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China-ASEAN Free Trade Area Quarterly Report (Q2-1)

Post Time:2014-08-25 11:08:00

In the second quarter of 2014, China and ASEAN countries remain as important trade partner of each other. Both sides occupy an important proportion of each other’s foreign trade and bilateral trade and investment showed an upward trend. In the first half of 2014, the proportion of trade volume between China and ASEAN in China’s foreign trade volume was slightly higher than that of 2013 and the year-on-year growth rate was higher than the average growth rate of China’s foreign trade.

In the first half of 2014, political and economic situation in ASEAN countries experienced stability on the whole, opportunities and challenges coexist. Major concern of the ten ASEAN countries is to promote the establishment of ASEAN Community; at the same time, the Chinese government is also working actively to build an upgraded version of China-ASEAN Free Trade Area and a new Maritime Silk Road.

This China-ASEAN Quarterly Report aims to provide the information requested by different sides and the general public to learn about the FTA development, to promote the FTA upgrading and new developments of regional economic integration, to facilitate the achievement of trade targets and cooperation goals jointly established by the two sides, and to promote the common development and prosperity of countries within the area.

The report is edited by China-ASEAN Business Council, with the Siam Commercial Bank of Thailand as the exclusive partner from the Thai banking industry.

Ⅰ. Brief Analysis of ASEAN Countries’ Economy in the First Half of 2014

Brunei

In the first quarter of 2014, Brunei’s GDP was 4.119 billion USD, showing a decrease of 3.3% compared to the same period in 2013. The declined economy was mainly because of the decreasing energy production. As the recovery of energy production, Brunei’s economy prospect will get better, the GDP is expected to increase 5.5% in 2014. In the first quarter of 2014, Brunei’s foreign trade showed a decrease of 20%. As the increase of crude oil and liquefied natural gas exports in the second quarter, the total foreign trade reached 1.683 billion Brunei Dollars in April. The export was 1.425 billion Brunei Dollars, increased by 15.3% and the import was 0.259 billion Brunei Dollars, decreased by 41.4%. The trade surplus was 1.166 billion Brunei Dollars, showing an increase of 47%. The main export products of Brunei are liquefied natural gas and crude oil, which account for 49% and 47.2% of total export. The main import products of Brunei are industry goods, machine equipment and food.

Cambodia

According to the forecast from the Cambodian government, the macro economy would maintain the momentum of going up in 2014, GDP would amount to 16.943 billion USD with a growth a 7%. The GDP per capita would  amount to 1,139 USD with a 3.8% increase in agriculture,a 10% increase in industry, a 9.9% increase in garment industry export and a 6.8% increase in service sector. During the first half of 2014, the Cambodian trade volume amounted to 8.95 billion USD with a growth of 17.6% year on year. The export volume is 3.77 billion USD with a 20% year-on-year growth, while the import volume was 5.18 billion USD with a 16% year-on-year growth, leading to a deficit of 1.41 billion USD. Major export products includes garment, footwear, rubber,rice, cassava,corn and fish, etc. Major import products include fuel oil, raw materials of ready-to-wear ,building materials, mobile phones, machinery, food stuff, beverage, pharmaceuticals and cosmetic,etc.

Indonesia

In the second quarter of 2014, the inflation in Indonesia got controlled, which was 6.7%, showing a decrease of 1.67%. During the first five months, the foreign trade of Indonesia was 147.658 billion USD, showing a decrease of 4.79%. The export was 73.417 billion USD, decreased 3.79% comparing to the same period in 2013. The import was 74.24 billion USD, decreased 5.75% to the same period in 2013. There was a trade deficit of 824 million USD in Indonesia. According to an analysis report from Jakarta Post, it is expected that Indonesia’s June exports to have contracted 2.44% month-to-month to 14.5 billion USD, mainly due to slower demand for coal from China as well as lower palm-oil exports to India and Pakistan. On the GDP outlook, it is expected that the second-quarter GDP growth to remain weak at 5.2% year-on-year, similar to the first quarter’s actual level of 5.21%. In the second quarter, private consumption will have remained resilient in the advent of the election as well as the fasting month. On the contrary, it is expected that the investments to have decelerated further on the negative impact of the tightening policy, whereas government expenditure growth would have declined due to spending cuts.

Laos

In the first half of 2014, the economy of Laos has maintained a continuous growth and the investment environment keeps favorable. Laos’s government forecasts that Lao’s GDP will increase 8.3%. In the first half of 2014, Laos’ GDP increased 7.6%. The economic growth on agroforestry sector was 2.9%, the growth of industry sector was 8.7%, and the growth on service sector was 9.3%. In the first half of 2014, the inflation rate of Laos was 6.21%. Meanwhile, the export reached 16.2 million USD, which increased by 84.09% and achieved 74.43% of Laos’ export target in 2014. The import reached 19.79 million USD, which increased by 70.45% and achieved 72.49% of Laos’ import target in 2014. During the first six months, Laos had a trade a deficit with 3.59 million USD. Looking at investment aspect, during the first half of 2014, 2469 projects were invested in Laos, reaching an investment volume of 29.164 million USD which accounts for 31% of GDP. In addition, the investment volume from Laos itself were 17.316 million USD and the foreign investment reached 11.848 million USD. Due to the low productivity in Laos, there has been trade deficits for a long time, which leads to an increase price on import products. Thus, the inflation rate of Laos in recent years shows a rising trend. In 2013, the inflation rate in Laos was 5.64%. The inflation rate was under control in the second quarter in 2014 that it decreased to 5.25% in April, which was the lowest during last 16 months. Due to the low labor costs, Laos has always been the production base for investors from Japan, China and so on. However, the increasing labor costs caused by high inflation rate greatly diminishes foreign investors’ interests. In the second quarter, the labor costs will decrease due to the decrease of Lao’s inflation, which will be conducive to attract more foreign investors.

Malaysia

Since the recovery of export provided a strong support for economic development, Malaysia’s economy is expected to grow 5.4%. According to the World Bank, Malaysia’s new investment activities have raised and the energy, primary products and petrochemical products have increased. This will effectively stimulate the growth of export. In the first five months of 2014, the trade volume of Malaysia was 597.2 2 billion Ringgit, increased by 10.2%. The export of Malaysia was 319 billion Ringgit, increased by 13.5%. The import was 278.2 billion Ringgit, increased by 6.7%. The trade surplus reached 40.8 billion Ringgit. In the first five months of 2014, the trades between Malaysia and ASEAN, China, Europe, Japan and America all increased by 7%, 8.2%, 9.2%, 6.7% and 7.6% respectively. The exports to other regions such as Australia, Taiwan, Hong Kong, and Korea also witnessed a growth by 34.8%, 27.6%, 29.1% and 14% respectively. In May 2014, the export of Malaysia was 64.91 billion Ringgit, increased by 16.3%. Meanwhile, the import was 59.19 billion Ringgit, increased by 11.9%. The trade surplus in May was 5.72 billion, which was two times larger comparing to the same period in 2013.

Myanmar

Been predicted by the IMF, even though Myanmar is facing with the pressure of inflation, its domestic and foreign investments keeps increasing and each field of production develops stably, especially natural gas and agriculture which grew significantly. Thus, Myanmar will usher in rapid economic growth. Followed by the 8.25% GNP increase in 2013-2014, the economy growth is expected to go up continually to 8.5% in this fiscal year and the inflation rate is expected to remain about 6.5%. If this target can be achieved, Myanmar will become one of the economic bodies which has the fastest economic growth in Asian and even in the world. According to the statistics of Myanmar government, in the first half of 2014, Myanmar’s total trade was 12.09 billion USD with an export of 4.52 billion USD and and import of 7.58 billion USD. China is the largest trade partner of Myanmar. By the end of May 2014, ranking as the first, China has invested 14.17 billion USD in Myanmar, accounting for 39% of Myanmar’s FDI.

The Philippines

The economic growth rate of the Philippines was 7.2% in 2013. According to the forecast by the World Bank, Philippine’s economy is to slow down to 6.6% in 2014. Affected by natural disasters, domestic price has gone up and the inflation rate has slowed since the inflation rate has declined since June from 4.5% of May to 4.4%, which is still high above the 2.7% of the corresponding period of last year. Food price of rice, garlic, sugar, pork, chicken, egg and ginger have generally experienced a rise while the growing speed of prices of alcoholic, tobacco, housing, water, electricity, gas and other fuels has slowed down. Referring to the statistics released by the Philippine National Statistics Office, the export volume of the Philippine increased to 5.483 billion in May with a year-on-year growth of 6.9%. Even though higher above the 1.3% in April, it is still significantly lower than the growth rate of 12.4% in March and 11.6% in February. In the first five months this year, the export volume of the Philippine amounted to 24.365 billion USD with a 5.8% increase year on year. Electronic products were exported with the largest volume for the five months, with an export volume of 2.048 billion USD. It occupies 37.3% of the total export and has decreased 1.6% year on year. Other industrial products and minerals were the second largest and the third largest in export by 0.633 billion USD and 0.485 billion USD with a growth of 40.6% and 107% year on year. Agricultural products exported increased to 0.45 billion USD in May with a growth of 18.4% year on year which was mainly contributed from coconut products, fruits and vegetables. Japan remains to be largest export market for the Philippines with an export of 1.12 billion USD to Japan, 20.4% of the total. China has raised from the third largest export market to the second with an export of 0.959 billion USD and 17.5% of the total, the year-on-year growth was 51.3%. America fell from the second largest market to the third with an export to America of 0.75 billion and 13.7% among total.

Singapore

Benefited from the lasting growth of the three industries (manufacture, architecture and service) in the forth quarter of 2013, Singaporean economic growth rate achieved 4.9% in the first quarter, a 0.8% increase over that of 2013. According to the report released by the Singapore Ministry of Trade and Industry, manufacture industry increased by 9.8% in the first quarter, architecture industry went up by 6.7%, the wholesale and retail industry rose 5.4% and the non-oil export decreased by 1%. Singapore’s economy in the second quarter showed a slower growth with an only 2.1% increase comparing to the same period in the last year, which was much lower than the market average estimate of 3.1%. Looking at Singapore’s economy quarter to quarter, there was a 0.8% economic contraction in the second quarter comparing to the first quarter, which was the first seasonal economic contraction during last seven seasons. Due to the shrink of electronics industry, the manufacturing industry in Singapore only obtained a year-on-year growth of 0.2%, which was much lower than 9.9% in the first quarter. On the other hand, the year-on-year growth of service industry was 2.8%, which was also lower than 3.9% in the first quarter. Based on this, Development Bank of Singapore reduced the economic growth forecast in 2014 to 3% from 4%. The changing external economic environment will be the main issue that needs to be considered in the future.

Thailand

Since November 2013, been impacted by the political turmoil, Thailand’s economy has been in doldrums. In the first quarter of 2014, GDP of Thailand witnessed a decline of 2.1% compared to the first quarter and a decline of 0.6% year on year. The Bank of Thailand published forecast in July, showing that the national economic growth will achieve 3%-4% in the second half of 2014. The forecast was depended on the active recoveries of national economy and national consumption level. Meanwhile, as the economic pillar of Thailand, tourism industry developed stably due to the government support on special allocated budget. According to the central bank’s forecast, whether Thai economy would grow depends largely on the next economic policy conducted by the military government: which market will be stimulated to drive economy and what sort of public infrastructures should be selected in releasing government investment. The central bank of Thailand pointed out that during the economy recovery and sustainable growth, household debt cannot be despised. A large amount of household debts are owned by low-income group and at the critical juncture when Thai market economy is experiencing recovery, there is no doubt that household debts will suppress the purchasing power of low-income group, and it may directly influence national consumption level. Thailand Board of Investment (BOI) pointed out that foreign confidence improved significantly since Thailand National Committee to Maintain Peace and Order (NCPO) has taken office. The accumulative application of investment reached over 300 billion Thai baht. In the first half of 2014, there were altogether 407 foreign direct investments ( FDI) projects, dropped by 34% comparing to 619 projects of 2013. At the same time, the total value dropped from 279 billion Thai baht to 239 billion Thai baht, however, new applications of projects has increased from 69 in April to 82 in June. Of all the foreign direct investment, Japan ranks the first place with 194 projects and a value of 80.5 billion Thai baht. America ranks the second place, with 15 projects and total value of 36.7 billion Thai baht. Among the above mentioned investment,value of manufacturing machines, metals and vehicles reached 165 billion Thai baht, followed by infrastructure and service investment totaled 92.9 billion Thai baht. Consumer price index(CPI) dropped from 2.62% in May to 2.35% in June, a decline of 0.1% month on month. The decline is due to on one hand, price control adopted by military government over energy products, including household gas and oil; and on the other hand, the frozen of consumer price for six months. To effectively promote economic development in the second half, NCPO will address measures to stimulate economy and accelerate the government withdraw and deposit budget, for instance, invest in double track train, and 10 lines of mass rapid transit and provide loans to small and medium sized enterprises via 8 state-run financial organizations, accelerate government withdraw and deposit budget in 2014 and the composition of budget for 2015 fiscal year.

Vietnam

In the second quarter of 2014, Vietnam’s GDP increased 5.25%, 0.16% higher than last quarter. There was a 0.241 billion USD’s trade surplus in second quarter, showing a decrease of 65% comparing to the first quarter ( 0.694 billion USD surplus ). In the first half of 2014, the export of Vietnam was 70.9 billion USD with a growth of 14.9% year on year. The domestic enterprises exported 23.1 billion USD, increased by 11.5%; the foreign enterprises (including crude oil) exported 47.8 billion USD (accounting for 67.5% of total export), showing an increase of 16.6%. In the export market, the EU ranks the first with 13.1billion USD which increased 12.8% year on year. In the first half of 2014, Vietnam imported 69.6 billion USD which increased 11% year on year. Foreign enterprises imported 30.3 billion USD with a year-on-year growth of 10.3% while domestic enterprises imported 39.3 billion USD with a year-on-year growth of 11.6%. In the import market , China marked the first place with 20.4 billion USD and a year-on-year increase of 21.1%. In the first half of 2014, Vietnam’s import on machinery, equipment, tools and accessories was 10.45 billion USD, showing a year-on-year growth of 21.7%. The import from China on this category was 3.62 billion USD, showing a year-on-year growth of 25.8%. In the first half of 2014, Vietnam’s import on shell fabric from China was 2.25 billion USD with a year-on-year growth of 27.2%, accounting for 49% of total imports on the category. Vietnam’s import on garment accessories, fabric and shoes from China was 0.752 billion USD with a year-on-year growth of 29.4%, accounting for 33% of the total import on the category. Vietnam imported 2.33 million tons steels from China with a year-on-year growth of 31.2%, accounting for 46% of total import. In addition, Vietnam imported 905 thousand tons chemical fertilizer from China with a year-on-year growth of 9.2%, accounting for 48% of the total import. Vietnam has enrolled FDI of 6.85 billion USD contract agreed funds which decreased 35.3% year on year while the money received is 5.75 billion USD which increased 0.9%.

To be continued


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