On today's papers, Chinese, Indian sprees can't replace missing US shoppers
- DAVOS (Switzerland): Chinese and Indian consumers appear to be going on a spending binge bucking the global trend, but they cannot make up for the billions not being spent by shell-shocked American shoppers, experts said.
India's Trade Minister Kamal Nath projected that the domestic consumption in his country is expected to grow by "around seven per cent" this year.
Growth through "domestic consumption has to be the only way," Nath said on the sidelines of the World Economic Forum here, explaining that exporters are being held back by falling demand elsewhere.
Chinese Premier Wen Jiabao said among early signs of recovery by the Chinese economy is a 20 per cent rise in domestic consumption at the start of the Chinese Lunar New Year, compared to the same period last year.
"The signs are small ones but they give me hope," he said.
Bank of China vice president Zhu Min forecast that Chinese domestic consumption will grow at about 20 per cent in 2009, the same pace as last year.
On the other hand, he noted that US consumer spending is set to plunge 10 per cent, or US$1 trillion (US$1 = RM3.61), due to the financial crisis, as consumers are hit by falling home values and a credit drought.
Americans normally spend about US$10 trillion domestically a year, or about 70 per cent of the US gross domestic product, estimated Zhu.
In comparison, Chinese spend just US$1.5 trillion worth on goods and service, about 38 per cent of GDP.
Export-driven economies such as China, Japan and Germany have been particularly hurt by the sharp fall in American consumption.
If US consumers spend US$1 trillion less annually, even a boost in Chinese and Indian domestic consumption is unlikely to make up the gap.
However, experts said the "pain" is necessary.
Ken Rosen, a professor at the University of California-Berkeley, slammed the American model of excessive borrowing to drive spending and thereby growth.
"The Japanese, German and Swiss model is a better model. The US model is wrong ... If the whole world went with the US model, the planet would not exist," he said.
Consumers in Japan, Germany and Switzerland set aside substantial savings unlike their American counterparts.
Rosen said that rebalancing the US economy would be "very painful" but that it "is the right thing to do."
India's Nath said: "The US certainly must temper its consumption patterns.
From the environment point of view, it's good," he said. - AFP
- YIWU (China): The global financial crisis has started to weave its way into Yiwu, the world's largest wholesale market for small consumer goods, but the city in east China still nurtures expansion plans.
With a population of just under two million people, Yiwu's business revolves around a huge building of 62,000 stalls containing umbrellas, socks, toys, electronics, zips and other goods - all spread out over four million sq m.
"If you allocated three minutes per supplier during eight hours of daily business, you would need over a year to make your way round it (the market)," said Li Xuhang, vice mayor of Yiwu city, at the heart of Zhejiang province.
But despite a successful model of making products that are always in high demand, Yiwu is suffering, with business slowing "since the end of the first semester in 2008," according to Li.
The vice mayor puts this down to a 12 or 13 per cent rise in labour costs, the appreciation of the yuan and an increase in the price of raw materials - problems exacerbated by the global downturn.
As a result, the city's GDP grew 12 per cent in 2008, higher than the 9 per cent growth figure for the whole country, but still lower than the 15 per cent or more increase Yiwu has achieved in recent years.
The city's economic activity has also slumped, as shown by its annual fair in October.
Orders dropped 3.2 per cent during the event, instead of increasing by the previous 10 to 15 per cent, and the number of foreign visitors fell by more than 5 per cent.
"In 2008, 55 per cent of our goods were exported, against more than 60 per cent the previous year," said Ding Yufeng, vice president of CCC, the group that manages Yiwu's market, majority-owned by local authorities.
For some people, the crisis has had a serious impact.
"Business? What business? For months, we haven't done any," said a woman surnamed Liao, sitting in her shop filled to the brim with odds and ends, from key-rings to dog collars.
A stroll along the market's alleys in the morning sees few clients jostling for space and, after lunch, the place is almost deserted.
But despite the slowdown, local authorities are planning a new extension to the market with the aim of reaching five million sq m in 2010. - AFP
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