John Auther's 'The Short View' is always one of the most interesting features in the Financial Times. However his column, and accompanying video, on 10 December is particularly important. It shows that the latest figures for exports for both China and South Korea show year on year falls - China by 2.2 per cent in November and South Korea by 18.3 per cent.
China's currency was appreciating in this period against almost all other currencies, as it was following the dollar upwards, but the exchange rate of the South Korean won has fallen this year by 25 per cent against the dollar and renninbi and 46 per cent against the yen - ruling out upward movements in South Korea's exchange rate as an explanation of the export decline.
These falls in exports are important indices of the extreme force of the recessionary tendencies operating in the world economy. China and South Korea are two of the most competitive export economies in the world. If even they are unable to maintain exports in the current world economic situation this indicates clearly the dramatic force of contractionary economic pressures.
For China this increases even further the importance of the huge domestic stimulus programmes it is projecting. If the international recession is so severe that China is unable to count on significant export growth then a huge deployment of resources in its domestic economy is required to maintain high GDP growth levels. There are no financial obstacles to a huge Chinese recovery package, given its $1.9 trillion foreign exchange reserves, but gearing up for the huge investment programmes required will put great strain on China's project management capacity and strength of its companies.
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