Who is buying Asia's exports?
May 6, 2010
By Frederic Neumann, Managing Director Co-Head Asian Economics Research
-- PHOTO: BT
IN THE aftermath of the global downturn, it has been Asia that has led the world into recovery.
Much of the economic strength of Asia lies in the quick recovery of its export levels which have now almost reached their pre-crisis peak.
In Asia's traditional export markets - the US and Europe - the level of economic activity remains sluggish, which raises the question as to who is buying the region's goods?
According to HSBC Global Research, Europe's demand is not driving the current export cycle in Asia, and while imports into the US have rebounded since the depths of the crisis, they are still 12 per cent lower than their previous highs. By contrast the volume of imports into Asia (excluding Japan) is now 6 per cent higher than it has ever been before.
This would imply that Asia is consuming its own exports.
But a closer examination shows this may not be entirely the case as much of the volume is generated by supply chain trading, where goods are sent from one Asian country to another, before ultimately being shipped as the final product to stores in the US or the EU.
There seems to be two factors at play which are driving Asia's export performance.
First, the demand changes caused by the recovering western economies are driving up Asian exports. But more importantly, research by HSBC shows that intra-Asian trade growth is clearly rising quicker than the growth in US retail sales - a sign that local demand is now boosting the region's trade performance.
An example of the growing importance of local demand on Asia's exports is the increased impact the Chinese New Year celebrations have on export levels across the region.
While the Western consumers are taking a breather after their Christmas spending, Chinese New Year shoppers are opening their wallets and purses.
Asian consumer demand during the holidays has started to compensate for seasonally sluggish spending in the West.
This new seasonal pattern of export demand may explain why Asian shipments have held up well in recent months.
Electronics exports are crucial to Asian economies accounting for roughly one third of all the region's exports, and an examination of the growth in electronic shipments shows an interesting trend emerging.
Where normally electronics shipments to China and the US rise together, in the last few months there has been a jump in China's import levels without the corresponding move in US imports.
This indicates the electronic gadgets from manufacturing countries like Korea are arriving in China and being sold through local Chinese retail shops, rather than being trans-shipped through to the US.
Sales figures of electronic goods in China and the US confirm that Asia's own demand levels are of greater importance.
China's consumer electronics sales continue to grow at an impressive rate, while US sales have recovered but remain well below their peak.
The conclusion here is that consumer electronic sales in China have more than made up for the decline in sales in the US.
In terms of total volume, the US still out-consumes China when it comes to electronic gadgets.
However, because there is now a critical mass of China consumers, growth in demand can still occur even if US demand is weak.
This shouldn't deflect from the fact that the American economy still has the greatest impact and if another downturn occurred in the US even the growing consumption levels in China will not be enough to compensate for the resulting lower demand.
According to HSBC estimates, Chinese consumer electronics sales will only surpass total US sales in 2015 if the historical trend continues.
So if sales were to rebound in the US, and with the growing importance of Chinese consumers, electronics producers can expect to have their capacity stretched.
The ability of Asia to grow its exports through internal demand is a significant new trend which will have a lasting impact on export cycles.
And the promise of this new trend is a positive one - it means Asia can still generate growth even if the West is standing still.
May 6, 2010
By Frederic Neumann, Managing Director Co-Head Asian Economics Research
-- PHOTO: BT
IN THE aftermath of the global downturn, it has been Asia that has led the world into recovery.
Much of the economic strength of Asia lies in the quick recovery of its export levels which have now almost reached their pre-crisis peak.
In Asia's traditional export markets - the US and Europe - the level of economic activity remains sluggish, which raises the question as to who is buying the region's goods?
According to HSBC Global Research, Europe's demand is not driving the current export cycle in Asia, and while imports into the US have rebounded since the depths of the crisis, they are still 12 per cent lower than their previous highs. By contrast the volume of imports into Asia (excluding Japan) is now 6 per cent higher than it has ever been before.
This would imply that Asia is consuming its own exports.
But a closer examination shows this may not be entirely the case as much of the volume is generated by supply chain trading, where goods are sent from one Asian country to another, before ultimately being shipped as the final product to stores in the US or the EU.
There seems to be two factors at play which are driving Asia's export performance.
First, the demand changes caused by the recovering western economies are driving up Asian exports. But more importantly, research by HSBC shows that intra-Asian trade growth is clearly rising quicker than the growth in US retail sales - a sign that local demand is now boosting the region's trade performance.
An example of the growing importance of local demand on Asia's exports is the increased impact the Chinese New Year celebrations have on export levels across the region.
While the Western consumers are taking a breather after their Christmas spending, Chinese New Year shoppers are opening their wallets and purses.
Asian consumer demand during the holidays has started to compensate for seasonally sluggish spending in the West.
This new seasonal pattern of export demand may explain why Asian shipments have held up well in recent months.
Electronics exports are crucial to Asian economies accounting for roughly one third of all the region's exports, and an examination of the growth in electronic shipments shows an interesting trend emerging.
Where normally electronics shipments to China and the US rise together, in the last few months there has been a jump in China's import levels without the corresponding move in US imports.
This indicates the electronic gadgets from manufacturing countries like Korea are arriving in China and being sold through local Chinese retail shops, rather than being trans-shipped through to the US.
Sales figures of electronic goods in China and the US confirm that Asia's own demand levels are of greater importance.
China's consumer electronics sales continue to grow at an impressive rate, while US sales have recovered but remain well below their peak.
The conclusion here is that consumer electronic sales in China have more than made up for the decline in sales in the US.
In terms of total volume, the US still out-consumes China when it comes to electronic gadgets.
However, because there is now a critical mass of China consumers, growth in demand can still occur even if US demand is weak.
This shouldn't deflect from the fact that the American economy still has the greatest impact and if another downturn occurred in the US even the growing consumption levels in China will not be enough to compensate for the resulting lower demand.
According to HSBC estimates, Chinese consumer electronics sales will only surpass total US sales in 2015 if the historical trend continues.
So if sales were to rebound in the US, and with the growing importance of Chinese consumers, electronics producers can expect to have their capacity stretched.
The ability of Asia to grow its exports through internal demand is a significant new trend which will have a lasting impact on export cycles.
And the promise of this new trend is a positive one - it means Asia can still generate growth even if the West is standing still.
