Asia: No Time to Wait for Chinese Recovery
The Chinese government announced that 7,148 companies closed down in Guangdong Province, which normally accounts for 33.7 percent of China’s total exports, during the first nine months of this year. But some media reported that 67,000 businesses closed after October.
In the case of Dongguan city, which houses the largest number of foreign companies in Guangdong Province, 27 percent of rented factories are said to be empty. The population of Dongguan, which surpassed 10 million at one time, has fallen to 8 million as laid-off workers leave. The situation is similar in Shangdong, Jiangsu, Zhejiang, Fujian and other provinces along China’s eastern coastline. There are accounts that 600,000 companies in those regions have closed so far this year, costing 6.7 million jobs. Last month, the World Bank forecast China’s economy would grow 8.5 percent next year, but it has recently cut that projection to 7.5 percent. Goldman Sachs forecasts 6 percent growth, while Hong Kong’s CLSA Securities predicts 5.5 percent expansion. China’s exports in November totaled US$114.99 billion, down 2 percent from a year ago. Since 2002, China’s exports have grown more than 20 percent each year. And it is the first time that China’s monthly exports have declined since the bursting of the American IT bubble in 2001.
China’s domestic consumption has also slowed drastically. This is due to depreciation in asset values stemming from the stagnant Chinese real-estate and stock markets. The Chinese stock market has lost 15 trillion yuan (around W2,200 trillion, US$1=W1,301) during the first eight months of this year due to plummeting share prices. That’s worth 61 percent of China’s GDP.
Real estate prices in China’s major cities, including Beijing, Shanghai, Shenzhen and Guangzhou, have fallen 20 to 30 percent. Since October, the Chinese government has announced two stimulus packages to revive the real estate market, including major reductions in transaction taxes, but the market has not rebounded.
The Chinese market offers a last chance for Korean exports at a time when the U.S. and European economies are slowing in earnest. Korea’s exports to China in October declined 2.6 percent compared to last year and dropped 32.9 percent in November. Korea’s exports to China, which have grown an average 30 percent or more each month during the first half of this year, have virtually come to a screeching halt.
Korea cannot continue to look at China for solutions. Instead, bold measures are required to tap into the Middle Eastern, Central and South American, and African markets, which have been relatively less impacted by the global financial crisis. We must search for niche markets where we can compete with Japan and utilize the competitiveness offered by the weak Korean won but strong yen. The Korean government has come up with its 2009 economic blueprint under the premise that China’s economy grows around 8 percent. We must come up with emergency plans for the possibility that China’s economy may grow at around the 5-percent level.
(http://english.chosun.com)