When the topic of China’s path to economic recovery comes up in conversation, inevitably so does Beijing’s US$586 billion stimulus package. Less widely discussed is the effect the package is having on China’s trading partners, says Dr Subir Gokarn, Asia-Pacific chief economist at Standard & Poor’s (S&P).
Speaking at S&P’s 2009 mid-year outlook road show in Shanghai yesterday, Gokarn noted that Beijing’s stimulus package is fueling demand for raw materials and merchandise from countries in the region. Merchandise exports to China from Australia were up 23.0% month-on-month in February 2009, from -88.6% in November 2008. In Korea, merchandise exports to China swung from -225.1% month-on-month in November 2008 to a gain of 119.6% month-on-month in February 2009. Taiwan also benefited, seeing an increase from -237.7% month-on-month in November 2008 to 194.8% month-on-month in February 2009.
Not all the growth is driven directly by Chinese demand. Korea’s exports are also being driven by China’s need for capital goods like manufacturing machinery as Chinese factories ramp up production capacity, wrote Wang Tao, UBS’s senior China economist, in a recent report. Taiwan’s biggest exports to China are processing components used in finished goods that are re-exported to developed countries. That makes Taiwan’s exports to mainland China linked more closely to demand from the US than to demand from the mainland.
For more on S&P’s 2009 mid-year outlook, see our story here.