SEOUL, South Korea Talk of the global economic recovery fizzling doesnt faze Cho Byung-cheol, president of a small South Korean technology company that has already set up a branch in China and plans one soon in the United States.
The company, which designs and makes semiconductor-based high-speed data storage and processing equipment, is planning to boost its South Korean workforce of nearly 60 by half, says Cho, who founded Seoul-based Taejin Infotech Co. in 1996. Sales, which totaled only 8.4 billion won $7 million last year, could swell fourfold this year and reach 100 billion won next year, he predicts.
Sitting in his spacious, well-ordered office, Chos confidence belies the grim mood that has settled over global stock markets in the past month as indicators from the U.S. to Japan show the economic rebound is running out of juice.
Asias big corporate names from Toyota to Singapore Airlines to Samsung Electronics have ridden a wave of recovery from the worlds worst downturn in decades as emerging powerhouses China and India spruced demand with massive injections of government stimulus.
Now, with interest rates rising, government spending programs winding down, the U.S. recovery looking shaky and debt problems lingering over Europe, there are doubts whether Asia, still reliant on exports for growth, can sustain its momentum.
Maintaining the current torrid pace of growth appears unlikely. Chinas economy grew 10.3 percent in the second quarter, albeit slowing from an even more blistering rate in the first. Singapore surged 19.3 percent, its best result since the country began releasing quarterly growth figures in 1975. And South Korea expanded 7.6 percent in the first half of this year, its best performance in 10 years.
Even Cho, counting on an explosion in demand for his companys products driven by expanding use of smartphones and cloud computing, expects the global economy to hit rough waters over the next six months to a year. "But as a broad trend, I expect it, including my company, to grow," he says.
Not many are predicting a setback for Asia as serious as last years recession. The Asian Development Bank estimated that the financial crisis added 60 million people in developing Asia to the ranks of those already trapped in extreme poverty. Those are in addition to 903 million Asians already living on $1.25 or less a day.
Yet the optimism has plenty of caveats. They include how bad things get in the United States, to what extent China can continue to pick up the slack and whether governments can put in place safety net policies that will convince their people to save less and spend more to make up for weak demand from advanced economies.
"I think clearly were going to move into a slower period here," said Bill Belchere, global chief economist for Mirae Asset Securities in Hong Kong. A key factor will be "how deep and how intense is the global slowdown," he said.
No region benefited more than Asia from the coordinated effort to revive the world economy after the global financial system went on life support following the collapse of Lehman Brothers Holdings in September 2008.
Central banks worldwide slashed borrowing costs and governments crafted massive stimulus programs to breathe life back into finance and commerce. The moves are credited with shoring up the global economy and helped spur demand for Asian companies.
A glance at some big name earnings reports tells the story. In South Korea, second-quarter net profit at Samsung Electronics Co. and Hyundai Motor Co. rose to record highs for the second straight three-month period.
In Japan, electronics giants Sony Corp. and Panasonic Corp. returned to profitability after booking losses the year before and both raised full-year profit forecasts even amid a strengthening yen.
Worries center on the United States, where growth in the worlds biggest economy slowed in the second quarter to a revised 1.6 percent annual pace � down from the initial 2.4 percent estimate � on an increase in imports and a smaller buildup in business inventories. Stubbornly high unemployment and a renewed slump in the housing sector suggest the worst may not be over. And while fears about a crisis over Europes sovereign debt woes have abated, Greece, Portugal, Italy and Ireland remain mired in debt that could take years to pare down.
Asian companies, for their part, appear optimistic in the face of signs the U.S. recovery is grinding to a near halt.
South Koreas Hynix Semiconductor Inc., which supplies chips to Apple Inc. for hit products including the iPhone, sees demand holding up.
"In spite of growing concerns about the global economy, we have not seen clear signs of downward adjustment to shipment forecasts from the customer side," Kim Min-chul, the companys chief financial officer, told analysts in July.
AirAsia X, a Malaysia-based long-haul budget airline, is expanding and announced in early August it will begin service to South Korea � its 11th destination � later this year.
"Its obviously not a bed of roses, but at the same time I think what weve learned coming out of 2009 is theres definitely opportunities to create value in an uncertain environment," said CEO Azran Osman-Rani.
A key factor in assessing the fate of regional growth is China, which surpassed Japan as the worlds second-biggest economy in the second quarter.
Premier Wen Jiabao said the slowdown in second-quarter growth from 11.9 percent over a year earlier in the first quarter was partly due to Beijings intervention to cool a credit boom and surging housing prices.
The Reserve Bank of India raised its growth expectation from 8 percent to 8.5 percent for the fiscal year ending March despite having hiked interest rates four times this year.
Ultimately, emerging Asia seems best placed to bounce back from another global economic downturn, said Rob Subbaraman, chief economist for non-Japan Asia at Nomura International in Hong Kong.
He cited the regions high foreign exchange reserves, current accounts largely in surplus, low external and public debt, relatively healthy banks and room to still cut interest rates. Also, China, with public debt at only about 20 percent of gross domestic product, has ample room for a further stimulus.
"If there was a double dip, just like in 2009 I think Asia would bounce back first out of all the regions," he said.
__
Associated Press business writers Joe McDonald in Beijing and Erika Kinetz in Mumbai, India and Associated Press writers Kwang-tae Kim in Seoul, Tomoko A. Hosaka in Tokyo, Alex Kennedy in Singapore, Eileen Ng in Kuala Lumpur, Malaysia and Peter Enav in Taipei, Taiwan contributed to this report.
Posts
0 comments:
Post a Comment