Asia's sinking economies
Jan 29th 2009
From The Economist print edition
The slump in East Asia was made at home as well as in the West
CHINA’s lunar new year sees the world’s largest migration, as tens of millions of workers flock home. Deserting for a few days the factories that make the goods that fill the world’s shops, they surge back to their native villages. This week, however, as they feasted to the deafening rattle of the firecrackers lit to greet the Year of the Ox, their celebrations had an anxious tinge (see article). Many will not have jobs to go back to.
China’s breakneck growth has stalled. The rest of East Asia, too, which had hoped that it was somehow “decoupled” from the economic trauma of the West, has found itself hit as hard as anywhere in the world—and in some cases harder.
The temptation is to see this as a plague visited on the region from outside, which its governments are powerless to resist or cure. In truth, their policy errors have played their part in the downturn, so the remedies are partly in their hands.
The scale and speed of that downturn is breathtaking (see article), and broader in scope than in the financial crisis of 1997-98. China’s GDP, which expanded by 13% in 2007, scarcely grew at all in the last quarter of 2008
on a seasonally adjusted basis. In the same quarter Japan’s GDP is estimated to have fallen at an annualised rate of 10%
, Singapore’s at 17% and South Korea’s at 21%.
Industrial-production numbers have fallen even more dramatically, plummeting in Taiwan, for example, by 32% in the year to December.
Nobody’s buying it
The immediate causes are plain enough: destocking on a huge scale and a collapse in exports. Even in China, exports are spluttering, down by 2.8%
in December compared with the previous year. That month Japan’s fell by 35%
and Singapore’s by 20%. Falls in imports are often even starker: China’s were down by 21% in December; Vietnam’s by 45% in January. Some had suggested that soaring intra-regional trade would protect Asia against a downturn in the West. But that’s not happening, because trade within Asia is part of a globalised supply chain which is ultimately linked to demand in the rich world.