Coronavirus: evidence of demand shock wave to China’s economy piles up, as South Korean exports collapse

South Korean exports plunged 46.3 per cent in the first 10 days of May, sparking fears that a second hit to China’s economy is on the way

Cancelled ship sailings, plunging metals exports and diverging air and sea freight rates all paint an ominous picture for the future of China’s economy

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Eyebrows around Asia will be raised by a 41 per cent drop in South Korea’s exports to the United States and a 36 per cent drop in shipments to the European Union. Photo: AFP

Published: 7:30pm, 11 May 2020Updated: 11:32pm, 11 May 2020

Just days after reporting surprisingly strong exports for April, evidence of tougher times ahead for China’s factories and traders is beginning to pile up.

Collapsing shipments from South Korea, plunging commodity rates, wildly fluctuating cargo costs and a hollowing out of jobs markets for major trading partners are all ominous signs for China’s industrial base, which has struggled to return to full capacity since a coronavirus-led shutdown in the first quarter.

On Monday, South Korea became the first major economy to release trade data for May, with its exports over the first 10 days falling by an enormous 46.3 per cent, while imports slumped 37.2 per cent.

This closely watched metric is viewed as a canary in the coal mine for global trade, since major South Korean products like smartphones, cars, ships, steel and semiconductors, form part of the backbone of the world economy.

With global demand unlikely to recover quickly, Asia’s export-dependent economies will continue to feel the strain for many months to come

Alex Holmes

Eyebrows around Asia will be raised by a 41 per cent drop in exports to the United States and a 36 per cent drop in shipments to the European Union. South Korean exports to China fell by a much smaller rate, 8.8 per cent, but the collapse in shipments to the West is among the first official signs of the demand shock wave heading for exporters in Asia.

“With global demand unlikely to recover quickly, Asia’s export-dependent economies will continue to feel the strain for many months to come,” said Alex Holmes, Asia economist at Capital Economics.

The gravity of this global demand crash was further laid bare by a succession of historically bad data releases over recent days.