COMMENTARY

With China’s growth faltering, dark days lie ahead for Taiwan, South Korea and Singapore

Obsession
China's Transition
Obsession
China's Transition

Orders for Taiwanese exports flopped unexpected in June, falling 3.5% on the same month last year, the fifth straight month of declines. That slowdown appears to be dragging industrial production down with it; last month, that metric fell 0.4% on the previous year, upsetting expectations for a 2.8% rise. Here’s a look at export orders:

That fall is partly due to China’s slowdown. Export orders from the mainland and Hong Kong, which make up more than a quarter of the total value of global exports, fell 8.6% since May, and were down 1.9% on June 2012.

Taiwan has run a fairly consistent trade surplus with China, which leaves it vulnerable to slowdowns in the Chinese economy. Take a look:

South Korea suffers from a similar dynamic:

Singapore’s better, but still vulnerable:

That’s one big reason why, in a recent note, Morgan Stanley flagged those three countries as danger zones in the (highly likely) event of a severe Chinese economic slump:

Asia’s hardest hit. (Morgan Stanley)

Running yawning trade surpluses can’t go on indefinitely. China learned that lesson with the onset of the global financial crisis, which wiped out a huge chunk of demand for its exports in Europe and North America. Now Taiwan, South Korea and Singapore are learning the same.

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