China Watch Blog

China Watch Blog has learnt that Chinese exporters are still feeling the squeeze from a lack of orders since the global financial crisis in mid-2008, and today some of them are turning to the Latin America and Southeast Asia market for new business.

As the world’s largest exporter of sodium hydrosulfite, widely used for textile dying and pulp bleaching, Zhongcheng exports products mainly to the United States, the European Union and Japan. In 2010, its exports amounted to 85,000 tons worth $90 million.

But because the recovery of these developed economies remains slow and uncertain, the exports situation is “deteriorating”.

“The second quarter was the worst that we have ever experienced since 2008, even worse than the last quarter of 2008,” said Matthew Yang, a sales executive at a chemicals company.

About 45 percent of Zhongcheng’s exports go to the US. The company accounts for 50 percent of US imports of sodium hydrosulfite.

Now there are few signs that things will get better in the coming months. “We have to expand our overseas sales network to developing nations,” said Yang.

Zhongcheng is only one of tens of thousands of Chinese manufacturers and exporters that have suffered from the uncertain global economic recovery and the worsening business environment both at home and abroad.

According to the General Administration of Customs, from January to June, China’s exports grew by 24 percent from a year earlier to $874.3 billion, compared with 35.2 percent during the same period of 2010.

China’s year-on-year export growth has been declining month-by-month during the first half, dropping to 17.9 percent in June from 37.7 percent in January.

“Although there is still double-digit growth for China’s exports, the situation for its exporters is getting worse,” said Zhang Ji, direct general of the Ministry of Commerce’s Department of Mechanic, Electronic and High-tech Industry.

According to the ministry, China’s exports of machinery and electronic goods increased by 13.8 percent year-on-year in June, down from 35.3 percent for January.

Figures from the National Bureau of Statistics showed China’s net exports contributed a negative 0.7 percentage points to its gross domestic product during the first half of the year.

China Watch Blog has picked up another worry piece of news published by The Business Times Singapore that the impact of Europe’s spiralling debt crisis on Asia is not just credit exposure to European banks nor is it the spillover effects of a possible recession in Europe, but rather, the key risk to Asia from a debt contagion still unfolding is another credit crunch.

Singapore port

The article quotes David Carbon, chief economist and managing director for economic and currency research at DBS Bank, as saying that that such a credit crunch would be the primary route by which Asia, including Singapore, would be affected by troubles in Europe. A credit crunch, like that which happened during the most recent recession, would interrupt trade and production financing.

If Singapore is affected, Hong Kong will similarly be affected.

The article continues that the good news, if you can call it that, is that the impact on Asia would almost surely be even shorter-lived than it was in late-2008.

“During the global financial crisis of 2007-09, Asia’s contraction in output was a modest four months between October 2008 and January 2009.

“By February, Asia was surging back in V-shaped fashion with no help from the US, Europe or Japan. Given that the euro is less important in international finance than the US dollar, it is reasonable to assume that the impact on Asia from a euro credit crunch would be less than it was in 2008,” Carbon was quoted as saying.

Coupled with the 2012 doomsday or judgement day theory that is spreading around in Hong Kong and other parts of the world, next year does not seem good. So, be prepared for more bad times ahead.