The U.S. Recession Knows No Borders

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Tony Sagami takes a closer look at how the U.S. recession is affecting China's economy. In this issue of Money and Markets, Mr. Sagami explains how China's slowdown affects more than its own economy.

Tony Sagami takes a closer look at how the U.S. recession is affecting China's economy. Mr. Sagami explains how China's slowdown affects more than its own economy.

The U.S. recession is spreading across the Pacific Ocean to the Asian economies. The Chinese National Bureau of Statistics GDP data for 2008 reports the Chinese economy expanded by 6.8% in the last quarter of 2008. For the year, the Chinese economy grew only 9%, down from the 13% growth rate in 2007. For all of 2008, exports were up by just 17.2%, a drop from 25.7% in 2007. Electrical output was also down for the fourth quarter of 2008 at 6% below the same period in 2007.

China's slowdown is going to affect more than just its own economy. And the steepness of this slowdown is likely to have a significant impact on much of the rest of Asia, which relies heavily on demand from China. It is already affecting Japan, South Korea, and Australia.

The Japanese Finance Ministry reported that Japanese exports plunged by 35% in December from the year before. South Korea's economy contracted 5.6% last quarter, twice as bad as had been expected. Korean electronics giant Samsung reported its first ever quarterly loss; the $674 million loss was two times larger than the Wall Street crowd was expecting.

Australian Prime Minister Kevin Rudd warned last week that the slowdown in China will cut back $3.3 billion of business from the Australian economy. He went on to say, "And that means a massive five billion dollar fall immediately in Australian exports, just because of China alone, and with a consequential impact on Australian jobs."

In fact, Australian mining giant BHP Billiton is closing a nickel mine and cutting 6,000 jobs around the globe because of weaker demand from China.
"The United States has become a nation of consumers. And countries that make all the toys, clothes, and other consumer goods are seeing their economies slow as Americans buy less," Sagami states.

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Tony Sagami, a veteran investment advisor and a leading expert on Asian markets, is the owner and founder of Harvest Advisors, an investment research and money management company. Mr. Sagami has been managing money for more than 20 years and is one of the early pioneers in the application of technical and quantitative analysis to mutual funds and stocks. He is a featured contributor to Weiss Research's daily e-letter, Money and Markets and monthly Safe Money Report as well as the editor of Asia Stock Alert.

Prior to establishing his own firm, Mr. Sagami was managing director at W.E. Donoghue & Co, serving additionally as the director of investment. During his successful career, he also held the position of account executive at Merrill Lynch.

Mr. Sagami's views on Asian markets, specifically Chinese investments, have been featured in publications such as The Wall Street Journal, Barron's, Kiplinger's, Smart Money, Business Week, New York Times, Washington Post, Investors Business Daily, Bloomberg, Financial Planning Times, Mutual FundsMagazine, Chicago Tribune, and the LA Times, as well as on CNBC and CNBC Asia.

Mr. Sagami holds a degree in economics from the University of Washington.

Money and Markets ( is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit


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