Asia Sentinel, 17 Dec 2008, John Berthelsen
"The United States, Europe and Japan – all three of which are descending into recession – account for at least 56 percent of China's exports, which went negative in November for the first time in seven years. Although exports to emerging markets grew by 20 percent in the first 10 months of 2008, these economies are also slipping. China’s imports from other Asian countries are intermediate goods used as imports for export processing, meaning they will have little impact on the regional economies. China can be expected to face an export collapse in the first quarter of 2009, perhaps by as much as 19 percent to 20 percent from the cyclical high and a fall of perhaps 3 percent year on year for 2009, according to an estimate by Qu Hongbin, China chief economist for global banking for HSBC.
China's exporters are already in trouble, particularly in the export-driven Pearl River Delta. For more than a year, squeezed by rising labor costs and falling margins, manufacturers have been facing a mounting crisis. Now, as bankruptcies and store closures rise in the west, fears are rising that the credit facilities on which the Asian supply chain is built will be severely strained.
"All the decoupling theory is total bunk," says a top figure in Hong Kong's outsourcing industry. "People are holding out China as the locomotive that is going to pull the rest of the world through. But China is just one big factory export processing zone for low-cost goods, based on western demand and cheap credit. It isn't going to work." "
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