Planning and Forecasting: Is the Current Recovery in Asian Exports Sustainable?

  • The Asian export recovery is reasonably broad-based, fueled not just by demand from China and the rest of Asia, but also from Europe, the major emerging markets and, to some extent, the US.
  • Intra-Asian trade has picked up particularly strongly, but that partly reflects trade through global supply chains that is eventually bound for third markets. Such trade has taken off again, after having languished for two years.
  • Moreover, Asian manufacturing exports to other parts of the world have also accelerated through Q1, especially those to Europe and emerging markets.

We have been welcoming the impressive recovery of Asian exports since it took hold in mid-2016. Nonetheless, despite strong growth of Chinese imports and some green shoots in the global economy, analysts remain cautious about import demand in other major economies.

South Korea and Taiwan are the major manufacturing exporters at the forefront of the current Asian export renaissance. For both, exports to China and the rest of Asia have seen the sharpest rebound since mid-2016

With China’s import strength likely to ease later in 2017, to what extent is demand from other economies driving the current Asian export rebound? The more broad-based it is, the more likely it is to be sustainable.

Export renaissance

South Korea and Taiwan are the major manufacturing exporters at the forefront of the current Asian export renaissance. For both, exports to China and the rest of Asia have seen the sharpest rebound since mid-2016.

Their shipments to China (including Hong Kong) rose in Q1 by 20-22% year-on-year in US dollar terms, and to the rest of Asia by 28% and 15%, respectively – compared with steep year-on-year falls a year earlier.

Sharp rebound: Korea’s exports to key markets
In US dollars, % year-on-year, 3-months moving average  

Sources: Oxford Economics, CEIC data

South Korea’s exports to China and the rest of Asia have seen the sharpest rebound. This partly reflects components that are re-exported to other parts of the world. South Korea’s direct exports to Europe and emerging markets have also recovered.

This is not just a China or Asia story. While 60% of South Korea’s exports (and 72% of Taiwan’s) went to Asia in 2016, a significant share of that then goes through global supply chains – notably in China – and is eventually re-exported to meet final demand in other parts of the world, especially the US and Europe.

Imports and exports into and from China’s “processing sector” – where imported components are assembled and re-exported – have staged a strong comeback recently, after having languished in negative territory since early 2015.

Strong comeback: China’s processing goods trade
% year-on-year, 3-months moving average  

Sources: Oxford Economics, CEIC data

Not just intra-Asia

South Korea and Taiwan have also both seen the momentum of direct exports to Europe improve significantly, with shipments in Q1 up 8.1% and 7.0% year-on-year in US dollar terms, compared with contractions a year earlier.

Korea’s shipments to North America remained subdued through Q1, but Taiwan’s North America-bound shipments recovered more convincingly and were up 7% year-on-year in Q1, in US dollar terms.

In all, the Asian export recovery is reasonably broad-based, fueled not just by import demand from China and the rest of Asia, but also from Europe, emerging markets and, to some extent, the US

In addition, direct exports of Korea and Taiwan to the rest of the world – largely emerging market economies in Latin America, the Commonwealth of Independent States (most of the ex-Soviet Union), Africa and the Middle East – also accelerated significantly.

The momentum of Korea’s shipments to these economies rose 8.9% year-on-year in US$ terms in Q1, compared to a collapse of 27% year-on-year in Q1 2016, with particularly large turnarounds for shipments to Brazil and Russia.

In Taiwan’s case, the momentum of shipments to these economies has also improved significantly, to year-on-year growth of 3.1% in Q1, with pronounced turnarounds in the case of shipments to Brazil and Russia.

China’s export recovery started in late 2016, after that of South Korea and Taiwan, but has been quite broad, in terms of destination.

Its exports to North America, Europe, Japan and the rest of the world were up between 4% and 8% year-on-year in Q1, in US dollar terms – with growth particularly strong in March. The momentum of China’s shipments to Asia ex-Japan has picked up only recently.

Joining the recovery: China’s exports to key markets
% year-on-year, 3-months moving average  

Sources: Oxford Economics, CEIC data

Broad-based and sustainable

In all, the Asian export recovery is reasonably broad-based, fueled not just by import demand from China and the rest of Asia, but also from Europe, emerging markets and, to some extent, the US.

Exports to the rest of Asia and, in the case of South Korea and Taiwan, to China have grown particularly strongly. However, that partly reflects trade through global supply chains that is eventually bound for third markets. This type of trade has taken off again, after an almost two-year slump.

Moreover, exports of these three economies to other parts of the world have also accelerated through Q1, especially those to Europe and emerging markets.

About the Author

Louis Kuijs is Head of Asia Economics at Oxford Economics. Copyright © 2017 Oxford Economics. All rights reserved.

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