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WASHINGTON: Southeast Asia will face stiffer export
competition from China and likely bear the brunt of any impact in
Asia from a major economic slowdown in the US, an official of the
International Monetary Fund (IMF) said.
A recession in the United States,
anticipated by some economists as a result of a current housing
slump and related credit crunch, will obviously lead to a cutback in
exports by Asia’s rapidly growing economies, led by China.
Based on a “rough rule of
thumb,” for about a 1-percentage point decline in US economic
growth, there could be a “half to a full percent decline in Asian
growth, depending upon what the effects are beyond the United
States,” said Steven Dunaway, deputy director of the IMF’s Asia
and Pacific department.
“There will be much more of an
impact in Southeast Asia,” which faces direct competition from
China in terms of a number of export products, he said.
“Those [Southeast Asian]
countries will all face a much tougher time with the slowdown in the
United States and probably some extra competition from China,”
Dunaway told a forum on the Chinese economy at the Woodrow Wilson
International Center for Scholars in Washington.
He said Asia’s exporting
nations were “going to be competing for a piece of a smaller
pie” if US imports shrunk. He raised the possibility of China
slashing prices to remain competitive.
“If the Chinese themselves face
a more difficult environment, there will be some tendency probably
at least to hold prices if not cut prices,” Dunaway said.
This would “affect profit
margins and put some additional competitive pressure on Southeast
Asian firms as well as firms in other countries competing with
Chinese companies,” he added.
Labor-intensive manufacturing
already appears to have given a competitive edge to China in trade
and investments at the expense of export-driven Southeast Asian
countries such as Thailand, Indonesia, Vietnam and the Philippines,
economists said.
But rapid Chinese economic growth
in recent years has also resulted in increased imports of raw
materials and intermediate inputs from Southeast Asia, helping
propel growth in the region, they said.
Amid the competition for exports
to the United States, China and Southeast Asia are also opening up
their economies to each other through a free trade agreement
covering a total of nearly two billion people.
IMF head Dominique Strauss-Kahn
warned in Paris Monday that the global economic situation in the
wake of a US slowdown was “serious” and could impact the
world’s emerging economies.
“Fortunately, emerging nations
continue to have fairly strong growth and to drive growth worldwide.
But it is not impossible that even in emerging nations it could have
a certain effect, that growth could be weaker than expected.”
Dunaway said any decline in
growth in Asian economies as a result of a US slowdown would depend
on policy responses.
“Most of the countries are in
positions where they can ease monetary policy, they can ease fiscal
policy, so they can offset some of the decline coming out of the
US,” he added.
There is one school of thought
that a US slowdown would provide a much needed breather for China,
which was stepping up efforts to cool inflation to prevent the
world’s fastest growing major economy from overheating.
“There may also be some impact
with respect to FDI [foreign direct investment] that might slow [in
China],” Dunaway said.
But Beijing would probably raise
government spending, particularly on infrastructure investment, to
keep the economy chugging along at a growth rate of 9 percent to 10
percent, he added.
--AFP
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