China can’t rely on Southeast Asian exports to offset a U.S. slowdown

BEIJING — China cannot easily rely on its neighbors as an export market amid a slowing global economy, the latest trade data show.

Exports to the Association of Southeast Asian Nations have been growing. The 10-member bloc overtook the European Union during the pandemic to become China’s largest trading partner on a regional basis.

Exports to Southeast Asia fell 16% year-on-year in May, dragging down China’s overall exports, data showed.

In dollar terms, exports to the US fell 18% in May from a year earlier. The United States is China’s largest single-country trading partner. This is according to official figures obtained through Wind Information.

The US exported US$42.48 billion in May, surpassing China’s US$41.49 billion export to Southeast Asia that month. According to customs data.

Bruce Pang, JLL’s chief economist and head of research for Greater China, said Southeast Asia could not fully offset losses in the U.S. market.

ASEAN is made up of 10 countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

Pang noted that the U.S. is a single market rather than a bloc of 10 countries, adding that companies can also sell in the U.S. market at higher margins.

Trade has been a key driver of China’s economic growth, especially during the pandemic.

Exports still account for about 18 percent of the economy, although that is far down from the roughly 30 percent it once was, Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank, told reporters on Monday.

Slowing global growth, especially in the US and Southeast Asia, does not bode well for China’s export prospects.

“We expect China’s exports to remain subdued as we expect the U.S. economy to enter a recession in the second half of the year, while global destocking pressures continue to mount,” Lloyd Chan, senior economist at Oxford Economics, said in a note on Wednesday.

U.S. companies are also Solve the high inventory that could not be sold due to high inflation in the second half of last year.

ASEAN’s GDP set to slow 4.6% growth this yeardown from 5.7 percent last year, the IMF said in April, when it cut its forecast for the region’s GDP growth by 0.1 percentage point.

“The sharp decline in May reaffirms our view that China’s monthly export data to some ASEAN economies, notably Vietnam, Singapore, Malaysia and Thailand, may have been somewhat weaker,” Nomura economists said in a note on Wednesday. Twisted suspicion.”

“Given the apparent plunge, exports to ASEAN have shifted from a major driver to a drag, negatively contributing -2.4 percentage points to overall growth in May.”

The U.S. and ASEAN each accounted for 15 percent of China’s total exports in May, according to CNBC calculations of Wind Information data.

On a year-to-date basis, the group has a slightly higher share, accounting for 16 percent of China’s exports, compared with 14 percent for the U.S., the data showed.

“Looking ahead, (China’s) exports are likely to shrink further amidst a high base, a deepening global manufacturing recession and heightened Western trade sanctions,” Nomura analysts said.

The decline in exports comes as U.S.-China relations remain tense, with Beijing seeking to boost trade with developing countries in the Asia-Pacific region.

“It costs 20-25% more to sell a lot of products to the U.S., especially intermediate products like machine parts,” Jack Zhang, an assistant professor of political science at the University of Kansas, told CNBC in an email.

“With the U.S. market closed and the EU’s investment deal with China collapsing after the Ukraine war, boosting trade with developing countries has become even more urgent,” he said.

The G10, along with Japan, South Korea, Australia and New Zealand, signed a free trade agreement with China in 2020.Regional Comprehensive Economic Partnership Agreement or RCEP Yes The largest such deal in the world.