Problems in Europe, elsewhere affecting Asia

An electronic stock indicator in Tokyo posts the bad news that Asian stock markets tumbled Friday as traders exercised caution ahead of the release of trade data from China.
An electronic stock indicator in Tokyo posts the bad news that Asian stock markets tumbled Friday as traders exercised caution ahead of the release of trade data from China. (SHIZUO KAMBAYASHI / Associated Press)
By Kelvin Chan, Associated Press
Posted: August 12, 2012

HONG KONG - Gloomy economic reports from Asian nations show that Europe's debt crisis and the global downturn are weighing on the region even as governments respond with extra spending and lower lending rates.

Hong Kong and Singapore, financial centers highly exposed to global trade, reported weak second-quarter GDP on Friday, the same day figures from China showed its trade slowed more than forecast in July.

China, the world's second-biggest economy, said its export growth slumped to 1 percent in July from the previous month's 11.3 percent in a sign of global weakness. Growth in imports sank to 4.7 percent from 6.3 percent in June, indicating that domestic demand remains weak.

Reports this month from South Korea and Taiwan underlined the challenges that the export-reliant region faces.

"Given this backdrop, the 1 percent from China merely reconfirmed that the severe headwind from the eurozone crisis and the U.S. slowdown is blowing harder," Societe Generale economist Yao Wei said in a report.

China has cut interest rates twice since June and boosted infrastructure spending to combat the downturn.

South Korea held interest rates steady this week after a surprise cut last month.

But it warned that Europe's debt crisis would result in the South Korean economy's underperforming for a sustained period. Central bank watchers predict another rate cut soon.

Singapore's economy shrank 0.7 percent in the April-June quarter from the previous quarter on weak global demand.

Hong Kong's economy grew a "tepid" 1.1 percent in the second quarter as the European crisis cut demand for exports, the government said. It lowered its full-year growth forecast to 1 percent to 2 percent, from 1 percent to 3 percent.

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