While the 21st century is said to become the “Asian Century,” 2019 is not likely to be representative of that claim. Asian trade is in a downward trend, with analysts saying regional trade is heading for its lowest point since 2015.
Chen Dong, Senior Asia Economist at Pictet Wealth Management, says, “Exports by major Asian economies have been in a downward trend since they peaked at the end of 2017, and the deceleration became more rapid towards the end of last year.”
“With the softening global demand and uncertainties related to the US-China trade dispute, this trend could continue, at least in the first half of 2019,” adds Chen Dong.
Global trade slowdown and long-term macroeconomic trends weigh on Asian economies
While the US-Sino trade war might have an impact on Asian economies, the downward trend is due to other factors. The overall slowdown of the global economy affects trade-heavy Asian economies across the board.
According to a forecast by the World Trade Organisation, global trade growth in 2019 will be at 2.6 per cent, slower than the worldwide GDP growth of 3.3 per cent.
Global semiconductor sales growth, for example, has declined by 5.7 per cent year on year, according to the Semiconductor Industry Association (SIA). That indicates a sluggish electronics sector, which is a dominant industry in many Asian countries. South Korea, for example, hosts leading electronics manufacturers and has recorded an export decline of 11.1 per cent in February 2019.
While events like the ongoing trade war might dampen global trade in the short-term, the long-term projection for Asian trade is affected by macroeconomic trends. It has already been apparent for some time now, that the Asian export growth model that relies on cheap labour is coming to an end. Automation and increasing protectionism are shifting production back to Europe and the U.S.
Thus, to remain their current economic growth rates, Asian economies need to strengthen their domestic consumption. Moreover, Asian businesses can leverage new technologies to boost economic growth. For example, Asia Pacific is the fastest-growing market for blockchain technology worldwide. That has already attracted substantial interest from leading multinational corporations and offers opportunities for the region.
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