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Asia’s export engine stuck in neutral despite US uptick
Exports from seven of East Asia’s biggest exporters - Japan, China, South Korea, Taiwan, Thailand, Hong Kong and Singapore - grew by just 0.8 percent in the third quarter, according to a Reuters analysis of national trade data, led by a 3.1 percent gain in exports to the U.S. from the same three months of 2012.
The data reinforce a worrying trend in a region where gross exports represent more than a third of its combined economic output: since peaking in 2010 as the global economy rebounded from financial crisis, Asia’s export growth has rapidly cooled.
Double-digit growth, common to the past decade, petered out in 2011 and has not recovered.
“There is really no change in the main thing that’s going on across Asia - which is no growth in exports the past two years,” said Tim Condon, head of financial markets research at ING in Singapore.
“I think it’s weak global spending, it’s as simple as that.”
There is a growing consensus that Asia faces slower growth and more uncertain prospects once the U.S. economy improves to the point where the Federal Reserve begins scaling back five years of radical monetary stimulus.
If exports fail to offset rising interest rates and ebbing global capital flows, economists say, Asia will have to rely on domestic demand to take up the slack - a difficult proposition given aging populations and other structural hurdles.
The failure of Asian exports to rise in tandem with global recovery has sparked a debate among economists about whether Asia might be losing its competitiveness as wages and other costs rise. But Asia’s share of U.S. imports, according to data from the U.S. Census Bureau and Bureau of Economic Analysis, has been growing since 2002 alongside a steady climb in China’s exports since its 2001 entry into the World Trade Organization.
“There’s no compelling evidence that the competitiveness of EM (emerging market) Asia’s exports has fallen,” said Johanna Chua, head of Asia economics and market analysis at Citigroup in Hong Kong. The sluggish recovery in U.S. imports reflects the lopsided nature of the U.S. recovery, she said, one led by housing and shale gas instead of consumer spending or business investment.
“We’re not getting a broad-based recovery,” said Chua.
Japan’s Hollowing Out
Japan, however, is a different story.
The world’s third-largest economy has slowly been losing market share in the United States. Japanese exports fell almost 11 percent to $180.4 billion (112.1 billion pounds) in the third quarter, leading Asia’s export decline.
In local currency terms, Japanese exports climbed nearly 13 percent in the quarter because of a sharply weaker yen over the past 12 months. But the volume of shipments was virtually flat.
And while Japan lost its lead as Asia’s top exporter to the United States and Europe a decade ago, it now appears to be losing its edge in China to neighbor and rival South Korea.
Asia’s exports to China in the third quarter rose 1 percent, with a 9 percent rise in exports from Korea offsetting an 11 percent decline in exports to China from Japan. Indeed, in the past five years, Korea has edged out Japan as Asia’s biggest exporter to China.
That may be a reflection less of declining popularity or competitiveness of Japanese products than a shift of production out of Japan to other production bases in Asia and the United States - the “hollowing out” of Japanese industry.
This phenomenon explains how a weak yen can boost exports in yen and the earnings of Japanese exporters calculated in yen even though shipments from Japan are falling. Japan’s exporters are earning more from products sold - and manufactured - overseas.
“Japanese automobiles and general machinery remain competitive and, in fact, Japanese auto sales have increased in the United States this year from last. But exports have not increased as much,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.
“The reason is their continued shift to local production. The weak yen at current levels won’t help reverse the trend of hollowing out of industry and is unlikely to boost exports as much as it used to.” (Reuters)
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