Asia’s export engine could remain stuck in neutral as long as Europe and China are slowing. An uptick in September exports has buoyed hopes for a U.S.-led rebound in regional trade. But in the past decade, Asian economies have shifted focus to Europe and responded to China’s rise by supplying the manufacturing juggernaut. A U.S. upturn alone won’t be enough.
The numbers from the six big Asian export economies that have reported September trade data so far are tantalizing: exports from both China and Taiwan rose roughly 10 percent compared with the same month a year ago. Even South Korea, the canary of the global trade coalmine, saw its export decline slow from 6 percent in August to just 2 percent in September. Taken together with encouraging signs from the U.S. housing market, the data has unleashed a flutter of cautious optimism.
On closer inspection, though, the recovery appears to be a mirage: Japan’s exports slid 10 percent in September, and Singapore’s were down 6 percent. Worse, for the third quarter as a whole, exports from the six economies combined were unchanged from the same period of 2011. As Europe now rivals the United States as the group’s largest export destination, the 12 percent drop in exports to the continent more than offset a nearly 3 percent increase in exports to the United States.
The other reason for caution is China. The country is now the biggest export destination for most Asian economies, which supply it with raw materials, components and machinery. True, many of these are used in goods that China itself then exports. But as China develops, it is also becoming a bigger end-consumer of Asian products. In the past decade, the proportion of imports that China ends up re-exporting has halved.
China’s slowdown, therefore, is putting further downward pressure on the rest of Asia. Exports from the five other Asian economies to China dropped by 7 percent in the third quarter, to $6.6 billion. That rivals the $6.7 billion drop in exports from the same economies to Europe. Until both Europe and China recover their taste for imports, therefore, Asia may find little solace in a U.S. recovery.