CHINESE INFLUENCE PERMEATES ECONOMIES OF EAST ASIA

CHINESE INFLUENCE PERMEATES ECONOMIES OF EAST ASIA

Chinese business influence has a far larger impact on Asia than many outsiders appreciate.

Not only are four of the most dynamic economies in East Asia dominated by the Chinese - China, Hong Kong, Taiwan and Singapore - but a huge percentage of the business activity in most other countries in Southeast Asia are also in the hands of those countries' own ethnic Chinese communities."You can't fight the tide of Chinese entrepreneurs," said one Singapore- based consultant.

Following is a rundown of what the Year of the Monkey holds for the four major Chinese nations in East Asia.

CHINA. China's economic growth for 1992 should remain at about the same level it was in 1991, at around 7 percent, said Pauline Loong, head of China research for Jardine Fleming. Industrial output should remain high this year, restrained only by government policies to cap inflation.

Imports should grow faster than exports, but in absolute terms the country should have a small trade surplus. That surplus will be smaller, however, than this year's $8.1 billion because China has more money to spend and because it wants to avoid further friction with trade partners like the United States.

One of the biggest clouds on the horizon for China this year, analysts say, is China's most-favored-nation status with the United States, given congressional furor over human rights and the Tiananmen Square disaster. MFN allows developing countries to bring goods into the United States with little or no duties.

The U.S. bill, imposing stiffer limits on China and known as the U.S.-China Act of 1991, passed the House of Representatives overwhelmingly and now faces a U.S. Senate vote. At issue is whether President Bush can sustain his expected veto.

Another major concern for China this year is its productivity, analysts say. As a semi-communist country, China has stressed production quotas rather than consumer demand. As a result, its stockpiles are huge, depending on the estimate they could be as large as 20 percent of gross national product, or up to $300 billion.

HONG KONG. Hong Kong should see its economy grow by about 5.8 percent this year, said Stella Fung, Hong Kong analyst with Citicorp. This compares with about 4.2 percent in 1991.

Hong Kong's growing trade will continue to underpin its economy. This year also will see a recovery in private consumption, which was dampened last year by the uncertain U.S. and European economies as well as worsening Sino-U.S. trade relationship in the face of a U.S. Special 301 action on intellectual property rights just resolved.

Hong Kong will remain the major conduit for activity between China and the outside world in 1992. According to official figures, Hong Kong's investment in China totals $26.5 billion, making it that country's largest investor. Hong Kong and China are also each other's most important trading partner. Total bilateral trade in 1990 was almost $47 billion.

For geographical and cultural reasons, Hong Kong investors tend to concentrate their investments in Guangdong and the Taiwanese in Fujian.

TAIWAN. Taiwan's consumer confidence was evident last week as Taipei retailers reported Lunar New Year's spending up 10 percent to 20 percent driven by larger annual bonuses. For a couple of sectors, these amounted to six months' added pay. Taiwan's currency also appreciated more than any other currency in the world last year at the same time the government cut tariffs and allowed a range of imports previously barred.

Although relations between Taiwan and China are improving, both countries still are expected to use Hong Kong as their message and middleman for the foreseeable future. Even if the legal and political barriers are lifted soon, which is not likely, it still would take some time before Hong Kong was pushed aside, analysts say, because Hong Kong has a strong working knowledge of Chinese economic and legal policy.

Hong Kong-based Political & Economic Risk Consultancy expects Taiwan's economy will grow by 7.4 percent in 1992, up from the 7.0 percent level in 1991. One major problem affecting the country is higher wages, which are starting to make the country less competitive. At the same time, Taiwan is realizing the difficulty of moving into more sophisticated markets quickly.

Still, limited options in 1992 will force Taiwan to be more aggressive with its $80 billion in foreign exchange reserves, the Political & Economic Rish Consultancy believes. This will show up in faster domestic growth and industrial upgrading, deeper integration with China and increased acquisition of foreign technology and marketing channels.

Taiwan and China's total bilateral trade was about $4 billion in 1990, compared with just $78 million in 1979. Taiwan only really got started integrating with China in the late 1980s. But it is China's fourth-largest investor at $2 billion. China is now Taiwan's fifth-largest trading partner, while Taiwan is China's sixth-largest.

SINGAPORE. Look for slightly slower growth in Singapore in 1992 of about 5.5 percent compared with more than 6.5 percent in 1991, said Kaan Quan Hon, chief economist for Singapore-based DBS Investment Research.

The slowdown stems from continued recovery problems in Europe and North America as well as the greater maturity of the Singapore economy.

Singapore has targeted China as part of its policy to diversify away from its dependence on the U.S. market. To date it has worked many of its China deals through Hong Kong.

Seventy-eight percent of Singapore's population is of Chinese descent. But analysts believe Singapore is in the weakest position of the three offshore Chinese countries as far as its ties with China go.

Most obviously, it lacks the geographic proximity to position it as an obvious middleman with the outside world. It also has a very different business culture than Hong Kong or Taiwan, preferring large business- government tie-ups to budding entrepreneurial companies.

Still, Singapore also has large reserves and is a major financial center. It could emerge as the offshore Switzerland of the group, said one analyst.

The Political & Economic Risk Consultancy, meanwhile, sees a somewhat tougher outlook for Singapore in 1992 due to the country's dependence on the United States for pass-through or entrepot trade. Singapore's annual trade volume is three times that of its gross domestic product.

The Political & Economic Rish Consultancy also sees a cautious manufacturing sector and a troubled chemical industry. But the country is also small and flexible and can respond quickly to global shifts.

Bruce Gail, Southeast Asia analyst with the Risk Consultancy Group, believes Singapore may be making a mistake by encouraging its citizens to speak Mandarin and largely ignoring Bahasa, the language spoken by 200 million Indonesians and Malays in its own backyard.

"The Chinese are not going to treat (Singapore) as any closer just because they speak Chinese," he said.

But others see a potential role for Singapore as a manager of large-scale infrastructure projects given its success with telecommunications, shipbuilding and the like.