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.”