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CHINA-MANUFACTURING-ASIA-TRADE-INDUSTRY
Trade war’s bark turns to bite in Asia
SHANGHAI, Nov 4, 2018 (BSS/AFP) – The US-China tariff slugfest has for
months triggered warnings that it could impact global economic growth, and
recent data indicates the trade tension is indeed beginning to bite.
Manufacturing gauges in several export-reliant Asian countries, as well as
China, weakened in October as gloom deepens over the trade outlook.
China’s official Purchasing Managers’ Index (PMI), which measures factory
activity, came in at 50.2 in October, down from 50.8 the previous month, the
latest sign of weakness in the world’s second-largest economy amid the trade
war and a domestic debt problem.
But China’s troubles are bad for the rest of the region, and the world,
analysts said.
Asian exporting countries from South Korea to Malaysia saw PMI decreases
in October, according to indices compiled by Nikkei/IHS Markit.
Taiwan saw its steepest falls in production and new business in just over
three years, purchasing activity by companies fell for the first time since
May 2016, and firms anticipate lower factory output in the next 12 months,
Nikkei/IHS Markit said.
“Taiwan is feeling the effects of this trade war because China is the
factory for many companies in Taiwan. When the estuary is blocked, you feel
the effects,” said Sun Ming-te of the Taiwan Institute of Economic Research.
– Paying the price –
South Korea’s PMI slipped to 51.0 in October from 51.3 in September, while
a separate Korean business sentiment index for manufacturing sank to its
lowest level in two years.
China is South Korea’s largest trading partner, absorbing a quarter of
Korean exports.
“The situation may get worse next year due to a prolonged trade war
between the US and China, growing default risks at debt-plagued Chinese firms
and a slowing global economy that reduces demand for our exports,” said c, an
analyst at the Korea Institute of Finance.
Southeast Asian manufacturers were feeling the effects too, with PMI in
Malaysia and Thailand slipping below the 50-point level, which indicates
contraction in the sector.
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CHINA-MANUFACTURING-ASIA-TRADE-INDUSTRY 2 LAST SHANGHAI
It was Malaysia’s lowest PMI since July and Thailand’s lowest in two
years.
In an AFP interview last week, Malaysian Prime Minister Mahathir Mohamad
complained that US President Donald Trump — who has accused various trading
partners of “ripping off” America — “seems to be withdrawing from all
commitments overseas”.
Mahathir, 93, said that hurts everyone, including the US.
“We want to remain friendly with the US, and we want to continue trading
with the US,” Mahathir said.
“But the trade war that is going on between the US and China is damaging
for us. We have to pay a price for that.”
– Vietnam or bust –
The International Monetary Fund warned at its annual meeting last month
that the trade friction and other threats would hobble the world economy,
lowering its growth forecasts for 2018 and 2019.
The Eurozone posted disappointing PMI figures in October, though due
largely to factors other than trade tension.
But not everyone feels the shock yet, with Japan’s manufacturing looking
solid last month.
Trump, meanwhile, faces little pressure to tame his trade rhetoric at
home, with a rosy US outlook marked by rising wages and low unemployment.
And even in Asia, there will be some winners as conflict re-aligns trading
patterns, economists noted.
Vietnam, in particular, looks to gain as foreign manufacturers relocate
out of China to escape the trade war crossfire and what many say is an
increasingly unfair playing field for foreign companies in China.
Vietnam PMI climbed from a ten-month low of 51.5 in September to 53.9 last
month.
“The hard data on exports and industrial production in recent months
haven’t been that great. The latest survey nonetheless shows how Vietnam is
weathering the US-China trade war better than its ASEAN peers,” Miguel
Chanco, senior economist at Pantheon Macroeconomics, told AFP.
“If the trade war escalates, Vietnam will be one of the prime destinations
for export-oriented firms looking to move out of China.”
BSS/AFP/HR/1005