With the global slowdown gaining momentum, and world trade expected to shrink in 2009 for the first time in 25 years, the Asian economies seem to be already bearing the brunt of the burden with the manufactured exports from the major economies declining much faster than anticipated. China, the global leader in merchandise exports, has seen outflows drop for the second consecutive month. Most recent figures show that the fall in Chinese merchandise exports has fallen by 2.8% in December 2008, which is marginally higher than the 2.2% drop in November and the largest decline since April 1999.
But, surprisingly, the numbers available till now show that rather than falling exports, it is the sharp decline in Chinese imports that is going to have a more debilitating impact on the recovery efforts across the globe. Chinese imports which grew by a peak level of 33.7% in July, steadily decelerated and touched a low of 15.5% in October 2008. However, the worse had followed in the next two months with Chinese imports declining by 17.9% and 21.3% in November and December respectively. The worse than expected show has put a big question mark on achieving the targeted 8% growth in 2009. This has also raised fears of a more aggressive policy response to reverse the trends that may negatively impact the major trade partners.
The sharper fall in imports has, however, helped China to raise its trade surplus to a new high of around $40 billion in the last two months. The growing trade deficits have also led the US to complain about the WTO prohibited subsidies being used by Chinese exports to boost sales in a range of products, varying from textile to electronic goods. The escalation of trade tensions also raises the uncertainties in the slowing global markets.
The sharp fall in Chinese imports have dragged down intra-Asian trade close to a collapse, especially hurting countries like Korea, Taiwan and Singapore. Most recent reports show that China is working on plans to support the steel and automobile industries, which have decelerated sharply in recent times.
South Korea, the other major Asian exporter of manufactured products, has taken a bigger hit than China with exports falling for the second consecutive month. South Korean exports fell by as much as 17.4% in December, a mite slower than the 19% fall in November, and the government has promised that the country will run an economy-emergency government to fight its worst crisis since the nineties. The sharp fall in imports has helped Korea to garner a trade surplus in the last three months. The official view is that exports will grow by just 1% in 2009 while imports will fall by 4.7% during the period, which is a far cry from the 13.7% growth of exports in 2008 and the 22% increase in imports during the year.
Malaysia, the other major manufacturing giant in Asia, has seen a similar trend. Both exports and imports have declined for the last two consecutive months, up to November 2009. While export decline accelerated from 2.6% in October 2008 to 4.9% in November 2009 while the imports decline went up from 5.3% to 8.6% during the period. The major Malaysian exports products which suffered the most in the export decline in November included refined petroleum products (31.1%), palm oil (19.1%), chemicals (18.9%) and electrical products (10.6%). The worst hit export market was that of China where export flows declined by as much as 15.5%. Exports to the US also declined by 2.1% in the month.
Singapore, the trading giant where exports are bigger than its GDP, has also taken a big hit and officials except that the economy may contract as much as 2% in 2009, which is around double the projection made earlier in November last year. The 11.8% fall in non-oil exports of Singapore in November was the highest decline six years. The scenario was worse in the case of non-oil exports which contracted by 15.4% in October and further by 17.5% in November.
Major exports markets most hit in November include the US, the EU 27, China, Taiwan and Korea?countries where exports have declined by more than 25%. In contrast, Singapore exports to India declined by just 5% in November. Efforts to ward off the slowdown have gained momentum with the government moving forward the 2009 budget announcement to January as the economy has already contracted in the last two quarters for the first time since 2002.
But the worst hit trading nation in Asia was Japan, where exports declined by as much as 26.5% in November?the highest ever fall registered since 1985. In contrast, the imports slid by a much slower 13.7%. One reason for the export slowdown was 22% appreciation of the Yen in the past year. The economy is depending heavily on the stimulus package, which includes cutting down of interest rate to 0.1%.
With inputs from Bloomberg