Will Asia’s export boom continue in 2018?


Asian exports have shown a remarkable rebound in 2017 after weak growth in 2015-16. Across most large Asian economies, exports have been growing strongly throughout the first three quarters of 2017.

Malaysia has been at the forefront of this strong upturn in Asian exports, with Malaysian exports up 21.5% year-on-year (YoY) in August 2017 and up 22.2% for the first eight months of 2017 compared to the same period a year ago.

The largest Asian economies have also recorded buoyant export growth, with the value of Chinese exports for the first three quarters of 2017 up 12.4% YoY, while Japanese exports in September were up 14.1% YoY and South Korea recorded surging export growth of 35% YoY in September.

A number of factors have contributed to this remarkable turnaround in Asian export growth this year.

One of the key drivers for the export rebound is the strong upturn in global demand for electronics.

Major new smartphone launches by Samsung Group and Apple Inc are key contributors to the upsurge in demand for semiconductors and other mobile phone components across the Asian electronics manufacturing supply chain.

The global memory-chip market grew 10.7% quarter-on-quarter (QoQ) in the second quarter (2Q) of 2017 to a record high of US$30.2 billion (RM127.96 billion), led by dynamic random-access memory and NOR flash memory, according to IHS Markit Technology estimates.

Apart from smartphones, other factors contributing to the upturn in global electronics demand include the impact of the Internet of Things and industrial automation on demand for memory chips and display panels, as well as the growing intensity of use of electronics components in cars.

According to the latest estimates by IHS Markit Technology, the consumer electronics and data processing segments have led this rapid growth, recording revenue growth of 7.9% and 6.8% respectively, QoQ in the 2Q.

Surging consumer demand for wearable devices, such as smart-watches and monitors for healthcare, sports and entertainment, is also contributing to increasing consumer demand for electronics.

The world market for wearable technology reached US$20 billion in revenues during 2015 and is forecast by IHS Markit Technology to exceed US$40 billion in revenue by 2020.

This global upturn in electronics demand has helped to boost the electronics exports of many East Asian economies during 2017, including Malaysia, South Korea, China, Japan, Taiwan, Singapore, Thailand, the Philippines and Vietnam.

Malaysian electrical and electronics exports rose by 21.4% YoY in the first eight months of 2017 compared to the same period a year ago, and accounted for 37.8% of total Malaysian exports in August. South Korean exports of memory chips rose by 70% YoY in September.

Improving global economic growth has also helped to underpin world export growth, with the World Trade Organisation having upped its forecast for world merchandise trade growth for 2017 from 2.4% to 3.6%.

Strong economic growth in the Asia-Pacific (APAC) region has also helped to boost intra-regional trade flows, helped particularly by robust growth in China.

Chinese gross domestic product (GDP) growth for the first three quarters of 2017 rose 6.9% YoY, driven by strong growth in household consumption which contributed 64.5% of total Chinese GDP growth in the first three quarters of 2017 and resulted in Chinese imports surging by 22.3% year-to-date.

The strong growth in Chinese imports during 2017 has contributed to Asia’s export boom this year, with Malaysian exports to China during the January to August 2017 period rising by 36.5% compared to a year ago.

Japanese exports to China rose 29.3% YoY in September, while South Korean exports to China were up 23.4% YoY in the same month.

Another factor that has contributed to Asia’s export surge has been the upturn in global commodity prices, helping commodity exporting countries like Malaysia and Indonesia.

In August, Malaysian exports of oil products rose 33.6% YoY while exports of liquified natural gas were 101.8% higher.

Asian countries which are significant exporters of refined petroleum products, such as Singapore, India and South Korea, have also seen significant increases of these exports.

Looking ahead to 2018, some moderation in the pace of Asia’s export surge should be expected.

Although the latest IHS Markit Global Electronics Purchasing Manager’s Index for September continued to signal robust growth in the sector in coming months, with higher demand from the US, Europe and China, the red-hot pace of electronics export growth will likely taper off due to high base-year effects and some dampening in the smartphone cycle following the major new launches during 2017.

Similarly, base-year effects will also likely dampen the rapid growth of export values for oil and refined oil products.

Nevertheless, IHS Markit forecasts that world growth will strengthen further in 2018, with continued robust growth in the APAC region. This is expected to underpin Asian exports, with intra-regional trade being a key factor supporting overall trade growth.

A silver lining for Asian exports is that Asian tourism flows are also booming, which is helping to drive exports of services.

Rajiv Biswas is the Asia-Pacific chief economist for IHS Markit.