China’s slowdown impacts APAC trade in varied ways

China’s growth slowdown will dampen economic activity across the APAC region. But the full extent of the impact will be determined by each country’s specific trade linkages to the Chinese economy.

For instance, via a simple quantitative analysis, we see that Japan’s exports to China respond to manufacturing shocks, whereas shocks to construction or services appear to have little impact.

What you will learn:

• The degree of sophistication or complexity of exports varies by economy. Australia and Indonesia ship raw materials and commodity-related products Japan and Thailand export capital goods, parts, and processed goods. And in South Korea, Taiwan, Malaysia, Vietnam, and Philippines, electronic components and other manufactured parts dominate exports.
• In considering trade structures, we analysed the connectivity of each country’s exports to Chinese demand indicators, confirming that the difference in trade structure is reflected in these empirical relationships.
• We expect that under China’s current softening pattern, weak real estate investment and retail sales will weigh on Australia, though there will be support from a recovery in infrastructure investment.