A trio of articles this week piece together a gloomy triptych of Asia, proving that the region is far from immune to the twists and turns of Europe’s ailing economy. Reuters reports major slowdowns in manufacturing not only in China and India but also South Korea, Australia, and Taiwan. Next, the NYT spotlights China, where deflation didn’t do much for exporters because of the euro mess:
Beijing has also allowed its currency, the renminbi, to weaken against the dollar in recent months, in what seems to be an effort to aid struggling exporters. However, that has not helped exports to Europe, as the renminbi has not weakened against the euro and demand on the Continent remains soft.
The FT also elaborated on the regional manufacturing slowdown, one anaylist warning of “much more pain to come on the export side”:
Japanese PMI fell two points to 47.9 in July, according to the Markit/JMMA. Activity in Australia’s manufacturing sector, which depends heavily on Chinese demand for its resources, hit a three-year low in July. The Australia Industry Group PMI index dropped 6.9 points to 40.3 last month.The poor data out of Asia highlight the region’s dependence on demand from the US and Europe, whose economies have struggled since 2008.While the eurozone sovereign debt crisis has hit growth in Europe for more than a year, the effects have only recently started to feed through into reduced demand for Asian exports.
If you factor in the local (and, for that matter, global) effects of China’s own slowing economy as well as the anemic growth in the other major importer, the U.S., then you begin to see how the Asian stagnation may be bound to drag on in coming months.