Asia in trouble

Recent news from Asia:

• Japanese exports fell 35 percent in December from a year earlier. Industrial production plunged a record 9.6 percent, month on month, in December.
  
  
• Chinese exports declined for the third consecutive month in January, falling 17.5 percent from a year earlier, after a 2.8 percent decline in December. Imports plunged even further—43.1 percent, twice as much as December's 21.3 percent year-on-year drop.
  
  
• More than 20 million Chinese migrant workers have lost their jobs so far, with some analysts warning of 50 million more job losses if the economy deteriorates further.
  
  
• India exports fell 24 percent in January. According to official data, one million Indian workers in the export sector have lost their jobs since September. Another half a million workers are expected to lose their jobs by March.
• New Delhi's public debt stands at 75 percent of its GDP, compared to just 18.5 percent in China, leaving less room for large stimulus packages.
  
  
• South Korea's exports, the main driving force of the economy, plunged 32.8 percent in January. Finance minister Yoon Jeung-hyun warned on Tuesday that the fourth largest economy in Asia would shrink by about 2 percent this year. Credit Suisse has projected as much as a 7 percent contraction.
  
  
• Taiwan, the sixth largest Asian economy, saw its exports fall 44.1 percent in January from a year earlier—the biggest fall since records began in 1972. Imports plunged 56.5 percent in the same month. For an economy where exports account for 70 percent of GDP, the impact is devastating.
  

More discussions of Asia's economic problems:

• http://mpettis.com/2009/02/more-terrible-trade-numbers-from-china/
• http://blogs.cfr.org/setser/2009/02/13/a-truely-global-slump/

Think "domestic demand" will be easy to stimulate in China? I doubt it. China has huge unemployment problems. Unemployed people just don't have money to spend. Want more evidence that domestic demand will be difficult to stimulate? Then please read this:
http://globaleconomicanalysis.blogspot.com/2009/02/inside-china-sculptors-view.html

Comments:

1. To the extent that imports are necessary inputs to Asia & China's production process then falling imports may be a leading indicator of even greater declines in production and exports.

2. Falling imports may also be an indicator of much greater unemployment than is being reported--unemployed people don't buy imports.

3. If unemployment is under-reported or accelerates it becomes doubtful that domestic demand can be stimulated and domestic demand may actually fall.

Implications:

- China's exports seem destined to fall and domestic demand will be difficult to stimulate.
- China's economy appears to be a bubble about to pop.
- If/when the China bubble bursts, China's equity markets will crash.

China Stock Gains to End as Profit Drops, Xie Says

(Bloomberg) -- China’s stocks rally, having turned the Shanghai Composite Index into the world’s best performer this year, will falter as profits are “non-existent,” said Andy Xie, former chief Asian economist at Morgan Stanley.


"This is your captain speaking, everyone remain calm, everything is under control. "

Cheers