South Korea, Taiwan and Hong Kong view mainland China as their largest export market, but the judges aren’t sure how badly they are feeling the effects of a robust Chinese economic recovery.
The three Asian power plants along with most other economies have shrunk this year due to shutdowns to curb the spread of the novel coronavirus.
They will be releasing economic data for the third quarter in the coming days.
An increase in China’s demand for computer chips before the US restricts technology exports is likely to have had a positive impact on South Korea and Taiwan. But Hong Kong’s political problems and the fact that it is embroiled in the US-China dispute should keep it in a recession, analysts say.
“An accelerated recovery in exports should be a good sign for the US [gross domestic product] Numbers “for the three economies, said Prakash Sakpal, senior Asian economist at Dutch bank ING, in a research note sent to Al Jazeera.
“We assume that export strength outweighs weakness in domestic demand and leads to a strong GDP upswing [the second quarter]”Added Sakpal.
But South Korea and Hong Kong saw virus cases spikes in the third quarter, which likely slowed their recovery.
Hong Kong’s pain
China’s economy grew 4.9 percent year over year in the July-September quarter as consumers returned to shops and restaurants and recovered from COVID-19 lockdowns earlier in the year.
The recovery provides a much-needed source of demand, not only for other parts of Asia, but also for the rest of the world, where coronavirus cases are on the rise again.
Of the three areas that reported gross domestic product (GDP) data by the end of the month, Hong Kong, a self-governing Chinese area, is the mainland dependent for its exports. Last year, 43 percent of all exports were sent to mainland China.
Democracy protests in Hong Kong have been a source of economic uncertainty for more than a year [File: Tyrone Siu/Reuters]Still, ING expects Hong Kong to see a 10 percent decrease in GDP between July and September compared to the same period – the sum of a country’s goods and services produced in a given period and the most widely used indicator of economic growth in the past Year.
That would be an even bigger drop than the 9 percent drop in the second quarter and the record 9.1 percent drop in the first quarter.
A combination of political turmoil related to Beijing’s introduction of a national security law on the territory, the aftermath of tensions between China and the US, and the coronavirus has hit the Hong Kong economy.
Hong Kong will report its data on October 30th, the same day as Taiwan.
ING also expects the Taiwanese economy to deteriorate in the third quarter, down 1 percent year over year, compared with a decline of 0.58 percent in the previous three months.
However, this is a relatively small downturn compared to the other two areas. Taiwan has been credited with an aggressive and early response to the outbreak in neighboring mainland China, which Taiwan regards as part of its own territory.
Taiwan’s world-class computer chip industry may also have helped cushion the downturn.
Taiwan Semiconductor Manufacturing Co (TSMC) is one of the world’s leading chip manufacturers [File: Tyrone Siu/Reuters]”Taiwanese, Korean and Japanese exporters saw an increase in shipments of electronic components before international and US overseas companies with US technology banned Huawei Technologies Co’s sourcing of semiconductors in the US on September 14,” said Sharmila Whelan, Deputy Chief Economist at Aletheia Capital A research report distributed on the Smartkarma platform.
In August, Taiwanese exports to China rose 18 percent from July, led by a 14 percent increase in electronic components, Whelan wrote.
According to the Bloomberg news agency, Huawei, one of the largest providers of state-of-the-art 5G cellular devices, spent months building up its supply of critical radio chips before the administration of US President Donald Trump imposed sanctions.
Its partner, Taiwan Semiconductor Manufacturing Co, began ramping up production of the key chips in late 2019 and eventually shipped more than two million units, Bloomberg cited unidentified sources.
South Korea’s soft landing
South Korean shipments to China rose 21 percent in the first 20 days of September and semiconductor exports rose 27 percent, Aletheia’s Whelan said.
South Korea is expected to report on Tuesday that its economy has contracted 1.9 percent, according to a survey of economists published by data provider Refinitiv.
Shoppers in Seoul’s stylish Gangnam district [File: Kim Hong-Ji/Reuters]This is an improvement over the previous quarter, when South Korea’s GDP contracted 2.7 percent year over year.
But not everyone believes that China’s swift turnaround from its own coronavirus slump in the first quarter will give the world a sizable economic boost.
“The contribution of mainland China to global GDP growth this year is roughly the same as it was during [2008-2009 Global Financial Crisis] – very helpful, but hardly a panacea for the global economic malaise, “said Frederic Neumann, co-director of Asian economic research at HSBC, in a research report sent to Al Jazeera.
According to Neumann, China’s stimulus measures lag far behind those achieved in the previous episode.
“As important as the revival of mainland Chinese demand is for many other companies (e.g. automakers or raw material manufacturers), China is still less dependent on imports than many other markets. To put it simply: China can at least hold global GDP arithmetically, but that does not lead to such a large global growth impulse as, for example, Europe would get going again. “