Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Rising role of China in the transmission of cross border trade shocks to small open East
Asian economies
Asia Institute of Tasmania
Presenter: Mala RaghavanTasmanian School of Business and Economics
University of Tasmania
(some points extracted from - International Trade and the Transmission of Shocks: The case of ASEAN-4 and NIE-4 Economies by Dungey, M., Khan, F., & Raghavan, M. (2018))
Trade Shocks, China and Asian Economies
• Introduction• Background• Objective
• Changing Trade Patterns• Export Shares
• Shock Transmission Mechanism• Third Market Effects
• Modelling Framework • Focus on time varying trade matrix
• Empirical Analysis • Impulse responses and output multipliers
• Discussion and Conclusion
Trade Shocks, China and Asian Economies Outline
Outline
Trade Shocks, China and Asian Economies BackgroundASEAN-5
IntroductionGlobal Economic Growth Rate
Between 2010 to 2018
• The US grew on average by 2.3%
• The EU by 1.7%
• Latin America by 1.8%
• East Asia by 6%
• Southeast Asia by 5.4%
• South Asia by 6.9%
• A substantial increase in the regional share of Asia on the worldGDP (calculated using IMF Data, 2019).
• This demonstrates, the world's economic centre of gravity isshifting east.
Trade Shocks, China and Asian Economies BackgroundASEAN-5
IntroductionASEAN-4 and NIE-4• East and Southeast Asia – currently a dynamic region in global
trade and is increasingly a major driver of global economicgrowth.
• This study focuses on two sets of countries:
• ASEAN-4 – Indonesia, Malaysia, Philippines and Thailand
• NIE-4 – Hong Kong, Singapore, South Korea and Taiwan
and their trade ties with Group of 4 (US, EU, Japan and China)
Why??? Due to their
• impressive economic growth rate, following the 1998 EastAsian Crisis.
• resistance during the 2008 global financial crisis.
• high trade openness and rising trade ties with China.
Trade Shocks, China and Asian Economies BackgroundASEAN-5
IntroductionASEAN-4 and NIE-4 Economic Growth RateAverage growth rate from 2010 to 2018
ASEAN-4 Growth % NIE-4 Growth % Group-4 Growth %Indonesia 5.5 Hong Kong 3.3 US 2.3Malaysia 5.4 Singapore 5.0 EU 1.7Philippines 6.3 South Korea 3.3 Japan 1.3Thailand 3.7 Taiwan 3.3 China 7.6
• Southeast Asia region have an impressive growth trajectory.
Trade intensity = imports plus exports as a percentage of GDP
Trade Shocks, China and Asian Economies Trade IntensityASEAN-5
IntroductionASEAN-4 and NIE-4 Trade Intensity
ASEAN-4 Trade Intensity
(%)
NIE-4 Trade Intensity
(%)
Group-4 Trade Intensity
(%)Indonesia 32.1 Hong Kong 333.6 US 20.4Malaysia 130.4 Singapore 216.4 EU 63.0Philippines 54.4 South Korea 68.7 Japan 28.1Thailand 89.9 Taiwan China 33.6
• High trade intensity• high trade openness• high integration into global production chains • can be heavily influenced by developments in global activities• vulnerable to external trade or economic shocks
Trade Shocks, China and Asian Economies Export SharesASEAN-5
IntroductionASEAN-4 and NIE- 4 Trading Partners
ASEAN-4 China Japan EU USIndonesia 11.0% 13.4% 9.6% 9.5%Malaysia 12.8% 10.5% 9.5% 8.6%Philippines 11.9% 21.3% 11.3% 14.3%Thailand 11.4% 9.6% 10.0% 10.6%
NIE-4 China Japan EU USHong Kong 54.2% 3.7% 9.4% 9.4%Singapore 12.6% 4.3% 8.1% 6.0%S. Korea 25.9% 5.7% 9.0% 12.1%Taiwan 30.7% 6.2% 9.9% 10.0%
Export shares of ASEAN-4 and NIE-4 to their G4 trading partners for 2015
ASEAN NIE
11.1% 19.8%11.2% 25.2%7.2% 25.1%
12.1% 13.8%
ASEAN NIE
3.3% 5.4%26.3% 19.2%6.4% 11.5%7.5% 21.4%
Trade Shocks, China and Asian Economies Trade PatternsASEAN-5
IntroductionChanging Trade Patterns of ASEAN-4 and NIE-4 from 1978 to 2015
Trade Shocks, China and Asian Economies Trade PatternsASEAN-5
IntroductionChanging Trade Patterns of Group-4 from 1978 to 2015
Trade Shocks, China and Asian Economies BackgroundASEAN-5
IntroductionIn summary…
• Growing economic integration and increased economicopenness
• created interdependencies among the Asian economies.
• changed the structure of the global trade over time.
• These changes are bound to alter the channels through whichthe trade related shocks are transmitted and their effects onthese small Asian economies.
Trade Shocks, China and Asian Economies ObjectivesASEAN-5
IntroductionThe focus of this study…
• Assess the changing nature of trade links and its influence ontransmitting trade shocks to the ASEAN-4 and NIE-4 economiesover time.
• The specific focus is on the change in trade link through exportdemand from the G4 economies
• Demand component of the trade shock, commonly know asexternal shock.
• Evaluate the role of China in the transmission of cross bordertrade shocks to these small Asian economies.
Trade Shocks, China and Asian Economies Transmission MechanismASEAN-5
IntroductionShock Transmission Mechanism
Demand component of trade shocks
Trade Linkages
Competition or Income effect
Trade intensity effect
Third market effect
Trade Shocks, China and Asian Economies Transmission MechanismASEAN-5
IntroductionThird Market Effect
Malaysia
US China
Trade
Direct effect Direct effect
Indirect effect
Trade Shocks, China and Asian Economies ModelASEAN-5
IntroductionModelling framework
• Develop a modelling framework and identification mechanismthat enable us to
• Measure the direct and indirect transmission channels ofhow output shocks originating from the G4 economiespropagate into ASEAN-4 and NIE-4.
• Evaluate the relative importance of changing traderelationships versus changing shocks in propagating shocksbetween global markets.
• The SVAR approach of Abeysinghe and Forbes (2005) byconstructing a trade matrix (W)
Trade Shocks, China and Asian Economies ModelASEAN-5
IntroductionData and Sources
• Variables: Output (real GDP) and Trade linkages (Export Shares)
• Countries: 12 Countries• ASEAN-4 (Philippines, Indonesia, Malaysia, and Thailand), • NIE-3 (Hong Kong, Korea, Singapore, Taiwan),• Group-4 (China, Japan, United States and Europe Union)
• Sources of data• International Financial Statistics, DataStream, OECD
Economic Indicators, Eurostat• Direction of Trade Statistics, IMF Data.
• Period of study: Q1-1978 to Q4-2015
Trade Shocks, China and Asian Economies GraphsASEAN-5
IntroductionThe responses of GDP growth ASEAN-4 to a one unit shock in the samples economies
• Same weighted shocks with changing trade links - different samples
Trade Shocks, China and Asian Economies Graphs ASEAN-5
IntroductionThe responses of GDP growth ASEAN-4 to a one unit shock in the samples economies
• Different weighted shocks with changing trade links - same sample period
Trade Shocks, China and Asian Economies Graphs ASEAN-5
IntroductionThe responses of GDP growth NIE-4 to a one unit shock in the samples economies
• Same weighted shocks with changing trade links - different samples
Trade Shocks, China and Asian Economies Graphs ASEAN-5
IntroductionThe responses of GDP growth ASEAN-4 to a one unit shock in the samples economies
• Different weighted shocks with changing trade links - same sample period
Trade Shocks, China and Asian Economies MultiplierASEAN-5
IntroductionAccumulated Impact of Four Growth Drivers on ASEAN-4
China Japan EU US
ASEAN-4 1998 2015 1998 2015 1998 2015 1998 2015
Indonesia 0.20 0.51 0.40 0.25 0.55 0.43 0.80 0.62
Malaysia 0.28 0.61 0.46 0.30 0.70 0.50 0.94 0.77
Philippines 0.14 0.34 0.25 0.18 0.44 0.32 0.60 0.46
Thailand 0.22 0.53 0.36 0.28 0.58 0.39 0.83 0.64
Average 0.21 0.50 0.37 0.25 0.57 0.41 0.79 0.62
• The cumulative average impact of China’s shock on ASEAN-4 has increased to 0.50 from 0.21 (2.3 times), confirming the emergence of China as a major force in global trade.
Trade Shocks, China and Asian Economies MultiplierASEAN-5
IntroductionAccumulated Impact of Four Growth Drivers on NIE-4
China Japan EU US
NIE-4 1998 2015 1998 2015 1998 2015 1998 2015
Hong Kong 0.38 0.70 0.34 0.26 0.80 0.63 1.12 0.83
Singapore 0.32 0.66 0.44 0.32 0.85 0.56 1.17 0.85
South Korea 0.42 0.64 0.50 0.35 0.66 0.54 0.98 0.75
Taiwan 0.25 0.62 0.37 0.39 0.61 0.45 0.91 0.69
Average 0.43 0.63 0.41 0.31 0.73 0.54 1.04 0.78
• On average, in 1998 the US multiplier effects on ASEAN-4 and NIE-4 were 3.8 and 3.1 times larger relative to those of China; however, this gap has reduced to only 1.2 times in 2015.
Trade Shocks, China and Asian Economies ComparisonsASEAN-5
IntroductionRanked by export shares and multiplier effect
• Output-Multipliers with 2015Q4 W –Matrix vs Export Shares at Q4 2015
Malaysia Singapore
Export Rank Multiplier Rank Export Rank Multiplier Rank
China 0.13 US 0.30 China 0.12 US 0.33
Japan 0.11 China 0.25 EU 0.08 China 0.28
EU 0.09 EU 0.24 US 0.06 EU 0.26
US 0.08 Japan 0.18 Japan 0.04 Japan 0.19
Indonesia South Korea
Export Rank Multiplier Rank Export Rank Multiplier Rank
Japan 0.15 US 0.24 China 0.25 US 0.29
China 0.11 China 0.21 US 0.12 China 0.27
EU 0.09 EU 0.20 EU 0.09 EU 0.25
US 0.09 Japan 0.15 Japan 0.06 Japan 0.21
Trade Shocks, China and Asian Economies Comparisons
ASEAN-5Introduction
Ranked by export shares and multiplier effect
• Output-Multipliers with 2015Q4 W –Matrix vs Export Shares at Q4 2015
Malaysia Singapore
Export Rank Multiplier Rank Export Rank Multiplier Rank
Singapore 0.14 Singapore 0.20 Malaysia 0.13 Malaysia 0.29
Thailand 0.05 Hong Kong 0.17 Hong Kong 0.11 Hong Kong 0.22
Hong Kong 0.05 Thailand 0.13 Indonesia 0.09 Indonesia 0.18
Indonesia 0.04 Indonesia 0.12 Thailand 0.04 Korea 0.15
Korea 0.04 Taiwan 0.11 Korea 0.04 Thailand 0.14
Taiwan 0.03 Korea 0.10 Taiwan 0.04 Taiwan 0.14
Philippines 0.01 Philippines 0.05 Philippines 0.02 Philippines 0.10
Trade Shocks, China and Asian Economies DiscussionASEAN-5
IntroductionDiscussion
• The economic outlook for the NIE-4 and ASEAN-4 relies on the level of engagement and prospects of their major growth drivers and how they affect one another.
• US• The results demonstrate the dominance of the US in
disseminating shocks across the Asian region, although its impacts are declining over time.
• EU• has been successful in economic interaction with individual
countries in Asian region but• it has been unsuccessful in pursuing regional level
agreements.
Trade Shocks, China and Asian Economies DiscussionASEAN-5
IntroductionDiscussion
• Japan• associations with ASEAN-4 and NIE-4 as an investor and
trading partner has been pragmatic.• economic growth stalled since early 1990s.
• China• has displaced the EU and Japan as the most dominant
connections, although the US remains the most important.• trade-biased growth presents both challenges and
opportunities for economies with complex trade links.• viewed to have a detrimental influence on trade and
manufacturing base due to crowding out.• provided a buffer for Asian economies from other
international influences.
Trade Shocks, China and Asian Economies DiscussionASEAN-5
IntroductionUS-China Trade War
• US-China trade war is the ‘biggest threat’ to Asian economies as growth forecasts slashed (ADB 2019)
• If China and US growth slows• the health of global manufacturing will suffer• the world trade volume growth will suffer• the trade volatility increases, creating uncertainties• the interdependence and integration would undermine
investment growth in these small Asian economies.
Thank You
Trade Shocks, China and Asian Economies DiscussionASEAN-5
Introduction