Asia’s pain unevenly spread as China slows

June 25, 2013

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.

Graphic: Exports to China as share of GDP  

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.

Graphic: Share of exports going to China

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.

Comments

Every dollar invested into the PRC only helps the PRC manufacture more bullets, tanks, bombers and missiles to arm its Peoples “Liberation” Army.

Every dollar spent on a cheap product from the PRC (Made in China) is a spit in the face of Tibetans whose freedoms have been taken away by the PRC through its Peoples “Liberation” Army.

The PRC would not be in a position to intimidate and bully nations like Japan, Vietnam, India, the Philippines, etc, if it were not for the massive injection of western dollars into the PRC economy.

Today the PRC is trying very hard to hide or minimise the fact that it is facing a credit bubble so massive that it will drain most of its dollar reserves when the bubble pops.

It is trying to hide or minimise the fact that many Chinese did not benefit from the so-called PRC boom times since only those families with close contacts within the PRC government have benefited.

In return, these cronies have squandered the economic riches by lapping up foreign luxury goods, traveling to the most expensive cities in Europe, sending their children to posh schools abroad and buying property in Australia (reputed to be the world’s most expensive country).

All this while poor provincial Chinese flock to PRC cities where they are treated like annoying 2nd rate denizens and foreigners in their own land. Discontent and petty riots are commonplace. Is this really where investors should place their money?

This is a plea for investors to invest in your own countries first. Invest in your own peoples education and job security first. If you have to invest abroad, then please invest in nations that are friendly to yours.

Please do not let some banker use your money to prop up an un-elected regime that will only threaten your country and other countries, in return.

Thank you very much.

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