The lack of significant rise in exports across Asia despite the steady recovery in the U.S. and Euro-zone economy in recent months has baffled analysts, which led some to speculate that a "decoupling effect" may have taken place or that the performance of developed economies may not have a direct impact on Asian exports.
More encouraging data are coming from the U.S. and Euro-zone at economic front in recent months. U.S. durable goods orders and flash manufacturing purchasing managers' index (PMI) jumped impressively in March, something that is supposed to benefit Asian exports given their sensitivity to the U.S. capital expenditure cycle in the past. In the Euro-zone, the flash PMIs all also pointed to accelerating growth.
But in Asia, there was little evidence of strong exports and manufacturing activities which should have been the natural consequence of the economic recovery in the U.S. and the Euro-zone.
China reported its official measure of manufacturing PMI came in at 50.4 in April, up a tick from March but under market forecasts of 50.5. Japan also saw a sharp dip in export shipments in March in volume terms. China Taiwan's new export orders, a useful leading indicator for the region, contracted by a similar amount. In all, there are hardly signs that the Asian trade cycle is firing up. The lackluster performance of Asian exports has baffled economists and market analysts, who are divided over the reason behind this phenomenon. ABN Amro Research, however, remained upbeat by saying it is a matter of time that export growth in the region will pick up as the U.S. and Euro-zone recover further.
It predicted the export up-cycle the coming months will likely to be led by China's Taiwan and South Korea.
HSBC Global Research, however, was not that optimistic. It said growth in the West appears to be less import intensive than in the past. This reflects to an extent a decline in Asian competitiveness, with wages soaring across the region in recent years, while remaining more or less unchanged in advanced countries.
In addition, growth in the U.S. and Euro-zone may have shifted away from import intensive sectors, such as housing construction.
Standard Chartered Research offered another explanation for the subdued export performance in Asia while U.S. and Euro-zone recover. It saw trade with other developing markets, in particular trade within Asian economies, playing more important role than trade with the West in measuring Asian export performance this time round.
According to Standard Chartered, most countries in the region have seen a profound shift in the proportion of their exports going to emerging markets rather than developed markets. Some of the most dramatic shifts include South Korea, up to 60 percent from 16 percent since 1990, and Thailand and Indonesia, also both up about 30 percentage points over the same period. China's share, perhaps reflecting its role in final assembly, has increased to 32 percent from 16 percent.
Asia's growing role in world trade has also been fueled by rising trade within Asian economies. Asia's intra-regional trade accounts for nearly half of all of Asia's trade with emerging markets, which very much relates to the expanding supply chains of manufacturing goods.
Standard Chartered thus concluded that it is the performance of emerging economies rather than developed economies such as the U.S. and Euro-zone that will determine the export performance of Asia in coming years.
