Sunday, June 10, 2018

How Hard Will Asia Be Hit By US-Led Slowdown?

For those of from Asia, I am afraid the prognosis isn't as swell as those who hold a "decoupling" theory would suggest. In fact, things may be even worse now than they were in the past as far as lower dependence on exports to the US and other Western economies is concerned. Although I keep hammering this point, there is only so much Asian countries can do to spur consumer demand in the US that they fail to do at home. The two natural limits to US mega-consumption are becoming more evident these days. Respectively, they're called "bankruptcy" and "foreclosure" (though they often go together). In a recent TIME op-ed, veteran Asia hand Stephen Roach offers this:
The U.S. consumption binge was fodder for export-led economies everywhere. This was especially the case in Asia, which since the turn of the century has been the world's fastest-growing major region. In search of rapid growth in order to achieve its development and poverty-reduction objectives, developing Asia viewed America's consumption binge as manna from heaven. Consumption-deficient Japan had a similar response, as did large, newly industrialized economies such as Taiwan and Korea.

Indeed, exports provided high-octane fuel for Asia's growth, accounting for more than 45% of pan-Asian GDP in 2007, which was a record and was more than 10 percentage points higher than the share prevailing in the mid-1990s. But this left the region more dependent on external demand than ever before. And with the American consumer — the biggest source of that demand — now in trouble, Asia's export-led growth formula is getting squeezed...

Asia's adjustments should not be surprising. The global boom of 2002 to mid-2007 was an outgrowth of the powerful linkages of globalization. No region benefited more from this connectedness than Asia. These linkages are just as strong on the downside of the global business cycle as they are on the upside. Connectivity is now hitting Asia head-on.
The entire Roach piece is well worth reading as it sets out the global implications of the current US-led slowdown concisely. Meanwhile, Bloomberg has anecdotal evidence that Japan is preparing for an export slowdown next year as Japan Air's cargo flights to LA are being cut almost by half:
Japan Airlines Corp., Asia's most- indebted carrier, will reduce cargo flights to the U.S. as a slowdown in the economy cuts demand, the Nikkei newspaper reported. The airline will end cargo flights between Narita and New York and cut flights to Los Angeles to 10 a week from 19, Nikkei said, without saying where it obtained the information. The reductions will start in January, Nikkei said. The airline cut cargo routes to Atlanta and San Francisco this past January, the newspaper reported.
The prognosis for Asia isn't too rosy when globalization is a one-trick pony whose sole trick is "sell boatloads of stuff to America."

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