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World Is China’s recovery helping Asia’s other big exporting economies?

04:06  26 october  2020
04:06  26 october  2020 Source:   aljazeera.com

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Southeast Asian nations will likely benefit from China ' s economic rebound as the country commands a "lion' s share" of regional exports , one economist said this "While numerous challenges remain, the uptick would rekindle hopes that China ' s economy can help to pull others along," Wellian Wiranto

China appeared to have achieved the V-shaped recovery being chased by finance ministers around “There are very big lessons here, because people think that China ’ s back. They’ve done a pretty Other long-term challenges including debt and an ageing population have been overshadowed by

South Korea, Taiwan and Hong Kong all consider mainland China to be their biggest export market, but the jury is out on how strongly they are feeling the effects of a robust Chinese economic rebound.

a group of people walking down the street: Taiwan's economy has escaped the ravages of the coronavirus relatively lightly, helped by surging electronics exports to mainland China [File: I-Hwa Cheng/Bloomberg] © Taiwan's economy has escaped the ravages of the coronavirus relatively lightly, helped by surging el... Taiwan's economy has escaped the ravages of the coronavirus relatively lightly, helped by surging electronics exports to mainland China [File: I-Hwa Cheng/Bloomberg]

The three Asian powerhouses, along with most other economies, have all shrunk this year due to shutdowns to contain the spread of the novel coronavirus.

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Asia ’ s foreign-exchange reserves are more a symptom of economic problems than a sign of First, reserves aren’t profits. In addition to net export payments, they include foreign investment. China has redirected its reserves into real investments in advanced economies and strategic projects such

But China is the first to report growth that significantly surpasses where it was at this time last year. The United States and other nations are expected Still, China ’ s recovery has done less to help the rest of the world than in the past because its imports have not increased nearly as much as its exports .

They will report third-quarter economic data over the coming days.

A surge in demand by China for computer chips ahead of US curbs on technology exports likely worked in South Korea and Taiwan’s favour. But Hong Kong’s political troubles and the fact that it has become ensnared in the US-China dispute are likely to keep it in recession, analysts say.

“Accelerated export recovery should bode well for the [gross domestic product] numbers” for the three economies, Prakash Sakpal, senior Asia economist at Dutch bank ING said in a research note sent to Al Jazeera.

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That puts it well ahead of all other big economies in the scale of its recovery . But the shape of China ’ s recovery is unbalanced. China ’ s share of world merchandise exports hit a record high of more than 13% in the second quarter, according to data from CPB World Trade Monitor.

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“We expect export strength to outweigh domestic demand weakness producing a strong GDP bounce over [the second quarter],” Sakpal added.

But South Korea and Hong Kong suffered a jump in virus cases during the third quarter, likely putting a damper on their recovery.

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But China ' s ability to buck the worldwide trend is accelerating the growth in its importance to the global economy . "The recovery in China has been much stronger Like in other countries, the pandemic has taken a heavy toll on China ' s poor and rural populations, according to the Fitch Ratings analysts.

China showed its first signs of recovery in the previous quarter, when it avoided falling into a Strong export growth in the third quarter, spurred by global demand for medical equipment and electronics “Generally speaking, the overall national economy continued the steady recovery and significant

Hong Kong’s pain

China’s economy expanded by 4.9 percent in the July-September quarter from a year earlier, as consumers returned to shops and restaurants, accelerating its rebound from COVID-19 lockdowns at the start of the year.

Its recovery is providing a much-needed source of demand, not just for other parts of Asia, but for the rest of the world, where coronavirus cases are on the rise again.

Among the three territories reporting gross domestic product (GDP) data through to the end of the month, Hong Kong, a self-governing Chinese territory, is the most dependent on the mainland for its exports. Last year, it sent 43 percent of its total exports to mainland China.

Despite that, ING expects Hong Kong to report a 10 percent contraction in its GDP – the sum of a country’s goods and services produced over a given period, and the most commonly used indicator of economic growth – between July and September compared with the same period last year.

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That would be an even sharper contraction than the 9 percent shrinkage in the second quarter and the record 9.1 percent plunge in the first.

A combination of political unrest surrounding Beijing’s imposition of a national security law on the territory, the fallout of tensions between China and the US, and the coronavirus have slammed Hong Kong’s economy.

Hong Kong will report its data on October 30, the same day as Taiwan.

Resilient Taiwan

ING also expects a deterioration in Taiwan’s economy in the third quarter, with a 1 percent year-on-year contraction compared with a 0.58 percent shrinkage in the preceding three months.

But that is a relatively shallow downturn compared with the other two territories. Taiwan has been credited with an aggressive and early response to the outbreak in neighbouring mainland China, which considers Taiwan a part of its own territory.

Taiwan’s world-class computer chip industry may have also helped cushion the blow of the downturn.

“Taiwanese, Korean and Japanese exporters saw shipments of electronic components soar ahead of the 14 September US ban on China’s Huawei Technologies Co’s sourcing of semiconductors from international and US overseas entities using US technology,” Sharmila Whelan, deputy chief economist at Aletheia Capital said in a research note distributed on the Smartkarma platform.

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In August, Taiwanese exports to China rose by 18 percent compared with July, led by a 14 percent rise in electronic components, Whelan wrote.

According to the Bloomberg news agency, Huawei, one of the biggest suppliers of cutting edge 5G mobile network equipment, spent months building its stockpile of critical radio chips ahead of sanctions by US President Donald Trump’s administration.

Its partner, Taiwan Semiconductor Manufacturing Co, began ramping up output in late 2019 of the crucial chips, eventually shipping more than two million units, Bloomberg quoted unidentified sources as saying.

South Korea’s soft landing

South Korean shipments to China rose by 21 percent and semiconductor exports by 27 percent in the first 20 days of September, Aletheia’s Whelan said.

South Korea is expected to report on Tuesday that its economy shrank by 1.9 percent, according to a survey of economists published by data provider Refinitiv.

That is an improvement on the previous quarter, which saw South Korea’s GDP shrink by 2.7 percent year-on-year.

But not everyone is convinced China’s rapid turnaround from its own coronavirus-driven plunge in the first quarter is giving the world a sizeable economic boost.

“The contribution of mainland China to world GDP growth this year is roughly the same as during the [2008-2009 Global Financial Crisis] – very helpful, but hardly a panacea for the global economic malaise,” Frederic Neumann, co-head of Asian Economic Research at HSBC said in a research note sent to Al Jazeera.

Neumann says China’s economic stimulus measures “fall well short” of those it delivered during the previous episode.

“As important as reviving demand in mainland China is for many companies elsewhere (think car makers, for example, or commodity producers), China is still less import-reliant than many other markets. Put simply: China may be holding up global GDP, arithmetically at least, but that’s not translating into as large a global growth impulse as if, say, Europe was firing back up.”

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