China’s weak exports in first half of 2019 are also bad news for its major trading partners
- China’s exports in the first six months rose by just 0.1 per cent, dampening demand for imports to increase pressure on the worldwide supply chain
- Biggest drop in first half exports was to the United States, down 8.1 per cent, despite the trade truce agreed by President Xi Jinping and US counterpart Donald Trump
While the meagre 0.1 per cent rise in exports in the first six months of 2019 was bad news for China, it was even worse for many of its trading partners, with a flat performance by the world’s second large economy causing ripples through the tightly integrated supply chains created by globalisation.
A decline in Chinese exports automatically dampens its demand for imports of components used in finished exports and that, in turn, hurts every other economy that sells to China.
But the decline in exports paled in comparison to the near 30 per cent drop in Chinese imports from the US, which range from raw materials to agriculture products, aircraft and semiconductors. The contraction was not only another indication of declining demand for American products, but more tellingly, a sign of weaker consumption worldwide.
Processing imports, where part of the production process is contracted out to a firm in a different country, are sinking as the trade war takes a toll on the global economy, with economists even warning of a recession if tensions escalate. China’s overall imports slid 4.3 per cent in first half of 2019, compared with a 19.9 per cent rise a year earlier.
Raymond Yeung, ANZ’s chief economist for Greater China, pointed out that supply chains are so intricately interwoven that it was no longer a zero-sum game where one market’s decline was another economy’s gain.
“When exports for one market drop, those for others also fall,” Yeung said.
For that reason, China’s first half exports to the European Union may have climbed 6 per cent, or US$11.12 billion, while those to the 10-nation Asean group increased 7.9 per cent, or US$11.84 billion. But both growth rates were well below the level in the first six months of 2018 after exports to the European Union grew 11 per cent, while those to Association of Southeast Asian Nations (Asean) states rose 16 per cent during the same period.