Daily Management Review

IIF Found Structural Crisis in Asian Trade


Growth in China is slowing, and dragging down all trade in Asia - growth in exports from developing Asian countries, lasted 20 years, is slowing; meanwhile, supply in China over the past year fell by 4%, according to the Institute of International Finance’s study. The changes are structural in nature, so the weakening of the national currency will not help restore the old volumes of exports – skeptically note experts.

Correlation between growth in the world economy and world trade volume is rapidly weakening. The most significant rebalancing awaits Asian countries, where share of exports in GDP is traditionally high (on average above 30%), say experts of the Washington-based Institute of International Finance (IIF, a global association of representatives of the financial industry ). South Korea, Malaysia and Thailand (40% of GDP) are dependent on deliveries abroad the most, China's exports equivalent to a quarter of GDP, in India it is 15%.

In recent years, trade in Asia has been increasingly concentrating around China as part of the production chain. Previously, this contributed to the growth in China's imports of raw materials and components, but now the supply is reduced. Share of Asian exports to China decreased by ten percentage points over five years, to a level of about 20% (despite the fact that share of imported components and raw materials in the composition of exports from the PRC is around 30%). Imports fall both because of localization of suppliers in China and due to increase in share of the services sector (in 2015, it had more than half of China's GDP - 50.5%). Only Indonesia managed to avoid shrinking exports last year - due to falling commodity price, correction there occurred a year earlier. However, the pace of supply growth abroad in all countries of the region were significantly below the level of 2011-2012. Vietnam still holds the relative advantage of cheap labor, as pointed by the IIF. China itself had to pay with 2% of GDP for rebalancing the economy and strengthening of renminbi - due to reduction in net exports.

Another trade subsidence factor is a slow recovery of the US economy, accompanied by the same concentration of growth in the services sector. Then again, share of trade with developed countries in Asia has been reducing the past decade and a half (from 70% to 47%). A widespread rejection of trade restrictions between the region’s countries themselves would stop stagnation of trade. This measure could increase the "horizontal integration", i.e. trade of competing products, the report's authors believe, noting, however, that similarity of the range of exports to Asia often reaches 60% or more. At the time, IIF considered useless competitive weakening currencies in terms of structural adjustment - just because of the structural changes in demand.


Science & Technology

Baidu comes up with a self-driving bus

Developing countries are stepping up their own space programs

McAfee: Number of cybercrime attacks skyrocketed

RemoveDebris Mission To Clear Debris Of In Orbit Over Earth

British experts: Online gambling is dangerous

Vodafone Chooses ‘Highly Trafficked Urban’ Space As Its 5G Testing Grounds

Space To Become A Travel Destination By 2022

Dream Of Immortality Can Be Realised By 2045

Predicting A Patient’s Death Might Be Possible With Google’s Machine Learning Tool

Are online DNA databases dangerous?

World Politics

World & Politics

Le Maire: The US refused to release France from anti-Iran sanctions

One Belt, One Road is facing difficulties around the world

Qatar to raise $ 4 billion to buy Eurofighter Typhoon jets

The UK sets to turn all cars zero-emission by 2030

Brexit Minister’s Resignation States May’s Brexit Policies Weakening The Country’s Stance

Global Plastic Waste Can Wrap The Planet ‘Seven Times Every Hour’

ILO: World has to pay more attention to children and elderly care services

German ruling coalition is under threat of disintegration