Exports drive growth for Asian economies and the recent slowdown in world trade has weighed on growth for many countries in the region. World Bank researchers have outlined four main factors that account for the slowdown, which break down as follows:
Changing demand composition: Demand for trade intensive commodities, such as copper, iron, has declined. In part this reflects lower investment from both public and private sectors. China looms large in this trend: as it moves away from investment-driven growth, demand for steel, cement has slowed considerably.
No doubt these factors explain part of the story, but there are also structural changes happening too. Most notably, a shift in sourcing by both Chinese and American companies toward domestic producers, two factors that have weakened import demand in two of the world’s largest economies.
Looking at recent signs, the trade slowdown looks to be continuing into 2016, with dismal figures being reported by Hong Kong and Thailand today. For a rapid turnaround, there will have to be changes in the above four factors for trade growth to begin to match the pre-crisis pace.