SEOUL — Asian economies are emerging as clear winners in the race to a full recovery, aided by demand from Western shoppers and success in containing Covid-19, which has helped the region keep its factories humming.
China remains on track to grow nearly 2% this year, the most of any major economy, while the world is expected to contract by 4.4% and the U.S. by 4.3%, according to the International Monetary Fund. Other Asian economies are close behind China: Vietnam is expected to grow 1.6%, Taiwan is expected to be flat from a year earlier and South Korea is forecast to contract modestly at 1.9%.
But they also derive an especially large part of their growth from exports of manufactured goods to the rest of the world, especially the U.S. and Europe. Asian economies are among the largest producers of laptops, communication equipment, TVs and other household goods that have experienced surges in demand as the pandemic forced people to stay home.
So as Westerners consume, Asia enjoys much of the benefit.
“We call it the Zoom boom,” said Rory Green, an economist at research firm TS Lombard who covers China and North Asia, referring to the increase in demand for screens and laptops as more people work from home.
A key question is whether all that demand can be sustained as Covid-19 caseloads surge again in the West. Stimulus paychecks have been spent and even if cases of infection come down again, there is a limit to how many smartphones and other devices people need to work and study from home.
For now, though, daily life looks much better in many parts of Asia. In Taiwan, an annual gay-pride parade drew thousands of people last month. South Korea has hosted international touring performances of Andrew Lloyd Webber’s “The Phantom of the Opera” and “Cats,” at a time when Broadway theaters in New York remain closed.
In China, restaurants are buzzing and leisure businesses like water parks have reopened, as entertainment companies like Walt Disney Co. lay off thousands in the U.S. Domestic airline capacity in China is still about 35% below pre-pandemic levels, but that is far better than in the U.S. and Europe, where it is down by more than 60%.
But containing Covid-19, as many Asian nations have done, isn’t always enough. In Thailand, where caseloads have been kept low, the economy is expected to contract by 7.1% this year, in large part because it is so reliant on international tourist arrivals — which have dropped to effectively zero — according to the Bank of Thailand.
A few other Asian countries are also looking particularly bad, including India and the Philippines, which are set to contract by 10.3% and 8.3%, respectively. Both were hit particularly hard by Covid-19 and India lacks a big electronics-export industry.
In China, Guangzhou Viewo Electronics Co., a Guangzhou-based television exporter, saw orders surge by about 50% from a year earlier as soon as the factory reopened from a virus lockdown in March, said Michael Yang, an overseas sales department manager. The company had to hire more workers to cope with all its orders, he said.
Demand has been so strong that the company is now struggling to keep up. Shortages of raw materials have driven up its prices by 50%, he said.
“We continued receiving new orders from our customers,” but the factory can’t fulfill all of them, Mr. Yang said.
With large companies like Samsung Electronics Co., Huawei Technologies Co. and Taiwan Semiconductor Manufacturing Co., Asia is home to many of the world’s top electronics makers. Globally, about 97% of the world’s handsets and 60% of the world’s PCs are made there, in addition to many of the world’s electronic appliances, according to Counterpoint Research.
In October, nearly all of Taiwan’s 11.2% year-over-year export growth came from electronic components and devices, according to TS Lombard. Without overseas shipments of these goods, Taiwan’s exports would have gained just 0.2% from a year earlier.
China’s trade surplus with the U.S., meanwhile, widened in October as demand for medical supplies and work-from-home gear remained robust. South Korea’s October exports to the U.S. and European Union jumped 3.3% and 9.5%, respectively, in contrast to declines for most other major regions.
Not all Asian manufacturers are experiencing a full rebound. In South Korea, YoungjinIND Co., which makes chip-making equipment, says it has only recovered half of its orders from pre-pandemic levels due to weak domestic demand.
“I’d cautiously aim for next summer for a full recovery,” said Park Jong-jin, the company’s head of planning.
Perhaps the biggest risk for Asian economies going forward is that American or European consumers will become less confident about spending as Covid-19 cases rise. A retail survey conducted by consulting firm Deloitte found that 38% of American consumers who were polled plan to spend less on holiday shopping this year due to economic concerns, while spending per household is set to drop 7% from a year earlier.
On the other hand, Asian consumers — particularly in China — are becoming a more substantial force in the world economy, which could help offset any weakening of demand from the West. China is expected to surpass the U.S. as the world’s largest retail market this year, according to research firm eMarketer. And while the U.S. may reclaim the top spot in 2021, China is likely to be the larger market in the long term, the firm says.
Retail spending in China took longer to recover than the country’s manufacturing sector this year. But it has shown strength in recent months, which in turn has improved results for international companies selling into China.
Japanese Uniqlo operator Fast Retailing Co. expects net profit to rise 83% this fiscal year thanks to stronger China sales.
“While the new waves of Covid have created a whole new risk in terms of where the global economy may go…there will continue to be enough global demand for goods that the Asian supply chains should be relatively engaged,” said Steve Cochrane, chief APAC economist at Moody’s Analytics in Singapore.
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