The city of Haining near Shanghai in Eastern China is famous for exporting socks all over the world but in recent months the city’s factories have been hit by a chill emanating from the troubled eurozone.

“Haining’s sock companies have seen their exports to the EU drop by around 30 per cent this year compared to last year, with the steepest drop beginning in September,” says Zuo Yefen, head of the Haining Socks Association.

All across China and the rest of Asia the crisis in Europe is being felt in export-oriented manufacturing sectors and prompting fears that falling demand from the West could once again cause a steep drop in growth, as it did during the 2008 financial crisis.

In response, many producers are trying to diversify exports away from turbulent Western markets and sell more to developing markets.

Whether they have diversified enough to shore up regional growth will become clear soon as most data point to an impending drop in Chinese exports to Europe, while exports to the eurozone from Korea, Japan and elsewhere are already falling.

Things are not yet as bad as during the 2008 global crisis but annual growth in Chinese shipments to the EU, its largest trading partner, decelerated to 5 per cent in November from 7.5 per cent growth in October and 18.1 per cent in the third quarter.

Most analysts believe Chinese exports to Europe will fall into negative territory this month or next as official figures on new export orders were well down in November.

“In the case of a much more serious European recession and a global recession, we think China’s exports could decline by 10 to 12 per cent,” said Wang Tao, an economist at UBS. “For now, we expect China’s export growth to drop to zero in 2012, and expect that to have a sizeable negative impact on the economy.”

South Korea has already been badly affected, with overall exports to the EU dropping 13.8 per cent in November from a year earlier. Exports of ships plunged 72 per cent, while those of mobile telecom devices dropped 53 per cent from a year earlier.

”Demand from Europe for Korean products is falling sharply due to the region’s debt crisis,” said Lee Eun-mi, an official at the Korea International Trade Association. “The situation will deteriorate going forward unless Europe’s debt crisis is resolved.”

In Japan, manufacturers have become increasingly concerned about Europe’s deepening economic woes at a time when they are already under pressure from a strong yen and weak domestic demand.

Didier Leroy, Toyota’s top executive in Europe, recently warned that even when the relatively robust Russian market is included, growth in European demand would likely be “much, much, much lower” over the next year.

“The biggest problem we face in 2012 is that European sales are declining,” Mr Leroy said.

Japan, Korea and most other Asian nations also export huge volumes of goods to China for processing and re-export to Western markets, so problems in the Chinese export sector have direct knock-on effects throughout the region.

In China, overall growth remains heavily reliant on exports but since the 2008 financial crisis many manufacturers have been trying to reduce their reliance on the West and sell more at home and to other emerging markets.

As Europe slips back towards recession, this trend is accelerating.

In its factories in the industrial province of Guangdong, British electronics company Euro Suisse International manufactures baby monitors and internet radios for European retailers as well as fans and voltage stabilisers for consumers in Africa.

For this company, the problems in Europe have been offset by continued rapid growth in its African markets.

“Africa has been strong, but we’ve seen a slowdown in the UK and Europe,” says Anish Lalvani, the chairman of the family-owned company.

So far, overall Chinese exports to emerging markets have remained robust, with shipments to countries in Southeast Asia rising 21.5 per cent in November from a year earlier, shipments to Brazil up 26.4 per cent and exports to Russia up 20.6 per cent.

“Weaker external demand poses the biggest downside risk to China’s growth,” said Zhang Zhiwei, an economist at Nomura. But “China’s efforts over the past few years to diversify the destinations of its exports will help to bolster export growth, barring a synchronised global recession.”

Despite those efforts, Europe remains China’s largest trading partner, followed by the United States, and not everyone is as sanguine about the country’s ability to find new markets for all the stuff that western consumers are no longer buying.

“We assume next year will be worse than this year,” says Ms Zuo at the Haining Socks Association. “Companies are trying to shift their focus to other markets or find other solutions but for now I have not heard of any effective solution.”

Reporting by Jamil Anderlini in Beijing, Patti Waldmeir and Shirley Chen in Shanghai, Rahul Jacob in Shenzhen, Mure Dickie and Jonathan Soble in Tokyo and Song Jung-a in Seoul

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