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How intra-Asian trade can sustain regional recovery as US and China economies slow
- Asia will undoubtedly feel the knock-on effects of a downturn in US growth, but that does not mean the recovery will end
- Decreasing exposure to the US market, the ongoing economic reopening and recovery in domestic consumption will cushion the impact
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Marcella Chow, executive director, is a global market strategist at J.
With US consumer confidence hitting a lull and growing uncertainties over China’s economy, there are increasing concerns that a slowdown in global growth could derail Asia’s recovery. To gauge the trajectory of Asia’s rebound in the case of a US economic slowdown, a useful starting point is the internal and external drivers behind the region’s growth over the past two years.
Externally, the US consumption boom, starting in mid-2020, fuelled an unprecedented rise in Asian exports. The internal driver, meanwhile, was kick-started by a relaxation of domestic Covid-19 restrictions, leading to a rise in domestic demand and a resumption of manufacturing activity.
As the saying goes, though, all good things must come to an end. While export growth in Asia is still above pre-pandemic levels, there are increasing signs that the external driver of Asia’s economic rebound is running out of steam.
This does not necessarily mean Asia’s recovery is coming to an end. The recent 1.9 per cent decline in Taiwan’s July new export orders – a useful indicator of future export demand – does highlight the external risk of a global slowdown. However, the variables affecting the trajectory of Asia’s rebound are much more nuanced and will depend both on the balance between the external and internal growth drivers and how the US economic slowdown unfolds.
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