Asian manufacturers looking closer to home for new business

HONG KONG -- Weakening European demand is forcing Asian manufacturers to drum up business closer to home.

Chinese manufacturers are marketing at trade shows in hopes of attracting domestic buyers for the late-January Chinese New Year's holiday. They're also launching a campaign — called "Made by Hong Kong" — to "promote a Hong Kong lifestyle that many Chinese aspire to," according to Dennis Yau, director-general of the Federation of Hong Kong Industries, which represents 3,000 manufacturers, most with factories in China.

Elsewhere in Asia, manufacturers are trying to tap regional demand. In Jakarta, Sumatra Coffee Luwak is increasingly focusing on markets outside Indonesia such as China, Singapore and Thailand. Philippines-based Fruits of Life has begun marketing its coconut water in Hong Kong and other parts of Asia.

Fruits of Life hopes to start exporting to Europe but fears that the economic turmoil could hurt its ability to do so: "If there's a crisis, everyone will be affected, and buying power will go down," said Sonia Tan, general manager at Fruits of Life.

The U.S. housing meltdown and Europe's debt crisis are pushing exporters to diversify beyond slow-growing advanced economies. In a survey this year by the Chinese Manufacturers' Association of Hong Kong, nearly 60% of the 213 respondents said they were selling products to the mainland, while another 20% plan to do so.

Asian governments are also acting to boost domestic, intra-regional and emerging-market demand, says Ganeshan Wignaraja, principal economist in the Asian Development Bank's Office of Regional Economic Integration.

Indonesia is cutting interest rates to make credit affordable to businesses, while China and South Korea are holding interest rates steady. The Chinese government has given small and midsize enterprises tax incentives and eased bank reserve requirements in some cases to boost lending to these entities.

Within East Asia, trade is already growing, making up 12.7% of the region's gross domestic product in the last two years, compared with an average of 12.2% of GDP in the eight years before that, according to ADB. Japan, South Korea and China are pushing for a trilateral free trade agreement that would accelerate this growth.

For now, the European Union remains China's largest export market, and an important one for many other Asian economies. As the EU's growth declines, it's dragging down exports from Asia. Singapore's exports dropped the most in 30 months in October. Chinese exports grew at their weakest level in eight months in the same month. Its shipments to Europe fell 9% month-over-month.

Chinese manufacturers are "trying to compensate for the decline in exports by selling more to the mainland market," says Yau. "We're making some headway.' "

Last week, Wang Shouwen, head of the Foreign Trade Department of the Ministry of Commerce, said the world's second-largest economy will boost its exports to fast-growing developing markets next year to offset slowing demand from Europe and the U.S., according to Xinhua, the state-run news agency.

Yet exports "aren't things you can turn on and off like a switch," says Alistair Thornton, China analyst at IHS Global Insight. "If the European market dries up, you can't stimulate demand to take its place immediately."