by In the wake of China's slowdown, emerging markets have become a source of concern for investors. As China’s economy slows, exports by its trading partners have slumped, adding to concerns about the outlook for the global economy and for emerging markets in particular. Moreover, this comes on top of a structural slowdown in world trade growth, which has been sluggish in recent years. Exports from South Korea dropped by 14.7% y-o-y in August, their sharpest fall since 2009. China accounts for around one-quarter of South Korea’s exports, but exports to Japan and Europe also declined markedly. Petroleum products, cars and ships were among the sectors most affected. Japan’s exports declined by 4.4% q-o-q in the second quarter of 2015 owing to falling sales to China (which takes 18% of Japan’s exports) and the rest of Asia. Weak exports were partly responsible for the economy contracting by 1.6% y-o-y in the second quarter, and raise further doubts over the prospects for “Abenomics” to reboot growth in the world’s third-largest economy. Indonesia’s exports have been falling sharply for several months, and the slide deepened to 19.2% y-o-y in July. Like other Asian commodities producers, the country is exposed to weaker growth in China both directly — China is its largest export market, accounting for 14% of total exports — and also indirectly, through weaker commodity prices.
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In the wake of China's slowdown, emerging markets have become a source of concern for investors.
As China’s economy slows, exports by its trading partners have slumped, adding to concerns about the outlook for the global economy and for emerging markets in particular. Moreover, this comes on top of a structural slowdown in world trade growth, which has been sluggish in recent years.
Exports from South Korea dropped by 14.7% y-o-y in August, their sharpest fall since 2009. China accounts for around one-quarter of South Korea’s exports, but exports to Japan and Europe also declined markedly. Petroleum products, cars and ships were among the sectors most affected.
Japan’s exports declined by 4.4% q-o-q in the second quarter of 2015 owing to falling sales to China (which takes 18% of Japan’s exports) and the rest of Asia. Weak exports were partly responsible for the economy contracting by 1.6% y-o-y in the second quarter, and raise further doubts over the prospects for “Abenomics” to reboot growth in the world’s third-largest economy.
Indonesia’s exports have been falling sharply for several months, and the slide deepened to 19.2% y-o-y in July. Like other Asian commodities producers, the country is exposed to weaker growth in China both directly — China is its largest export market, accounting for 14% of total exports — and also indirectly, through weaker commodity prices. Almost 60% of Indonesia’s exports are commodities. The government is seeking to diversify the economy.
Brazil, which had boomed in recent years from selling commodities to China, has now been hit hard by the country’s economic slowdown and the slide in commodity prices. China’s currency devaluation is another blow to Brazil, which is already facing the prospects for the worst contraction in 25 years.
Mexico's trade deficit widened to $2.3bn in July, bringing the accumulated shortfall in the first seven months of the year to $6.3bn. From one year before, exports fell by 2.6% to $32.8bn, while imports increased by 1.1%, to $35.1bn. Going forward, the peso’s drop to all-time lows against the US dollar is expected to benefit Mexico on the trade front. With the US as Mexico’s main trading partner, its economy is less exposed to China's slowdown.