Asia’s factories are being squeezed as China’s nascent recovery teeters, according to a Nikkei Asia report.
The report found that factory activity in Asia slowed in October 2023, with many countries reporting a contraction in manufacturing output. This was due to a number of factors, including:
Weakening demand from China:
China is a major export market for many Asian countries. However, China’s economy is slowing down, and demand for imported goods is weakening.
The cost of raw materials and energy has been rising sharply in recent months. This is putting pressure on Asian manufacturers, who are struggling to pass on the higher costs to consumers.
Supply chain disruptions:
The COVID-19 pandemic and the war in Ukraine have disrupted global supply chains. This has made it difficult for Asian manufacturers to source the raw materials and components they need.
The slowdown in manufacturing activity is having a negative impact on Asian economies. Many countries are reporting higher unemployment and slower economic growth.
The Nikkei Asia report found that the following countries were particularly hard hit by the slowdown in manufacturing activity:
South Korea’s exports to China fell by 12.2% in October 2023, compared to the same month in 2022. This is the biggest decline in exports to China since 2009.
Japan’s exports to China fell by 5.9% in October 2023, compared to the same month in 2022. This is the biggest decline in exports to China since 2020.
Vietnam: Vietnam’s exports to China fell by 11.6% in October 2023, compared to the same month in 2022. This is the biggest decline in exports to China since 2016.
The slowdown in manufacturing activity is a major concern for Asian policymakers. They are trying to boost demand and support businesses. However, it is unclear how long the slowdown will last. If the Chinese economy continues to slow down, it could have a significant impact on the Asian region.
What can Asian countries do to address the slowdown in manufacturing activity?
Asian countries can take a number of steps to address the slowdown in manufacturing activity:
Boost domestic demand:
Governments can boost domestic demand by increasing spending on infrastructure and social programs. They can also cut taxes and provide subsidies to businesses.
Governments can support businesses by providing them with access to financing and tax breaks. They can also help businesses to improve their productivity and competitiveness.
Asian countries should try to diversify their export markets. This will reduce their reliance on China and make them less vulnerable to economic shocks in China.
Strengthen supply chains:
Asian countries should work together to strengthen their supply chains. This will make them more resilient to disruptions in the global supply chain.
It is important to note that there is no easy solution to the slowdown in manufacturing activity. It is a complex problem that is caused by a number of factors. However, by taking the steps outlined above, Asian countries can reduce the impact of the slowdown and promote economic growth.