Asian exporters prepare for US pullback

The weakening American demand is clear. American orders for small tractors fell 5 per cent last year at the Kubota Corporation in Osaka and are expected to fall further this year. At Aigret Industries, a manufacturer of multiline phone systems and fax machines in Xiamen, China, orders from the US plunged 30 per cent in the fourth quarter compared with a year ago.

In response to the downturn, some companies are pursuing remedies that will affect economic output, like Aigret Industries, which has lengthened next month’s Chinese New Year vacation for its workers to 20 days, instead of the usual 10.

Others are investing in more technological research and developing new models, like the Xigo Electric Company in Zhongshan, China, which manufactures air-conditioners and liquid-crystal display television sets.

Asian exporters lie at the center of the debate in financial markets over the extent to which Asia has decoupled from the US and can grow strongly even if the American economy slows significantly. The evidence so far is that the effects of an American slowdown will vary widely, depending on each country’s reliance on exports and the extent to which each country’s economy is currently overheating or stumbling.

For countries that were already struggling with weak growth and faced little if any inflation, like Japan, weak exports are proving a serious setback.

“Now we see ‘re-coupling,’ ” said Tetsufumi Yamakawa, chief economist in Tokyo for Goldman Sachs. “The economy of Japan is proving disappointingly fragile to external shocks.”

For Japan, Malaysia, Thailand, Australia, Bangladesh, Sri Lanka, Cambodia and Indonesia, exports to the United States actually dropped in dollar terms in November.

On Wednesday, Citigroup cut its average estimate for economic growth this year among Asian economies by four-tenths of a percent, while reducing its estimate for growth in the US by seven-tenths of a percent, to 1.6 per cent. The question across Asia is how much worse can it get.