Asia’s pain unevenly spread as China slows
By John Foley
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Asia’s falling markets reflect the belief that a slowdown in China will take its toll on the region. But things aren’t so straightforward. Look at what proportion of the region’s largest economies goes to China, and how important those exports are to domestic GDP. Despite a decade of rapid growth, the world’s second-largest economy has had a smaller impact on its neighbours than might be expected.
Consider Australia. A third of its exports go to China, according to calculations based on data from the International Monetary Fund. That’s mostly mined commodities like iron and coal. Yet the total value of those exports was equivalent to just five percent of Australia’s GDP in 2012. Japan is similarly insulated – over a fifth of its exports are China-bound, but those equate to just three percent of total output.
Vietnam is deeper into China’s slipstream. Some 17 percent of exports go to China, reflecting its growing role as a low-cost link in the global manufacturing supply chain. That is equivalent to 13 percent of GDP. South Korea, home to Samsung and Hyundai, exports goods equivalent to 15 percent of GDP to the Middle Kingdom, double the level a decade ago. For Singapore – perhaps unsurprisingly, given its trading roots – exports to China have risen to 32 percent of GDP.
Trade figures don’t capture the full extent of economic interdependence. Roughly a quarter of tourists who came to Korea in 2012 were from China, for example. And for Australia, Chinese demand has boosted growth in other ways, such as raising prices for commodities it sells to other customers.
But if China had opened up to imports as much as its regional trade partners might have wished, the slowdown would be more worrisome. In the past decade – as China’s economy almost quadrupled in size – exports to the country from its nine biggest near-neighbours rose from 17 percent to 23 percent of the total. For the Philippines and Indonesia, in export-to-GDP terms the Chinese economic miracle has barely moved the needle.
In boom times, China’s slowness to open up was reason to grumble; as growth slows, it might actually offer some reassurance.