July 24, 2008 | posted by Michael Baxter in China, Japan |

These days we are not supposed to be so reliant on Uncle Sam. If America sneezes the rest of the world catches a cold, they used to say. Well, right now, the US is doing far more than sneezing. The truth is that Uncle Sam has been confined to bed, wrapped in blankets, a hot water bottle by its feet while it sniffles and moans.

The UK is, of course, in the doctor’s surgery room, waiting to be told it too can have a sickie.

But Asia, at least, and maybe mainland Europe are supposed to be above all that now. The world has decoupled. The US is no longer the world’s hub.

If that is so, explain this. Japan saw its first fall in export orders in June for four years; now fears are growing the economy of the Rising Sun could be heading for an economic sunset – or at least a recession.

Economists had expected to hear exports had risen.

These days, the global economy is a bit like that children’s rhyme about our bones. You known the one: “The foot bone’s connected to the leg bone, the leg bone’s connected to the knee bone,” etcetera.

Well, China is connected to Japan, Japan is connected to the US, the US is connected to Europe, Europe is connected to China. Sorry about the complete failure to make that rhyme, but you get the point.

Almost 20 per cent of all Chinese exports are to the US. Just under 10 per cent of its exports are to Japan. Around 20 per cent of Japan’s exports are to the US. The list goes on. World trade is like a complex web, but the US still stands pretty much at the centre.

If Merrill Lynch’s forecast, reported here yesterday, that the US will contract by 0.5 per cent next year is right, then expect to see a big fall in US imports. This will have a big impact on the Chinese and Japanese economies.

For some time, economists have been arguing that China needs to see more economic impetus coming from its own consumers. This in turn will lead to a rise in Chinese imports. And enable the likes of the US to export their way out of trouble.

2009 will see the truth of those words, as China is left with no choice but to look towards its own citizens for the next phase of growth.