Hong Kong, New Delhi
Sanjay Janghala walks across a humming factory floor as 400 employees of Orient Craft Ltd stitch together women’s blouses and embroidered dresses.
“That’s for Ann Taylor, that’s for Gap,” said Janghala, the factory head, before stopping to pick up a white dress. “This is for J. Crew. This is all value added. This is all cut by hand.”
This factory outside of New Delhi is just one of Orient Craft’s 26 facilities in India, which together export nearly 250,000 pieces of clothing a day — more than 60 per cent of which flow to the US. Annual revenues at the closely held company have grown steadily to more than $300 million (Dh1.1 billion).
It’s just one example of how Asia’s export engines are motoring again.
Buoyed by US and European demand, shipments of everything from South Korean cars to Indian t-shirts have pushed exports from Asia to their highest levels to multi-year highs. Sleek smart-phone upgrades planned by Apple and Samsung are also helping as Chinese manufacturers hoover up components from around the region to build the handsets.
The trade rebound is happening amid worries over rising protectionism and a still fragile outlook for the world economy that raises the question: how long can the good times last.
Asia’s exporters are in the cross hairs of US President Donald Trump’s vow to boost US jobs by reducing imports. Of the 16 countries facing scrutiny from Trump’s 90-day review of possible “trade abuse”, more than half are in Asia with the biggest bilateral trade surpluses chalked up in the region by China, Japan, Vietnam and South Korea. China’s easily ranked as the largest at $327 billion in 2016.
Although Trump has reined in some of his criticism of trading partners, the threat of heightened trade tensions hasn’t gone away.
“Our base case is that this is going to be a bigger issue next year than this year, especially between the US and China,” said Rob Subbaraman, chief economist for Asia ex-Japan at Nomura in Singapore.
Orient Craft, the Indian garment exporter, is among those watching developments carefully. Sudhir Dhingra, who founded the firm in 1972, has seen his exports to the US grow to $181 million in 2016 from $129 million in 2012, according to figures supplied by the company. But with Trump and Brexit darkening the global prospects of freer trade, Dhingra said he expects countries to pursue simpler bilateral deals than grand regional free trade agreements as politicians realize that bringing jobs back home to high-cost labour markets isn’t so simple.
“The US under Trump could impose some additional duties, that’s a worry,” Dhingra said. However, “people will find out that you can’t move everything back home. People won’t pay those prices.”
Other worries include signs that China’s economy may be slowing as authorities clamp down on excessive credit, meaning demand for commodities will soften and hurt producers such as Australia and Indonesia. Some cooling in the US economy is also weighing sentiment.
For Asia, exports matter. The region is the world economy’s fastest growing economy — accounting for around 30 per cent of global growth — and one that relies heavily on trade.