Monday, 20 December 2004

Everybody is exporting to the US

From his analysis of the US October trade data, Brad Setser points out that China's rapid export growth is no longer just due to the shift of production from other Asian economies to China.

[T]he facts have changed: US imports from China and the Asian NICs are now both growing strongly. In 2004, overall imports from the Asia Pacific region are set to rise by 17%, or by about $70 billion. That is faster than the overall rate of increase in all imports -- 16% -- and all the more impressive because the US is not importing oil from Asia(oil imports are likely to increase 30%). Imports from China are set to rise by over $40 billion, and to reach $190 billion -- an amazing 28% y/y increase. But imports from the NICs and Japan are also rising -- imports from the NICs are set to increase by $13 billion, or 14%. China's export growth clearly stems from more than just the shift of production lines from Asian NICs to China.

This is consistent with what I had pointed out in "US demand and Chinese production". In that commentary, I had cited Morgan Stanley economist Daniel Lian's research in saying that "developed economies like the US have probably felt the brunt of the rise of China's manufacturing capability in terms of lost jobs and investment in recent years, rather than other emerging economies, as has often been believed".

Basically, the surge in US imports have been so large that all the Asian economies have benefited. The question is what happens once the US import machine slows down.

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