Friday 04 December 2015

Since 2011 Asian exports have been slowing. This is caused by three key factors.


Since 2011 Asian exports have been slowing. This is caused by both the weak rate of global investment and growth, and the slowdown in the Chinese economy. It also seems to indicate the end of a period of expansion signalled by two related events: on the one side, the growth of China's international trade and its role in globalisation, and on the other side the diminished importance of global value chains in trade.
 
Bilateral trade dependence highlights the reshaping of Asian economies' trade with China, as in recent years bi-lateral trade dependence with China has increased, and conversely decreased with G3 countries (US, Japan and EU).
 
This dynamic of trade dependence with China has left Asian economies vulnerable to final Chinese demand. In particular the impact of global value chains has led to a declining trend in exports within the region, as China's share of imported inputs in exported goods has fallen in recent years, yet has contrastingly risen in Singapore, Thailand and the ASEAN block as a whole. With the block becoming more dependent on Chinese trade, the impact of global value chain dynamics becomes more pronounced, which has led to a decline in Asian exports.
 
The most profitable shifts resulting from the fall in exports have already occurred. Additionally the returns offered from the drivers of this trend, such as lower transport costs and remote coordination are diminishing. The short term impact will be most felt by commodity exporting countries such as Malaysia, Mongolia and Indonesia. The long term picture is somewhat broader, affecting Asian countries with exposure both to direct competition arising from the gradual upscaling of Chinese production, and to fluctuations in Chinese growth. Recent history shows that the fine international division of production processes can also be a source of instability.
 
Pierre Joseph Costa, Head of Commodity Finance for APAC has seen the impact of this dynamic within the region. 

"Some large Asian countries that are important commodity producers have developed a huge dependency on China during the so called "commodity super-cycle" , and are feeling the impact of the new model of the Chinese economy characterized by a lower growth rate and less emphasis on capital intensive sectors. This is the case for Australia, which has seen the value of its exports plummeting due to a reduction of export volumes and a collapse in the price of its main commodities traded, whilst at the same time some large projects initiated during the boom years are coming on stream."

"Although Asian export growth has slowed, over the last couple of years some sectors have seen a significant increase in Asian exports. This is particularly the case for steel and aluminium. These are sectors where Chinese exports have expanded significantly in and outside Asia, generating concerns for local producers, and leading to the adoption of protectionism measures in many countries."


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