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China now rivals U.S., Europe as growth engine for Asia Exports

Date 13-Jun-2016
Subject China now rivals U.S., Europe as growth engine for Asia Exports

BEIJING: China is now an equal or even bigger driver of export growth in neighboring economies than the U.S. and E.U combined, marking a significant shift in the economic pecking order since the 2008 global financial crisis. That’s according to research by Deutsche Bank AG Economists who weighed up the influence of the U.S. and China over the rest of Asia through the prism of export growth, as well as the currency and bond markets.

In Taiwan and Indonesia, for example, the growth of China’s gross domestic product dominates the U.S. and European Union’s as a source of export demand. In other economies, the trading giants are equally important. “This is noticeably different from the pre-crisis years when China was much less important –- bordering on irrelevance -– as an engine of growth in the region," Deutsche analysts led by Asia-Pacific Chief Economist Michael Spencer wrote in a note.

After a rocky start to the year, China has been aided in its growth prospects by a record surge in credit in the first quarter. Key indicators for May are expected to show that the economy is continuing to find its footing and growth is on track to hit the Communist Party’s goal of 6.5 percent to 7 percent for 2016.

IMF Upgrades

The International Monetary Fund in April upgraded its China growth forecasts by 0.2 percentage point for this year and next, following signs of “resilient domestic demand” and growth in services that offset weakness in manufacturing.

Beyond the pace of GDP growth, China’s currency gyrations are also increasingly important across the region. While the dollar still drives volatility in most Asian currencies, the yuan is as least as important for fluctuations in the ringgit and won and is growing in significance for other exchange rates, except the peso.

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