26 Nov 2015
China's imports vs US imports - DB
FXStreet (Guatemala) - Deutsche Bank's China economists led by Zhiwei Zhang quantify how much exports from other countries are absorbed by China and the US.
Key Quotes:
"We argue the conventional measures based on headline trade data are misleading, as some 27% of China’s imports are re-exported to other countries. We rely on a proprietary model to properly adjust for such processing trade and unveil the true economic gravity of China and the US.
The rise of gravity from China is remarkably fast. In 2005 China only attracted more imports than the US did from a few countries. By 2014 China has become as important as the US for exports from the continental Europe, Middle East, and part of South America.
The shift of gravity is most surprising in East Asia and ASEAN economies. Many may expect China has replaced the US as the most important importers from these countries. Our estimates suggest, however, that only Taiwan and Laos export visibly more to China than the US. Japan still depends more on US, while the US and China are equally important to most other countries’ exports.
Quantifying the true trade linkage is important for investors. We expect the overall shift of gravity by 2020 to be much less striking, as growth in China slows. But there might be interesting dynamics in certain regions and countries. For instance, with TPP, “one-belt- one road”, and other initiatives underway, it is quite uncertain how East and Southeast Asia will look like in five years. Also, if the trend in the past few years continues, the UK, still more dependent on the US for now, might follow Germany and France and turn to neutral as well."
Key Quotes:
"We argue the conventional measures based on headline trade data are misleading, as some 27% of China’s imports are re-exported to other countries. We rely on a proprietary model to properly adjust for such processing trade and unveil the true economic gravity of China and the US.
The rise of gravity from China is remarkably fast. In 2005 China only attracted more imports than the US did from a few countries. By 2014 China has become as important as the US for exports from the continental Europe, Middle East, and part of South America.
The shift of gravity is most surprising in East Asia and ASEAN economies. Many may expect China has replaced the US as the most important importers from these countries. Our estimates suggest, however, that only Taiwan and Laos export visibly more to China than the US. Japan still depends more on US, while the US and China are equally important to most other countries’ exports.
Quantifying the true trade linkage is important for investors. We expect the overall shift of gravity by 2020 to be much less striking, as growth in China slows. But there might be interesting dynamics in certain regions and countries. For instance, with TPP, “one-belt- one road”, and other initiatives underway, it is quite uncertain how East and Southeast Asia will look like in five years. Also, if the trend in the past few years continues, the UK, still more dependent on the US for now, might follow Germany and France and turn to neutral as well."