Pedestrians wearing face masks walk along a road in the Central Business District in Beijing on July 16, 2020. Wang Zhao | AFP | Getty Images
Southeast Asian nations will likely benefit from China’s economic rebound as the country commands a “lion’s share” of regional exports, one economist said this week. China on Thursday said its gross domestic product grew by 3.2% for the second quarter of 2020, compared to the same period a year ago. The country’s GDP shrank by 6.8% in the first quarter, when lockdowns were in place due to the coronavirus outbreak. Analysts were expect GDP to grow only 2.5% for the April to June quarter. “While numerous challenges remain, the uptick would rekindle hopes that China’s economy can help to pull others along,” Wellian Wiranto, an economist at OCBC Bank, wrote in a note on Thursday. “The fact that China commands a lion’s share of ASEAN exports … takes on extra importance now,” he said, referring to the Association of Southeast Asian Nations. That dependence on China was a “painful liability” in the first quarter, but the recent uptick has now turned it into a “key asset,” he added.
Global trade is not going to be a strong lift for the region, it will be a modest lift. Steve Cochrane chief Asia Pacific economist, Moody’s Analytics
Southeast Asian countries ship 18.8% of their exports to China, the note said. China’s recovery will not “save the day” for these countries, but would make a slight difference given that other export destinations — such as the U.S. — are still working to control the coronavirus situation.
Signs of rebound
The wider Asia-Pacific region may also be entering the recovery phase, said Steve Cochrane, chief Asia Pacific economist at Moody’s Analytics. “We troughed back in May,” he told CNBC’s “Squawk Box Asia” on Monday, noting that economies in China, Australia and New Zealand are improving. That’s because activity is restarting as lockdowns and restrictions are eased, removing supply-side constraints, he said. Not everyone is so positive. Vishnu Varathan, head of economics and strategy at Mizuho Bank, said the economic pick-up in the first half of 2020 may have been “flattered” by various factors such as “speculative” property investment and the fact that China was one of the first countries to emerge from lockdowns. “The recovery ahead will, in all likelihood, be hampered by lingering waves of pandemic risks colliding with fresh flare up in U.S.-China tensions, and sheer uncertainty,” he wrote in a note on Thursday. Cochrane of Moody’s Analytics agreed that social distancing and other risks will remain a point of friction.