic demand.”
Analysts say that is easier said than done.
In places like Japan, where manufacturers cut production by a record 10 percent in January and exports plunged more than 45 percent, the health of the economy at home is still inextricably linked to overseas markets.
“It is hardly possible for Japan to boost domestic demand now and pull the economy up,” said Hideyuki Araki, an economist at the Resona Research Institute in Osaka.
“After all, corporate spending on plants and equipment is linked to exports,” Araki said. “Japan needs to wait for a recovery in foreign demand.”
Across much of Asia the story has been the same.
Hong Kong exports are down almost 22 percent. In South Korea, where they account for more than one-third of GDP, exports are down 34 percent.
“South Korea is now suffering from a double whammy — sluggish domestic demand and sinking overseas demand,” said analyst Yu Byoung-Gyu of the Hyundai Research Institute in Seoul.
As the global crisis started to take hold, some suggested Asian economies might be able to “de-couple” from the West and be able to keep going strong even while the US and others started to suffer.
“The de-coupling theory has been disproved,” said Sherman Chan (陳穎嘉), an analyst with Moody’s Economy.com.
“Even China is counting on demand from the US and Europe to restore growth,” she said in a recent report. “All eyes will remain focused on when the US will recover.”
In Taiwan, a leading semiconductor maker, exports fell 44 percent in January while GDP contracted by 8.4 percent in the last quarter of last year — the kinds of steep declines that cannot be compensated for by domestic demand.
“This is the very fear of export-dependent economies like Taiwan,” said Lucas Lee (李志安), a Mega Securities Co (兆豐證券) analyst. “Few can be sure whether or when global demand will pick up.”
Even in Asia’s smaller economies, the drop in exports has had a powerful impact. Malaysia, which is heavily dependent on exports — in particular electronics, accounting for about 40 percent of overseas sales — has also been hit hard.
“The impact is now global and Malaysia is no exception,” Malaysian Trade Minister Muhyiddin Yassin said last week.
He said the government was looking at a “worst-case scenario” of exports falling as much as 3 percent to 4 percent this year.
Chan said Indonesia and the Philippines looked to be two of the region’s bright spots for the year ahead — and that both would be resisting external drags on their economies from “solid” domestic demand.
When an apartment comes up for rent in Germany’s big cities, hundreds of prospective tenants often queue down the street to view it, but the acute shortage of affordable housing is getting scant attention ahead of today’s snap general election. “Housing is one of the main problems for people, but nobody talks about it, nobody takes it seriously,” said Andreas Ibel, president of Build Europe, an association representing housing developers. Migration and the sluggish economy top the list of voters’ concerns, but analysts say housing policy fails to break through as returns on investment take time to register, making the
EARLY TALKS: Measures under consideration include convincing allies to match US curbs, further restricting exports of AI chips or GPUs, and blocking Chinese investments US President Donald Trump’s administration is sketching out tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry, an early indication the new US president plans to expand efforts that began under former US president Joe Biden to limit Beijing’s technological prowess. Trump officials recently met with their Japanese and Dutch counterparts about restricting Tokyo Electron Ltd and ASML Holding NV engineers from maintaining semiconductor gear in China, people familiar with the matter said. The aim, which was also a priority for Biden, is to see key allies match China curbs the US
NOT TO WORRY: Some people are concerned funds might continue moving out of the country, but the central bank said financial account outflows are not unusual in Taiwan Taiwan’s outbound investments hit a new high last year due to investments made by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and other major manufacturers to boost global expansion, the central bank said on Thursday. The net increase in outbound investments last year reached a record US$21.05 billion, while the net increase in outbound investments by Taiwanese residents reached a record US$31.98 billion, central bank data showed. Chen Fei-wen (陳斐紋), deputy director of the central bank’s Department of Economic Research, said the increase was largely due to TSMC’s efforts to expand production in the US and Japan. Investments by Vanguard International
The popular Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) arbitrage trade might soon see a change in dynamics that could affect the trading of the US listing versus the local one. And for anyone who wants to monetize the elevated premium, Goldman Sachs Group Inc highlights potential trades. A note from the bank’s sales desk published on Friday said that demand for TSMC’s Taipei-traded stock could rise as Taiwan’s regulator is considering an amendment to local exchange-traded funds’ (ETFs) ownership. The changes, which could come in the first half of this year, could push up the current 30 percent single-stock weight limit
RSS