The second-largest economy in the world is emerging from a protracted coma. Since the beginning of the pandemic, China’s “Zero COVID” strategy has had negative side consequences on its economy. The most stringent public health regulations in the country are no longer in effect, but the alarming signs of its economy continue.
However, what takes place in China does not remain in China as Beijing is inter-connected with the whole world on a great level. South-east Asia in particular trades enormously with China. If China sees a further downfall, where does that leave South-east asia?
The Downfall of China
The Chinese economy which grew in two digits in the twenty-first century is losing its steam. It grew just 2.2% in 2020 and the full picture is yet to be seen.China’s horribly inflated real estate bubble is constantly in danger of exploding. There is a crisis with youth unemployment in its big cities.
The labour force, which is consistently underpaid, is fighting to maintain customer demand. And the one-child policy’s impact on the demographics has only started.
The economic trajectory of the nation with the largest population has significant effects on its trading partners. Countries that depend on China for exports may experience a margin pinch across certain important industries as it slows down even more in coming years.
And it might even have an effect on government finances since countries will need to make up for the decline in demand for their goods to China by selling to other nations.
Global Dependence on China
Let’s take a look at Taiwan:
Despite last year’s Nancy Pelosi media stunt to back Taiwan, Taiwan is far more dependent on China than the United States for trade. The U.S. had a 15% share of exports from Taiwan in 2021 while mainland China and Hong Kong accounted for 42%. Again, mainland China and Hong Kong were Taiwan’s top two import suppliers, accounting for 22% of total imports. The United States came in last with a 10% share. This trend has seen a surge in the last 5 years when the dependency of Taiwan on China continues to grow.
The second country which is heavily dependent on China’s trade is South Korea. With 25% of all trade last year, China is by far South Korea’s largest trading partner. Last year, 22.8 percent of all exports outbound were exported to China. More than 2,000 of our imports, including raw materials, come from China.
The same goes for other Southeast Asian economies.
| Exports to China (2021) | Imports from China | |
| Japan | 23% * | 25% |
| Malaysia | 15.4% | 23% |
| Thailand | 14% | 24% |
| Indonesia | 23% | 28% |
| Singapore | 15% * | 14% * |
| Cambodia | 9% | 33% |
| Vietnam | 17% | 32% |
| Laos | 31% | 22% |
*Figures from 2020
In the table above you can see the dependency of South east Asian countries on trade with China. Even a major economy like Japan is heavily reliant on China. Their economies can go upheaval if China’s economy goes for a spin. The imports of semiconductors from China is another highlight of the trade.
It’s time these economies start looking beyond China. China has time and again capitalised and violated South east asian countries’ sovereignty because of the trade advantage it has over countries. These countries need to break China’s import and export dependence. Government and business initiatives must pick up speed.
They need to form new supply chain alliances. They must undertake a more aggressive turn towards India, as well as other ASEAN nations, and the Middle East. Before China’s cloud collapses, South-east Asia needs to look for safer grounds.
