Global Courant
Pictured here is a cargo ship sailing from the Chinese port of Yantai to Indonesia on April 23, 2023.
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BEIJING — China cannot easily rely on its neighbors as export markets are in a global slowdown, the latest trade data shows.
Exports to the Association of Southeast Asia Nations have grown. The 10-member bloc surpassed the European Union during the pandemic to become China’s largest trading partner on a regional basis.
Data showed that exports to Southeast Asia fell 16% in May compared to a year ago, causing China’s total exports to decline.
Exports to the US — China’s largest trading partner on a single country basis — fell 18% year-on-year in May in US dollars. This is evident from official figures requested via Wind Information.
At $42.48 billion, U.S. exports in May exceeded the $41.49 billion China exported to Southeast Asia that month, according to customs data.
Southeast Asia cannot fully offset the loss in the US market, said Bruce Pang, chief economist and head of research for Greater China at JLL.
ASEAN consists of 10 countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The US is a single market versus a grouping of 10 countries, Pang stressed, adding that companies can also sell in the US market with higher profit margins.
Trade has been a major driver of China’s growth, especially during the pandemic.
Exports still account for about 18% of the economy, though that’s much lower than the roughly 30% share it once had, Tao Wang, head of Asia economics and chief economist for China at UBS Investment Bank, told reporters Monday. .
Drag from the US
Slowing global growth, especially in the US and Southeast Asia, does not bode well for the outlook for Chinese exports.
“We expect Chinese exports to remain subdued as we expect the U.S. economy to enter recession in the second half of the year as global destocking pressures continue to mount,” said Lloyd Chan, senior economist at Oxford Economics. , Wednesday in a note.
Boosting trade with developing countries has gained urgency with the closure of the US market and the collapse of the EU-China investment deal following the war in Ukraine.
Jack Zhang
University of Kansas, assistant professor of political science
US companies also worked with large inventories that were not sold in the second half of last year due to high inflation.
According to the International Monetary Fund, US GDP is expected to slow from 2.1% in 2022 to 1.6% this year.
Southeast Asia is also slowing down
ASEAN’s GDP will slow to 4.6% this year, down from the growth rate of 5.7% last year, the IMF said in April, when it revised its forecast for the region’s GDP growth by 0 down .1 percentage point.
“The sharp slump in May confirms our suspicions that China’s monthly export data to some ASEAN economies — notably Vietnam, Singapore, Malaysia and Thailand — may be slightly biased,” Nomura economists said in a note Wednesday.
“Given the apparent plunge, exports to ASEAN have turned from a major driver to a drag, contributing negatively by -2.4 percentage points to overall growth in May.”
The US and ASEAN each accounted for 15% of China’s total exports in May, according to CNBC calculations from Wind Information data.
Year-over-year, the bloc has a slightly higher share, at 16% of China’s exports versus the United States’ share of 14%, the data showed.
“Looking forward, (Chinese) exports are likely to contract further on a high basis, the deepening global production decline and the intensification of trade sanctions from the West,” Nomura analysts said.
Regional trading strategy
The export declines come as relations between the US and China remain tense and Beijing has sought to bolster trade with developing Asia-Pacific countries.
“It’s 20-25% more expensive to sell a lot of stuff to the US, especially intermediates like machine parts,” Jack Zhang, an assistant professor of political science at the University of Kansas, told CNBC in an email.
“Boosting trade with developing countries has gained urgency with the closure of the US market and the collapse of the EU-China investment deal following the war in Ukraine,” he said.
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The bloc of 10 countries – along with Japan, South Korea, Australia and New Zealand – signed a free trade agreement with China in 2020. The Regional Comprehensive Economic Partnership or RCEP is the largest agreement in the world.
Beijing has said it is also keen to join another trade bloc: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The US is not part of the CPTPP, while the UK announced a deal to join in March.
RCEP has boosted China’s trade with ASEAN, as well as the shift of some labor-intensive manufacturing to the region, Zhang said.
Meanwhile, he noted that “China has stepped up negotiations on a China-ASEAN Free Trade Agreement (CAFTA 3.0), is exploring free trade agreements with Mercusor in LatAm and the Gulf Cooperation Council (GCC).”
The Mercusor trade bloc includes Argentina, Brazil, Paraguay and Uruguay.
– CNBC’s Clement Tan contributed to this report.
