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China’s Slowdown Drag Exports Worldwide

By Ricardo Guzman | Fri, 03/06/2020 - 17:42

Mexican exports trimmed US$1.36 billion on February this year influenced by disturbances related to the supply of inputs and components imported from China, according to the United Nations Conference on Trade and Development (UNCTAD).

While global economy affectation linked to the COVID-19 (coronavirus) outbreak is still being assessed by analysts, the UN body announced a US$50 billion drop worldwide in manufacturing exports in February alone.

“China's industrial production 2 percent contraction in February had a domino effect on the world economy,” the organization reported. Disruption in Chinese supply in Mexico had the biggest blow in automotive equipment and electrical machinery.

In the last two decades, China has become the largest exporter and the main driver on global manufacturing, establishing as a key supplier of goods and components for all kind of products.

UNCTAD’s report states that the European Union exports had the biggest impact with US$15.59 billion lost, followed by the US and Japan with US$5.77 billion and US$5.18 billion, respectively.

The most affected sectors include precision instruments, machinery, automotive and communication equipment. The European Union, US, Japan and the Republic of Korea are expected to experience a bigger impact, given their relevance in those sectors.

Although there is still uncertainty about the full impact of coronavirus on China's productive capacity, the economic slowdown is inevitable. The affectation on global value chains will be accounted in the coming months, according to UNCTAD.

For developing economies that are reliant on selling raw materials, the effects could be felt “very, very intensely”, said Pamela Coke-Hamilton, who heads UNCTAD’s Division on International Trade and Commodities. “Assuming that it is not mitigated in the short-term, it’s likely that the overall impact on the global economy is going to be significant in terms of a negative downturn.”

 

Impact in Sonora

Manufacturing sector in Sonora is already being affected by the lower flow of inputs from China, according to a Reforma report. In recent weeks auto parts, aerospace and healthcare equipment production lines were stopped in the northern state, Gerardo Vázquez Head of the manufacturing association Index Sonora warned.

So far, Bimbo and the auto parts company Nemak have closed some of its units in China.

 

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Global exports are down

Most affected economies by China’s slowdown (figures in billions of US Dollars)

European Union

15.59

US

5.77

Japan

5.18

South Korea

3.81

Taiwan

2.64

Vietnam

2.29

Singapore

2.16

United Kingdom

1.91

Mexico

1.36

 

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Ricardo Guzman Ricardo Guzman Editor