Wu estimates that reduced U.S. demand for Asian exports could knock as much as two percentage points off the economic growth rates of countries around Asia. But China would face far more serious problems. A severe fall in U.S. stocks could tip the economy back into recession. With markets still trading well above levels seen 12 months ago, the wealth effect will continue to encourage consumer spending, supporting demand for Asian exports. The notion that weaker stock prices will massively undermine U.S. companies' demand for Asia's electronics exports is also open to question.
Companies have to reconfigure to survive.
Weaker equities may crimp some corporate investment plans, but some analysts predict the impact on electronics will be marginal. Their hope is that even if a bear market on Wall Street does lead to slower growth in the U.S., companies will still spend on technology in the search for a competitive edge in the tougher business environment. Still, there remains a danger that a prolonged slump in U.S. equities could have an indirect effect on regional economies. Copycat sales of local equities slice into the wealth being created by last year's recovery in regional stockmarkets. Given the overall poor performance of most regional equity markets so far this year, domestic consumption is unlikely to be the powerful engine of Asian growth in 2000 that many economists had predicted.