As Chinese economy suffers, Southeast Asian exports take a hit

Little did China know that winding up its COVID-zero policy would threaten its economy with a double edged blade. In order to open the Chinese economy to the world again, its government ended all lockdowns and as a result, within a couple of months, the country saw another very severe COVID wave with millions of people being infected. 

China is Southeast Asia’s largest trading partner and monetary tightening by western countries may result in the region’s export demand shrinking even further, which ultimately contributes to a global economic slowdown.

In an unfavorable trend, Southeast Asian countries are witnessing a decline in exports to China due to lower demand from the country. According to a statement by the Thai Ministry of Commerce, exports in December 2022 dropped by 14.6%  year-on-year after exports show a downward trend for the third month in a row. Similarly, for Singapore’s non-oil exports, shipments to China were down by 31.8% in December 2022.

China, world’s second largest economy, is currently being threatened by a double edged blade. If they bring back the COVID-zero policy, they might save the lives of people, but at the same time, once again put a negative impact on the economy.

According to the news report, there are predictions that China is expected to witness more than a million COVID-related death in the coming days. At the same time, the Chinese government is struggling to impose restrictions due to its negative effect on the country’s economy. According to analysts, China’s economic growth will fall between 2.8%-3.2% this year, which would be the lowest in 50 years.

Internally, there has been a drop in retail sales, industrial output and fixed asset investment in China, all of which are essential components for an economy’s health. Moreover, the sudden shutdown of factories and small businesses resulted in huge livelihood losses and increased China’s unemployment rate to 5.7%. 

Boosting domestic consumption will be vital to China’s economic recovery plans, and there is lots of lost ground to recover – imports rose only 1.1% last year, down sharply from 30% growth in 2021. China’s purchases of coal and copper also shrank in December, as industrial activity slowed on a surge in COVID-19 infections.

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