China trade slowdown not all bad news for Asia

HONG KONG - The Chinese external sector succumbed to trade-war pressure and domestic slowdown, with both exports and imports contracting in December after double-digit growth for most of the year. The wearing-off of trade-war tariff front-loading, a worsening of domestic sentiment and external demand all pushed trade performance downward.

In a briefing note, French banking group Natixis says China shipments to the US contracted, while they stalled to Asia and the EU in December.

"The bad news is not limited to Chinese exporters but also impacts global traders - Chinese imports shrank in December, with Chinese imports of Korean goods down by 18%YoY. And Korea is not alone in seeing weakness of Chinese demand. With the exception of Hong Kong, import demand from China declined everywhere in Asia," Natixis says.

"While everyone in Asia is affected by worsening global demand, the impact of weaker trade on the individual economy differs due to divergence of dependency on trade for sources of growth," it adds.

"In emerging Asia, Singapore is most exposed to China due to its trade-oriented nature via both merchandise exports and services for the sector.

"Vietnam, Malaysia, and Korea are also very exposed (but) India, Indonesia and the Philippines are least vulnerable to weak global trade as a share of GDP due to their less trade-oriented economy.

"India, for example, has close to zero per cent of GDP exposure to China exports. Indonesia's direct exposure is only 2%."

Natixis also comments on EM Asia's exposure to commodities as a share of GDP.

"Although Indonesia's exports are primarily commodity driven, it says, commodity exports as a share of GDP account for only 10%, which means that its indirect GDP vulnerability is also small, although much more significant for the sector and much more than India's 4% exposure.

"The country most exposed to a China slowdown again is Singapore, through its composition share of GDP at 27% of GDP.

"In other words, Indonesia may at first glance seem rather exposed to China's industrial production and investment slowdown via its export structure, its domestic orientation shields it from significant macro-economic spillover.

"All the three current account deficit countries - India, Indonesia, and the Philippines -- are least exposed to China due to their domestic demand-driven growth model, which means they are likely most immune to a slowing China and global trade."www.natixis.com(ATI).