Word: exports
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...real culprit of dropping economic indicators in these three Asian nations is as much the fragility of the middle classes as it is export problems. The American middle class, as it is constituted now, began to form after WWII. It has driving the construction, automotive, energy, travel, and retail industries and made each of them large and relatively stable, even when the economy moves toward deep trouble...
...economic reality has been jarring for a country considered not long ago nearly impervious to the global slowdown. With consumer spending declining in the U.S., China's export machine - which accounts for some 20% of GDP growth - has run out of steam. Exports fell 2.8% in December, the worst performance since 1999. (See pictures of the global financial crisis...
...support struggling manufacturers, the government over the past six months has restored or raised tax breaks on more than 3,700 export items, including consumer goods like toys. The rebates could make Chinese exports even cheaper, but that doesn't mean cash-strapped shoppers in the U.S. and Europe will exercise their credit cards. HSBC estimates China's exports could contract by as much as 19% in the first quarter of 2009. "The international financial crisis is deepening and spreading, with continuing negative impact on the domestic economy," Ma Jiantang, the head of China's statistics bureau, told reporters...
...worry of Beijing's leadership as well. In a frantic effort to preserve jobs, officials are trying to stimulate the domestic economy to make up for lost export growth. In November, the government announced a $586 billion stimulus package, much of which is new infrastructure spending. Taxes on some real estate transactions were also suspended late last year to boost the sagging property sector, which accounts for some 10% of national employment. More steps are likely to come. Analysts expect the government to introduce measures to support the steel and auto industries...
...these types of export-at-all-costs policies that some economists worry will cause a resurgence of 1930s-style antitrade policies. Jim Walker, an economist at independent research firm Asianomics in Hong Kong, says "the big danger" in Asia is a "round of competitive devaluations" of Asian currencies that sparks protectionism in the West. Walker fears that China, in its efforts to support growth and the millions employed in export factories, will eventually allow the yuan to depreciate, forcing all other Asian countries to do the same to keep their exports competitive. "If conditions do worsen, then every lever...