Macroscope | Why China’s slowing growth need not worry emerging Asia

Name: China’s economy rose 7.9 per cent year on year in the second quarter of 2021
Uploaded: 2021-09-03T06:30:08.000Z
Duration: 1 min 19 s
Description: China’s economy rose 7.9 per cent year on year in the second quarter of 2021

China’s slowdown is likely to weigh on the export performance of its regional trading partners, but policy easing by Beijing and solid demand from major developed economies are likely to mitigate the impact

Reading Time:3 minutes

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Workers assemble ice skates at a factory in Zhangjiakou, in northwestern China’s Hebei province, on July 15. China’s retail sales and industrial production growth weakened in July as floods and Covid-19 outbreaks disrupted consumption and supply chains. Photo: AP

Sylvia Sheng

Published: 2:30pm, 3 Sep 2021

Investors’ perception of the greatest tail risk from China has shifted notably in recent months. Earlier in the year, overtightening of macro policies in China was viewed as a key risk to the global economic recovery.

More recently, these concerns have given way to growth concerns following the disappointing July activity data and weak August PMI figures.

Most economists had been expecting China’s growth momentum to slow in the third quarter, in part reflecting the impact of tighter policies earlier in the year. However, the speed of the slowdown was much sharper than expected.

Given the close economic links, slower growth momentum in China casts a shadow over the growth outlook for the rest of emerging Asia, mainly through the trade channel.

Among the major growth drivers, exports have been a bright spot for the region since the start of the pandemic while consumption has lagged. Emerging Asia’s exports have been supported by China’s strong growth rebound as the first economy to emerge from the Covid-19 crisis.

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China’s economy rose 7.9 per cent year on year in the second quarter of 2021

After a notable decline in the second quarter last year when Covid-19 first hit, export volume from emerging Asia excluding China rebounded quickly to its pre-pandemic level in the third quarter. This recovery is faster than in previous cycles. For example, following the 2008 global financial crisis, it took almost two years for exports in the region to return to pre-crisis levels.