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Asian exporters brace themselves for slowdown

Companies changing how they operate rather than wait for things to get worse

HONG KONG – ASIAN exporters are already feeling the effects of a United States economic downturn – effects that may be magnified by a weak US dollar, volatile world markets and fears that more bad loans may be ticking in the coffers of American companies.

Rather than waiting for things to get worse, companies from Chinese garment businesses to Japanese equipment manufacturers are changing how they operate.

The weakening US demand is clear. American orders for small tractors fell 5 per cent last year at Kubota in

Osaka, Japan, and are expected to fall further this year. Orders from the US have been weak for a year at Top Form, the Hong Kong company that is the world’s largest bra manufacturer. And at Aigret Industries, a manufacturer of multi-line phone systems and fax machines in Xiamen, China, orders from the US plunged 30 per cent in the fourth quarter compared with a year ago.

In some industries, the result has been deep gloom. At Evergreen Knitting in Ningbo, China, orders from the US for T-shirts and sweaters abruptly dropped 20 per cent this winter.

‘We anticipate that this year, 10 per cent to 20 per cent of the knitwear factories will have to close due to the inability to compete,’ said Mr Sean Zhu, Evergreen’s sales manager.

In response to the downturn, some companies are pursuing remedies that will affect economic output, like Aigret Industries, which has lengthened next month’s Chinese New Year vacation for its workers to 20 days, instead of the usual 10.

Others are investing in more technological research and developing new models, like Xigo Electric in Zhongshan, China, which manufactures air conditioners and liquid-crystal display television sets.

‘We really felt the impact of the slowdown in the US during the second half of 2007,’ said Mr Stan He, a Xigo

sales manager. ‘Orders were generally down by 10 per cent to 20 per cent relative to the same period a year ago.’

Asian exporters lie at the centre of the debate in financial markets over the extent to which Asia has decoupled from the US and can grow strongly even if the American economy slows significantly. The evidence so far is that the effects of a US slowdown will vary widely, depending on each country’s reliance on exports and the extent to which each economy is overheating or stumbling.

China, which has struggled in recent months with rising inflation, has actually benefited from slower exports, although a steeper decline could prove a problem. The Chinese government announced on Thursday that growth eased to 11.2 per cent in the fourth quarter from 11.5 per cent in the third quarter.

The modest slowing, almost entirely because of less brisk growth in exports, helped reduce inflation to 6.5 percent last month from 6.9 per cent in November, the government said.

But with fixed-asset investment still soaring in China, Mr Xie Fuzhan, the director of the National Bureau of Statistics, said China was still worried that overall growth was too fast to be sustained without inflationary pressures.

 

Source: NEW YORK TIMES (The Straits Times 26 Jan 08)

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