Asian Markets: Sunrise For China?

ver the past decade, China has become the textile powerhouse of the world. Exports have
soared by double digits every year. But China’s textile industry had a tough year in 2008 with its
first decline in a decade, and the government is drafting a stimulus package to boost sales and
create jobs.

In 2008, China’s textile and apparel exports were worth US$185 billion – 8.2-percent more
than in 2007. Higher labor costs, the renminbi’s rising value and weakened export demand are the
major reasons for pessimism about the future of its textile industry. But with some 20 million jobs
in that sector, China wants and needs growth in textile exports. The Obama administration said
China’s trade surplus is unacceptable, and it wants Beijing to help balance flows. But China
opposes any return to quotas on its textile exports and seeks steady growth in those exports
despite weak prospects for 2009.

The game in the world market is, “Who’s to blame for the financial crisis?”  The crisis
has been attributed to a combination of macroeconomic imbalances and a total lack of risk and money
management by government agencies. For some experts, strengthening existing global financial
institutions such as the International Monetary Fund is a key factor in helping the many countries
that either are in crisis or could be hit by the global recession. However, a new attitude in the
financial world – more responsibility, which means less gambling – would be more helpful.

Emerging from the crisis requires actions and not blame. It has been common to blame China
for any problem, which leads to more protectionism. Policy makers in many countries have unveiled
stimulus packages to either respond to the crisis or provide ammunition for defense in the future.

Much of the debate has moved on to creating a new regulatory environment, and there is a need
for Asia to boost domestic demand. Since 1999, Chinese authorities have promoted private
consumption as a major driver of growth, along with investment and exports, to help reduce economic
volatility and uncertainty. Progress has been slow, but after weeks of bad news, it seems there is
some hope – at least for China. Many Chinese textile manufacturers seem fed up with price
discussions abroad and are selling domestically.

April/May/June 2009