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Economic uncertainty spreads
(Agencies)
Updated: 2008-10-11 16:21 But the International Monetary Fund predicts that growth in the 15 nations that use the euro will fall during the second half of this year and barely rise in 2009. (And that estimate was prepared in advance of this weekend's meetings of the monetary fund and World Bank in Washington and is already considered out of date by many experts.) Britain's economy, the only major European one outside the euro zone, is expected to shrink through next year. Many in Asia, despairing of help from the West, are looking toward Beijing. "The United States is beyond saving - our only hope rests with China," Dick Chen, a middle-age manager, said as he watched the markets with dismay Friday in a Hong Kong trading room. For the last six years, the Chinese economy has charged ahead despite every obstacle. In fact, Beijing was more concerned that the economy would overheat, spurring inflation. So China ran a budget surplus, repeatedly raised interest rates and required banks to deposit a remarkable one-sixth of their assets as reserves to the central bank. Now, facing slower growth, Beijing is suddenly trying to prod its economy by cutting interest rates and taxes and lowering reserve requirements. Economists see annual growth slowing from 12 percent a year ago to 8 or 9 percent this winter. South Korea is already hurting. "The problem is the global recession - people don't buy consumer electronics, this means less exports and fewer dollars for us," said Choi Hae Pyong, whose company south of Seoul manufactures electronics parts. "It's like walking in a thick fog." Lower exports have an impact throughout Asian economies - on real estate, for instance. As long as the region kept exporting and kept saving the proceeds, investors bid up real estate and share prices. Now prices of both have a long way to fall. This week showed the first concrete signs that the financial crisis might be starting to damage Japan's broader economy. On Wednesday, Tokyo Shoko Research, a market research company, released data showing the number of corporate bankruptcies jumped 34.4 percent last month from a year earlier, to 1,408, a five-and-a-half-year high. Economists said the increase might reflect a growing credit squeeze in which Japanese banks cut back on loans to smaller, lesser-known companies. Since mid-September, lending to even creditworthy companies has dried up in Europe. Last March, for example, Thomas Serval arranged a private equity investment of three million euros for his small French company, which develops Bluetooth devices to read data from bar codes, ubiquitous in modern commerce. But he is carefully nursing the money. Mr. Serval, like other business executives in Europe, has had to cancel several projects because his suppliers could not get loans. His banks now refuse unpaid invoices as lending collateral, a recent reversal of their longstanding policy. Banks, in a fashion, are blaming consumers. Steven Cooper, managing director for local business banking at Barclays, said some small businesses simply failed to accept that their businesses would make less money in the future. Unemployment is rising, sapping the client base of restaurants and hotels, but nervous suppliers are often demanding more money up front, squeezing businesses on both. |
