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Asia Benefits From China's Shopping Spree

Beijing runs a trade deficit with its neighbors -- a key factor in the region's rebound.

September 01, 2003|Tyler Marshall | Times Staff Writer

HONG KONG — With her eye-catching pearl earrings and dazzling gold bracelets, Shanghai housewife Wu Ping personifies the bright side of Asia's economic future.

Wu is one of a growing number of mainland Chinese tourists flooding into Hong Kong after an easing of visa restrictions in recent weeks. With thick wallets and liberal spending habits, they are helping revive the territory's sagging economic fortunes.

"I have no budget for this trip," she said, pausing to talk with a reporter as she browsed through racks of women's clothing at a fashionable department store on her first day in Hong Kong. "If I like it, I'll buy it."

On a grander scale, China as a nation is making its own impact in countries throughout East and Southeast Asia as it shops in ever greater quantities for imports needed to sustain its phenomenal growth. Undeterred by slowdowns elsewhere and unfazed by the outbreak of pneumonia-like SARS last spring, which crippled many economies in Asia, China's explosive expansion hasn't missed a step.

Asia-based economists estimate that China's spending on capital investment alone is running more than 30% above last year's rate, and the country's growing appetite for imports is a key factor driving a stronger-than-expected rebound in nations throughout much of East and Southeast Asia.

"China is now a source of strength for everyone in the region," said Tim Condon, chief Asia economist for ING Financial Markets in Hong Kong.

The perception of China as a locomotive for growth may seem odd to Americans far more familiar with the accusations that cheap Chinese imports are taking their jobs. U.S. Treasury Secretary John W. Snow is expected to press China on that issue when he visits Beijing this week, and is reportedly ready to ask China to revalue its currency as a remedy.

The reason for the different views is apparent.

Whereas China has a trade surplus of more than $100 billion with the United States, it now buys more goods than it sells in its trade with Asian nations.

Michael Kurtz, Asian strategist for investment bank Bear Stearns, noted, for example, that South Korea's trade surplus with China has moved steadily upward from about $500 million to $800 million per month over the last 18 months as newly rich consumers in China's fast-expanding moneyed class snap up consumer electronics made in South Korea.

"China is now huge for consumer electronics as well as raw materials and other basic goods from the region," Kurtz said.

According to China, its imports rose a whopping 44.5% during the first half of this year, to $186 billion. Li Yushi, vice president of China's Academy of International Trade and Economic Cooperation, a Commerce Ministry think tank, told the state-run People's Daily that the jump was driven by rising domestic demand, lower tariffs and an easing of import license constraints.

Although the Communist government in Beijing acted last month to head off an overheating of its economy by increasing deposit requirements for domestic lending institutions, there has been no indication it plans any restrictions on imports.

Li told the newspaper in July that an increase in imports "is helpful for driving China's economy, in my view."

To be sure, other factors have acted to lift the region's fortunes. The U.S. recovery is boosting economies such as those of South Korea and Taiwan, which rely heavily on sales to America's high-tech sector, and favorable commodity prices have helped boost growth in countries including Malaysia and Thailand.

Even Indonesia has shaken off the impact of terrorist bombings to record higher than expected growth, thanks in part to continued high oil prices.

But it is China's new role as an engine for expansion that is helping Asia generate its own growth.

Some believe the development reflects a gradual shift within the region as China begins to replace Japan as Asia's pivotal trading power. Fred Hu, a managing director of Goldman Sachs Group, noted that China already buys as much as Japan from the rest of Asia, even though China's economy is only one-quarter the size of Japan's.

"The influence of China on the region will continue to grow," he said.

Although China made headlines this year by replacing the U.S. as the largest exporter of goods to Japan, Japan's exports to China are also soaring, mainly because its capital equipment industries are well positioned to meet China's needs.

Back in Hong Kong's prime shopping areas, mainland China's contributions make for an even rosier picture. James Lau, who sells watches at a well-located store, says the majority of his customers are now rich mainlanders.

Three in 10 will buy a watch costing between $1,280 and $2,500, he said.

"We may consider hiring more salesmen."

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Tammy Wong in The Times' Hong Kong Bureau contributed to this report.

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