In the context of climate change, what is the role of biodiversity as well as human activities...
7 days of Economics: European Union, China exposure and export sentiment
Considering its considerable weight in world GDP, slower growth in China causes spillover effects
Over the past 12 months, countries which are more exposed to China in terms of exports have seen a bigger drop in their new export order assessment
In Germany there is a close correlation between the Chinese purchasing managers index and the assessment of exports in the PMI
This shows that Germany and, by extension, Europe as a whole should hope that recent Chinese growth support measures will be successful.
Paraphrasing the quote which is attributed to Napoleon that “when China will wake up, the world will tremble”, one can argue that if China would fall asleep, it would not go unnoticed either. After all, as the country’s GDP represents about 15% of world GDP, weaker Chinese growth should cause spillover effects. The extent depends on the nature of the slowdown (the import content of the components of final demand which see softer growth) and on the importance of China as a trading partner.
Chart 1 (see Ecoweek) shows on the horizontal axis the exports to China as a
percentage of total exports . The vertical axis shows the change over
the past 12 months in the assessment of new export orders. With the
exception of the Netherlands and Austria, there seems to be a
relationship between China’s weight as an export destination and the
change in the export order assessment. Despite their more limited
exposure to China, the Netherlands and Austria have witnessed a big
drop in export sentiment, probably because of the important weight of
Germany in their exports (respectively 24% and 30%) and in view of
the considerable growth slowdown in Germany last year. Focussing
on Germany, chart 2 (see Ecoweek) shows the close correlation between the Caixin
purchasing managers index for China and the exports assessment in
the German PMI. Developments in China do not provide the full
explanation, but it is clear that Germany and, by extension, Europe as
a whole should hope that recent Chinese growth support measures
will be successful.
Read moreAll news
The economic shock caused by Covid-19 is indisputable: deterioration of public finances, shifts...
For nine months now, Europe has been dealing with the Covid 19 crisis and the resulting...