Asia to take a beating if recession hits anew

Global trade volumes could drop by up to 15 per cent by early next year if the world enters a recession similar to the downturn caused by the 2008 financial crisis, Standard Chartered Bank's chief economist for Asia warned yesterday.

Nicholas Kwan said Asian economies would also be hit if trade collapsed as a result of deeper financial problems in the euro zone, triggered by a Greek default.

'In the next six months, the decline in trade could be 10-15 per cent globally. In Asia it would be slightly less and China less still,' he told the Journal of Commerce's Trans-Pacific Maritime conference in Shenzhen.

By comparison, global trade slumped 25 per cent between 2008 and 2009. In China, trade volumes dropped by 12 per cent and in the rest of Asia by 20 per cent over the same period, Kwan said.

He said the mainland and Asia were now more exposed to Europe's financial problems than they were during the 2008 crisis, indicating there could be a deeper impact on trade over the longer term. This is because Germany and France, whose financial institutions are heavily exposed if Greece defaults, are big trade partners of Asian economies.

Kwan said the recent Greek bailout agreement reached by Germany and France offered some optimism. But uncertainty over the euro zone's financial woes would not be lifted until at least December when the International Monetary Fund would be due to decide whether to release Euro8 billion in aid to Greece.

Kwan also doubted 'China could save the world again' as it did three years ago because the mainland's debt levels had already soared over stimulus packages.