“China and Asia in Global Trade Slowdown”

That’s the title of a just released IMF Working Paper by Gee Hee Hong, Jaewoo Lee, Wei Liao, Dulani Seneviratne:

Asia and China made disproportionate contributions to the slowdown of global trade growth in 2015. China’s import growth slowed starkly, driven by both external and domestic factors, including a rebalancing of demand. Econometric results point to weak investment and rebalancing as the main causes of the import slowdown. Spillover effects from China’s rebalancing are estimated for some 60 countries using value-added trade data, and are found to be more negative on Asia and commodity exporters than others.

As noted in the abstract, rebalancing toward consumption is proceeding apace, albeit perhaps not as fast as might be desired. This is shown in Figure 7 (Box 3) from the paper.

Source: IMF Working Paper

The World

The slowdown in international trade is not a phenomenon specific; this point was highlighted in a recent FRB Richmond Focus by Jessie Romero, which asks the question “Why trade growth has slowed down — and what it might mean for the global economy?”.

after decades of rapid growth, trade suffered its greatest drop in the postwar era during 2008 and 2009, an episode known as the “Great Trade Collapse.” Today, growth rates are still well below the previous trend. The reasons for this sluggishness are unclear: Are there lingering effects from the global financial crisis and recession, or has some fundamental change occurred in the world economy?…

Source: Focus.

Early Warnings, and Anticipations of the Future

The concerns about the slowdown in trade are not new. Back in October, Bank Underground noted the slowdown, and through a different prism concluded: