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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (1312)	11/10/2003 4:37:04 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

The collateral damage of a slowing China: Asia looks unprepared By Daniel Bogler Published: November 10 2003 4:00 \| Last Updated: November 10 2003 4:00 Investors have spent a good part of this year fretting about an apparently overheating Chinese economy, growing at anywhere between 8 to 14 per cent, depending on whether you believe official statistics or private forecasts. A more pertinent question for 2004 is what will happen when China slows down? That China isstarting to slow is not yet evident from the data. But Beijing, clearly concerned about emerging bubbles in real estate, cars and construction materials, has started to crack down. Anecdotal evidence suggests that since the central bank announced it was raising its reserve requirements in late August, bank lending growth has slowed dramatically. Indeed, bank lending is reported to have actually fallen in September and October. This monetary tightening should initially cool off the property market and then spill over into capital investment spending by companies as well as exports. Though this might ease trade tensions with the US, it is bad news for most Asian nations. The rate at which China has been sucking in imports, up 41 per cent in the nine months to September, has been a boon for the country's major trading partners. China has accounted for three-quarters of the rise in Japanese exports this year, 99 per cent of those from Taiwan and 40 per cent of those from South Korea. Among the smaller economies, such as Malaysia, Thailand and Singapore, the China dependency is smaller - at 20-30 per cent of their export growth. But they are still suffering from lacklustre domestic demand and a relative paucity of foreign direct investment, leaving them with few alternative sources of growth. Any material lessening of China's import growth will therefore have a material impact on the economic growth of all these countries - and could, in Japan's case, snuff out the current cyclical recovery when combined with the rising yen. As Stephen Roach, Morgan Stanley's chief economist, notes that, with rising stock markets at their back, policymakers and businessmen around the region seem rather blasé about this. China's barnstorming growth during the past few years has restored the sense of self-confidence Asia lost during its financial crisis. A lot of the painful memories of six years ago appear to have been forgotten - not unlike post-bubble America, as Mr Roach rightly points out. The pull from China has also enabled most of the smaller countries to gloss over the fact that they have not completed necessary structural reforms - in particular reducing bad debts in their banking systems, encouraging competition and dismantling subsidies and cronyism. A slowing China will cruelly expose those deficiencies and could thereby rob Asia of much of its recently re-acquired gloss. news.ft.com