China’s export rose only 0.1% in first six months, impacting global supply chain
July 30, 2019 Category China News Round-up, Weekly
While the meagre 0.1% 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 globalization. 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.
The biggest drop in first half exports was to the U.S. amid the ongoing trade war. Exports to the U.S. contracted by 8.1%, a sharp reversal from the 13.5% rise during the first half of 2018, according to the China’s General Administration of Customs. But the decline in exports paled in comparison to the near 30% drop in Chinese imports from the U.S., 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% in first half of 2019, compared with a 19.9% 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%, or USD11.12 billion, while those to the 10-nation Association of Southeast Asian Nations (ASEAN) increased 7.9%, or USD11.84 billion. But both growth rates were well below the level in the first six months of 2018 when exports to the European Union grew 11% and to ASEAN states 16%. What is more, neither of the increases in exports to the two large economic blocs so far this year would have been sufficient to fill the gap of USD18.19 billion resulting from lower Chinese exports to the U.S., the South China Morning Post reports.
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