In the monthly economic update video for eZonomics, ING head of macroeconomics Maarten Leen tells how Asia’s new export challenge is having an impact on world trade. Leen says the slowdown is relevant to people around the globe, as well as investors who have exposure to international markets.
Made in China?
This isn’t the first time Asian exports have faced a downturn, but this time seems different, Leen says.
He tells how Asian exports slumped in 1997 following the Asian crisis and in 2001 after the dotcom bubble burst.
“But exports rebounded quickly then, in part helped by China’s admission to the World Trade Organisation. This time seems different,” he says.
Slow recovery and higher wages
Leen explains the slow recovery of developed economies in Europe and the United States is part of the reason why exports from Asia have slowed.
“But also it seems that some of the export products have become too expensive on the back of higher wages. This is especially true for China,” he says.
Policymakers in the region may act by overhauling their economies, increasing efficiency and “liberalising” agriculture and finance sectors to increase domestic demand.
Another way to stimulate exports Leen says, would be to weaken currencies. But, he warns, the more countries that follow this route, the higher the risk of a currency war.