A lot of bloggers are linking to this Dave Schuler post about how bad things are in East Asia. I certainly don't dispute the facts in the post, but I'm a bit worried about the implicit schadenfreude that's accompanying a lot of the links.
To understand why I'm worried, consider this latest blast of bad economic news from the FT's Geoff Dyer:
Chinese exports dropped 17.5 per cent in January compared with the same month the year before, the biggest decline in more than a decade as the impact on the economy from the global slump gathered pace.
Imports to China declined by a dramatic 43.1 per cent in a further indication of sharply lower demand in the Chinese economy over the last few months which has caused unemployment to soar.
January was the third month in a row that Chinese exports fell although the pace of decline was much faster than the 2.8 per cent drop in December. The decline in imports also accelerated sharply from the 21.3 per cent contraction in December....
With imports falling faster than exports, China recorded another large trade surplus in January of $39.11bn, just below the record of $40.1bn set in November last year.
Everyone will focus on the export number, because that's seen as the important sign of China's economic health. My concern is with the import number. Brad Setser explains:
What worries me the most? The possibility that the sharp y/y fall in imports doesn’t just reflect a fall in imported components or a fall in commodity prices, but rather a major deceleration in China’s domestic economy.
In some sense, it is hard to imagine a worse combination. China’s export are falling, making China understandably reluctant to allow its currency to appreciate. But China’s trade surplus is also rising … certainly in nominal terms and quite possibly in real terms. That isn’t good for the world.
At a time when the world is short demand, China seems to be subtracting from global demand not adding to it. The best solution: an absolutely enormous domestic stimulus in China.
For the global economy to start growing again, China is going to have to be one of the locomotives. But these kind of numbers are going to make it difficult for Beijing to do anything more on its currency or domestic consumption. This inaction is going to depress the export sectors of a lot of economies, and I'm really worried about the political response to that.
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