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The uncertainties swirling around world trade put a damper on the Asian economists' usual optimism. Their forecasts for major Pacific nations:
JAPAN. The focus of the American protectionist furor is Japan, which racked up a $37 billion trade surplus with the U.S. last year. Trying to curb that imbalance, Prime Minister Yasuhiro Nakasone has moved in 1985 to modify regulations that block imports and has gone on national television to urge the Japanese people to buy foreign goods. Nakasone also hopes to spur imports by stimulating the Japanese economy. Last month the government unveiled a program to boost real estate development and ease restrictions on consumer loans.
Bunroku Yoshino, president of the Institute for International Economic Studies in Tokyo, predicted that Nakasone's modest plan would have little impact. He expects the Japanese growth rate to slip from 4.5% this year to 4% or even 3.5% in 1986, primarily because the country's exports will increase at a slower pace. The government is reluctant to adopt more potent stimulative measures, like large tax cuts, because it wants to keep the Japanese inflation rate, only about 2.5% this year, firmly under control.
SOUTH KOREA. From January through September, South Korea's exports were down 1.3% from the same period a year ago. Some of the most important industries were hardest hit: steel exports fell 8.4%, and electronics shipments were off 7.2%. The export decline helped slice South Korea's growth rate from 7.5% in 1984 to about 4.8% this year.
The government is now stimulating the economy in hopes that increased demand by Korean consumers will make up for lost exports. Public spending is up about 10% this year, and the money supply is expanding at a 15% clip, compared with 10% in 1984. Economist Suh forecast that the government's generosity will help boost the South Korean growth rate slightly, to 6.2%, next year.
CHINA. Under Deng Xiaoping, China is rapidly transforming its economy by loosening centralized Communist control. State-owned businesses can now keep part of their profits and thus have an incentive to be more productive. Most important, China is opening its door to the Western consumer culture. Color television sets, washing machines and refrigerators are becoming commonplace in big cities.
For the Chinese outlook, TIME's Pacific Board invited its first guest economist from the People's Republic: Huan Xiang, the director general of Peking's Center for International Studies. Huan reported that Deng's reforms have been a tonic for the Chinese economy, but its runaway 12% growth rate is a bit more than the country can handle. The quality of many manufactured goods is suffering, and inflation is a disturbing 8%. A flood of imports has created a record trade deficit of more than $4 billion this year. Said Huan: "We have been on a spree of building too much, spending too much and importing too much."
To slow things down, the government has curbed the money supply and put new limits on foreign purchases. Two weeks ago, for example, Peking slapped a two-year ban on imports of cars and trucks, Huan predicted that all those measures would reduce growth slightly, perhaps to 9%, next year. Despite China's growing pains, Huan thinks the country will stay on its new course. Said he: "We must not be afraid of learning from the capitalists."