The Roaring Tiger is Here!

Signs of Economic Recovery Across Asia Pacific as 2009 Closes and 2010 Opens

China is leading a regional rebound
In the past few years China has been a key driving power for economic development in Asia Pacific, with tremendous effects on others in the region through partnerships and cooperation. Optimistic economists say that China was not affected by the financial crisis as much as others but of course there are other economists and scholars who beg to differ. Information from Synovate studies show that affected or not, China is certainly the roaring tiger that is now leading recovery across the region.

In the first three quarters of 2009, China's retail sales grew by 15.1% nationwide, or 17% without pricing factors. As a key leading indicator of consumer confidence and economic trends, retail growth was perceived as a very positive sign.

China's automotive industry could possibly be the only one that escaped unaffected by the global economic downturn, especially compared to happenings in that industry in North America and Europe. China sold 10.9 million vehicles in the first 10 months of 2009, which represented a 37.8% increase over the same period in 2008, according to the China Association of Automobile Manufacturers in November 2009.

Apart from retail and automotive, China has also displayed other very positive signs in different industries. The country's software industry, the majority of which is software outsourcing, has grown 38% annually and is expected to reach RMB 1 trillion (USD 150 billion), according to the China Software Industry Association. Civil aviation firms have also reported a total profit of RMB 12.2 billion (USD 1.79 billion) for 2009 (Civil Aviation Administration of China, or CAAC), compared to the loss of RMB 26 billion (USD 3.8 billion) in 2008, an impressive result given the current climate.

The consumption of electricity in China also grew by 5.96% year on year to 3.6 trillion kilowatt-hours. In addition, usage by China’s major industrial enterprises in the first 11 months of 2009 rose 7.8% compared to the same period in 2008, according to the National Bureau of Statistics. What cannot be ignored is the substantial rural development of China in 2009. The Government of China committed RMB 716.1 billion (USD 104.8 billion) from the central budget to the development of agriculture, rural areas and farmers’ lives. That was RMB 120.59 billion more than the investment in 2008, which has helped to further stabilize the development of the agricultural businesses and increase farmers' income.

In Hong Kong, Mainland China's immediate neighbour, things are also looking better than they have in recent months. The value of Hong Kong's total retail sales in November 2009 rose 11.7% compared to a year ago, according to Synovate research. More specifically, the sales volume of motor vehicles and parts showed the most impressive growth increasing by 52.1%, followed by miscellaneous consumer durable goods up 21.1%, electrical goods and photographic equipment up 19%, jewellery, watches and clocks, and valuable gifts up 14% and fuel up 11.3%.

India is also showing positive signs
India, a major economic driving force in Asia in its own right, has also shown positive signs on the road to recovery. Finance Minister Pranab Mukherjee pointed out that India's growth is largely driven by the domestic economy with merchandise exports only accounting for approximately 15% of GDP. Private consumption is expected to bounce back very strongly in 2010 and the growth rate of private domestic demand is projected to reach 8.14%.

IT and IT-enabled services comprise a very important element of the country's economy. This industry is expected to grow by 15% in 2010, compared to a modest but impressive growth of 5.4% in 2009, as reported by IDC.

In order to meet rising demand, Tata Steel Ltd., the world's eighth-largest steelmaker, is raising domestic capacity to 10 million tons from 7 million tons while the Steel Authority of India Ltd., the nation's largest state-run producer, is increasing its capacity to 23.46 million tons from 14 million tons by March 2012. In addition it should be noted that India's industrial production outpaced expectations by growing at 11.7% in November 2009 compared to the year before.

Synovate's conclusion is that this successful economic performance reflects a strong and buoyant domestic market that is supported by the Government’s effective fiscal stimulus measures, which have protected the economy from the worst of the global economic downturn.

China and India are not alone
Indonesia has also ridden out the fiscal storm with little damage to its economy. According to Synovate research, the Ministry for State-Owned Enterprises has targeted the total net profit of state-owned firms in 2010 to reach RPH 90.12 trillion (USD 9.9 billion), 21% higher than the figure in 2009 of RPH 74.28 trillion.

The President of Indonesia, Susilo Bambang Yudhoyono, has stated that in the light of the positive economic prospects the Government has set a target of USD 100 billion for currency reserves by 2014, up from the current USD 65 billion in 2009 and, at the same time, aims to reduce its current unemployment rate of 7.87% to 5% by 2014. The Indonesian Government has also approved an RPH 1.27 trillion (USD 134.7 million) fiscal stimulus programme for industrial manufactures this year.

Singapore and Malaysia are riding the wave as well. According to the Singapore Department of Statistics, retail sales decreased by 1.4% in November 2009 compared with a year ago but sales of watches and jewellery increased by 7.2% and sales of household equipment increased by 14.8%. Apparel and footwear, telecommunications apparatus and computers also reported increases of 1.3% and 4.4% respectively compared to the same period a year ago.

The Singapore Government has stated that small companies will continue to receive financial support from the government. With this extension Singapore expects to support up to SGD 8.4 billion (USD 5.87 billion) of new loans until the end of January 2011, according to Synovate research. Meanwhile in the tourism sector visitor arrivals to Singapore registered an 8.4% growth in November 2009 over the same period last year.

Malaysia has opted to liberalize its services sectors and reduce unnecessary red-tape in order to support the country's economic recovery. Earlier this year Malaysian Prime Minister, Najib Razak, announced various liberalization measures, allowing full foreign equity ownership in 27 services sub-sectors. Malaysia has also emphasized the importance of exports of rubber and related products, the value of which will reach MYR 11.1 billion (USD 3.2 billion), an increase from MYR 7.7 billion (USD 2.2 billion) the year before.

Some good news is finally coming out of Japan, a country that has been in the doldrums for years even before the latest financial crisis. In November 2009 the job market continued to pick up, with 530,725 people, excluding new graduates, receiving job offers. This was up from 528,968 in October. The number of new houses being built in Japan also posted an increase, signalling that consumers may finally be gaining the confidence to make large investments once more. 5.877 million square meters of new housing construction started in November, compared with 5.611 million square meters in October 2009. Large industrial power consumption, a key indicator of activity in manufacturing, increased to 22,524 million kwh from 22,030 million kwh in October 2009 in Japan.

In Thailand the economy is expected to grow 3.5% after contracting by about the same amount last year. The export sector, which accounted for more than 60% of Thailand's GDP prior to the crisis, is showing signs of recovery thanks to the general global recovery. As a result, unemployment in Thailand stood at 400,000 in December 2009, or 1.1%of the working population, down by half from nearly 800,000 in April 2009, or 2.1%, according to the Labour Ministry. This number is expected to decrease even further in 2010.

Conclusion
There is no doubt things have been bad! Effects of the financial crisis have been seen everywhere in Asia Pacific but overall the disruption has not been as severe as elsewhere. The key factor that makes most people feel more confident is that there are signs everywhere in Asia that economies and markets are picking up. China and India are two very important driving forces in the region and they have undoubtedly ridden out the crisis far better than most, as has Indonesia.

The up-coming Chinese New Year season is one filled with heavy spending and a lot of hope for the year to come, both in China and the surrounding countries that share the Chinese culture. Hopefully this should provide another effective stimulus to economic growth around the region! 2010 may well signal the return of two big Tiger economies to supplant the Asian Tigers that were so visible in the 1990s.

The staff at Synovate Business Consulting would like to wish you health, happiness and prosperity for the Year of the Tiger.