Affect of recession in asian market due to recession in foreign market

with the US economy sinking into recession, the question, which arises, is whether Asia is immune from
recession. Many had thought that the "decoupling" theory would work i.e. the theory that Asian
economies are unlikely to be affected by the US recession. While it is true that the "decoupling" theory
may not have worked as was expected (since the MSCI Emerging Asia Index was down by 25 per cent at
one point from its October high, last week), one can still say that this time around the emerging
economies would be in a much better position compared to the previous US downturns.

It is true that exports and profits would be hurt and it is also true that Asia is also exposed to the sub-
prime mess. Singapore, Hong Kong and Malaysia have exports to the US, accounting for 20 per cent or
more of their GDPs. Singapore's exports to the US fell by 11 per cent and Malaysia's by 16 per cent.
Despite all this, one can still be optimistic because China's and India's exports to the USA are equivalent
to 8.0 per cent and 2.0 per cent of their GDPs respectively. And other important factors are that in East
Asia, the macroeconomic fundamentals are strong i.e. they have huge foreign exchange reserves,
current account surpluses, strong economic growth rates etc.

after effect

In addition, their domestic demand is also very strong and governments have more flexibility. And some
economies have already decoupled. For instance Malaysia's exports to the USA fell but still their GDP
increased from 5.7 per cent to 6.7 per cent in the third quarter of last year. Many analysts now say that
in 2001 Asian economies were affected not only due to declining exports, but mainly because
investment fell sharply. But today firms are in a much better position; capacity utilisation is high across
the region, corporate balance sheets are stronger and real interest-rates are low, thereby indicating that
investment is unlikely to fall. They can also implement fiscal stimulus measures to boost growth since
they are facing budget surpluses.

So, it would be unwise to say that Asian economies will be badly affected. They will be affected but by
much less than in the past. At least, it look set to suffer fewer losses than the previous financial trouble.
That is, the "decoupling" theory may still be alive and well.

Some of foreign companies in asia are

1. BMW , a german car company

2. Skoda , which is a part of Volkswagen Group and is based in Czech Republic
3. Royal bank of Scotland
4. Bank of America

Problems faced by foreign companies on entering asian market

1. First and foremost, Asians have a different culture from the US and Europe. The way the asians carry
out their business tends to differ from the foreigners. Hence, cultural differences are always the root of
conflicts and disagreements between the overseas companies and the locals.

 
2.Language barrier is a huge issue for many foreign companies when they want to enter into the asian
market. Previously most of the Asians were unable to communicate in English and many foreigners are
unable to speak the asian language. One must be able to understand what the other party wants before
conducting a business. Thus, more foreign companies would need the help of interpreters and translators
to communicate with the locals.
3. and Being able to speak the language does not mean that the party will be able to

converse effectively. The Chinese may work using the Chinese language but they also inculcate their
values in their business. An effective translator would not only be able to speak the language but must
also be familiar with both the Chinese culture and that of the foreign companies as well.

4. the Chinese are very particular about having a good relationship with others. The way to move around
in China is through “Guanxi”, network. The Chinese would put in a lot of effort in socializing and building
up relationships with others as they believe that “Guanxi” is the

foundation of a successful business. The advantages of “Guanxi” in China allow them to

develop trust with their business partners and prevent any hiccups with the higher authorities.

5. At times, foreign investors may think that socializing too much is a waste of time but to the Chinese, it
is actually all part of doing business. Thus, foreign investors would need to develop their network if they
would want to expand in asian market