Market Slide Tests Asian 'Decoupling' Theory

The experience of factory workers in Dongguan City suggests their well-being remains tied to the financial health of the United States. That contrasts with a theory that China's economy has grown enough that it has "decoupled" from U.S. influence.

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RENEE MONTAGNE, host:

Investors in the rest of the world are trying to determine the extent of the impact of the financial crisis on them as well. Stocks in Asia responded well to yesterday's rate cut, and that may be continued proof that Asia's economy is still closely linked to the U.S. economy.

That's what our labor reporter, Frank Langfitt, has been hearing. He spent a day at factories in China and joins us now from Dongguan City. Hello.

FRANK LANGFITT: Hey, Renee. How are you?

MONTAGNE: Fine, thank you. First of all, tell us about Dongguan City. It is one of China's key factory towns. What is it like?

LANGFITT: It's amazing. It would be great if some Americans could come and see this because they'd really got a sense of where all those toys and all their furniture and all those other things they see that are made in China come from. I'm looking out my window right now, it's 11th story of a hotel, and it's just apartment block after apartment block, and then there are these huge factories. I mean, some of them are the size of aircraft hangers. And there are, you know, many of these factories employ three to four thousand workers, and they're working all the time, producing for the - mostly, you know, for an export market.

MONTAGNE: And we just heard in Jim's earlier piece about deep concerns here in the U.S. about a downturn in the economy. Are people there, working in Chinese factories and also owning them and involved with them, are they concerned about this downturn?

LANGFITT: Absolutely. They are very worried about it, and they see these economies as pretty closely linked. I had lunch today with a fellow named Michael Ling(ph). He's a Chinese Canadian, and he works for a U.S. furniture company and he sources furniture for them. And after lunch, I asked him this question...

So if there were a U.S. recession, what it would do to what you do, the people you deal with, and to the city here?

Mr. MICHAEL LING: I think it's already happening, actually. We see a lot of suppliers either closing down or they're moving to other countries or laying off people. And because of this, we find it getting difficult to find good qualified suppliers for our products.

MONTAGNE: Now, that's the voice of someone who acquires furniture for a U.S. firm. What about the workers inside the factories? What were you hearing today?

LANGFITT: Well, I heard the same thing. I talked to two factory managers today, and they're both quite concerned about the U.S. economy and the U.S. market. And what was really interesting - I talked to a young woman, she's in her early 30s, her name is Becky Sueng(ph). She's a sales manager at Creation Furniture Company here in Dongguan City, and they sell to Lazy Boy and J.C.Penney. And I asked her about sort of what she's seen in the last few months.

Have you felt the slowdown as well here from your customers? Are they ordering less?

Ms. BECKY SONG (Sales Manager): Yes. They do order much less than before - 20 percent. They said the housing crisis, so nobody want to buy the furniture.

MONTAGNE: So there in Dongguan City a factory worker is very aware of the housing crisis in the U.S.

LANGFITT: Yes. She's the sales manager of this company. And what she's saying is the subprime lending crisis in the United States is directly affecting her company, her workers. There have been a lot of other problems here too, but recently they had to close down two of their factories and lay off 1,300 hundred workers.

MONTAGNE: Frank, there's a popular economic theory that's called decoupling, the idea being that Europe and Asia are not as dependent on the American economy as they once were because they trade with each other. And economists apply this idea especially to China, because its economy has become so strong. Would you say your evidence supports or debunks that idea?

LANGFITT: I haven't talked to anybody today who thinks that's the case at all. In fact, when I talk to people in Chinese and English, they use the word globalization and interdependency. And the idea is that every year this country and the rest of the major producers in the world are more tightly and tightly connected. And so when something happens to one big market, it really ripples through the other ones.

MONTAGNE: Frank, thanks very much.

LANGFITT: Happy to do it, Renee.

MONTAGNE: NPR's Frank Langfitt, speaking to us from Dongguan City, China. You can track the ups and downs of Fed interest rates since the last recession at npr.org.

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