Coronanomics (4) - Chinese Economy and The Rest of the World


Wednesday, June 10, 2020 /  07:00 AM / by Proshare Content/ Header Image Credit:  EcoGraphics

 Proshare Nigeria Pvt. Ltd.

China's influence as a market, supplier, and provider of capital has expanded over the last two decades. There has been an increase in the exposure of the rest of the world to the Chinese economy. The Chinese economy accounts for 35% of total global manufacturing output, while it was the source of 31% of global household consumption growth between 2010 and 2017. Also, in many categories including automobiles, spirits, luxury goods, and mobile phones, China is the largest market in the world, accounting for about 31% of global consumption. China was the world's second-largest source and second-largest recipient of foreign direct investment (FDI) between 2015 and 2017 (see Chart 12).


Chart 12China-World Exposure Index

Proshare Nigeria Pvt. Ltd.

Source: McKinsey Global Institute analysis, Proshare Research


Countries with regional proximity, significant trade in resources, and cross-border capital flows are most exposed to China.

  • Asian economies are tightly linked with China through regional supply chains; there has been an increase in the exposure of Asian countries to China, as China is the export destination to most of the Asian economies. The Chinese economy is the largest trading partner in Malaysia, Singapore and the Philippines. Chinese outbound FDI was equivalent to 6% of domestic investment in Malaysia and 5% in Singapore between 2013 and 2017.
  • Resource-rich countries are highly exposed to Chinese demand; Countries that export natural resources are highly exposed to Chinese demand. Chinese imports now account for 15% of production in South Africa, compared with only 2% in the period from 2003 to 2007. Chinese imports now account for 16% of gross output in Australia, compared with just 4% in the earlier period. Iron ore alone accounts for 48% of Australia's exports to China, and 21% of Australia's mining and quarrying output is exported to China.
  • Some emerging and smaller mature economies are highly exposed to Chinese investment; From 2013 to 2017, Chinese outbound FDI was equivalent to 13% of domestic investment in Egypt and 8% in Pakistan. According to Mckinsey Global Institute analysis research in 2017, it discovered that China was the largest source of finance for infrastructure, the third-largest source of foreign aid and Africa's largest trading partner.
  • Large developed economies have relatively lower exposure to China;  Developed economies have relatively lower trade and investment exposure to China. Exports to China typically account for less than 5% of gross output, and imports from China account for less than 5% of domestic consumption. Also, Chines FDI was equivalent to less than 1% of domestic investment( see Table 5).

Table 5: Countries Exposure To China Based on Regional Proximity, Significant Trade-In Resources, and Cross-Border Capital Flows 

Proshare Nigeria Pvt. Ltd.

Table 6: Technology, Labor-intensive Tradables, and Resource Value Chains Exposed To Trade With China

Proshare Nigeria Pvt. Ltd.

The world economy is exposed to China through trade in five distinct ways:

  • China is integrally embedded in the value chains of the electronics, machinery and equipment sectors. It accounts for 17 to 28% of global exports and 9 to 16%
  • The world depends on Chinese output in highly tradable light manufacturing and labour-intensive sectors. Sectors in which China has served as a factory to the world are exposed to Chinese production. China accounts for 40% of global exports in textiles and apparel, and 26% in furniture.
  • Upstream sectors have increased exposure to China as a result of China's industrialization. Sectors that produce inputs for further processing are exposed to Chinese imports. The Chinese manufacturing sector growth has significantly increased its demand for raw materials and intermediate goods that are processed into final goods, and growth in per capita income has increased demand for goods overall in China. China accounted for 7% of global mining and quarrying imports from 2003 to 2007, and its share grew to 21% from 2013 to 2017.
  • In other sectors that are highly traded globally, China is not a major player. In sectors where companies focus on serving rapidly growing local demand and local content requirements are in place, trade exposure to China has remained relatively low despite high trade intensities. For example, China accounts for only 4% of global pharmaceuticals exports and 3% of global imports. Similarly, in motor vehicles, China accounts for only 3% of global exports and 7% of global imports, despite a relatively high trade intensity. However, given that China is a large market for these sectors, a local presence is important for companies wishing to serve that market. 
  • Sectors that are not globally traded tend to have low exposure to China. Five have been noted to have relatively low trade intensities, as a "local production for local consumption" archetype. Despite relatively low trade intensity, China accounts for a large share of trade in some of these sectors. For instance, it accounts for 23% of global exports of fabricated metals and for 18% of global imports of agricultural products.

 Proshare Nigeria Pvt. Ltd.

Chart 13:  China's Share of Global Goods and Services (%) 2000-2017

Proshare Nigeria Pvt. Ltd.

Source: McKinsey Global Institute analysis


Chinese production accounts for up to 35% of global manufacturing output and Chinese demand accounts for 10% of global consumption, second only to the United States. China's global flows of goods and services are significant. China became the world's largest exporter of goods in 2009, and the largest trading nation in goods in 2013. China exported goods worth $2.2trn in goods in 2017, making it the world's largest exporter. The Chinese economy also serves as the largest export destination of thirty-three (33) countries and the largest source of imports for sixty-five countries (65) countries (see Chart 13).


Chart 14: Outbound Tourism Spending by Tourist Origin, 2017 ($' bn)

Proshare Nigeria Pvt. Ltd.

Source: World Travel and Tourism Council; Hong Kong Census and Statistics, MOTC (tourism bureau), Taiwan; Macao tourism data; McKinsey Global Institute analysis


China is already the largest source of outbound tourists in the world, Chinese tourists made more than 140m trips and spend $265bn while US tourist spends $168bn on foreign travel. Spending by Chinese tourists as a share of worldwide tourism spending has soared from 6 to 22% in just ten years and is forecast to reach about 30% by 2028, equal to spending by European tourists and just short of spending by tourists from North America and the rest of Asia combined (see Chart 14).

Proshare Nigeria Pvt. Ltd.


Related Reports (PDF)

1.     Download the Full PDF Report - Coronanomics and the Nigerian Economy, June 06, 2020

2.     Executive Summary PDF - Proshare, June 06, 2020


Proshare Nigeria Pvt. Ltd.

Related News

1.      Coronanomics (3) - The Global Economy Spinning on a Wishing Wheel

2.     Coronanomics (2) - Easing Out of a Crisis

3.     Coronanomics (1) - Understanding the Realities of an Impending Recession

Related Links and References

Related News - Opinions & Analysis

  1. An African Perspective on the impact of COVID-19 and the Response to it - FBNQuest
  2. Corporate, Financial Institution Downgrades On Pace for Record
  3. The Case Against High Interest Rates in Time of Contagion - Bola Tinubu
  4. The Coming Greater Depression of the 2020s
  5. Why the Global South Should Temper Expectations Over The Basel Convention Ban Amendment
  6. Of Q1'20 Economic Output and GDP Forecasts - Lessons from China
  7. Of Q1'20 Economic Output and GDP Forecasts - Lessons from China
  8. It's Time to Build - OpEd
  9. What Would the World Look Like after Coronavirus: Economically, Politically and Socially?
  10. Risk-Weight Variation Among Emerging Markets Banks Impedes Capital Comparisons

 Proshare Nigeria Pvt. Ltd.

Related News - Reviews and Outlooks

  1. Coronavirus Crisis Impact on Jobs Could Outweigh GDP Impact
  2. Moody's Affirms Nigeria's B2 Ratings, Maintains Negative Outlook
  3. Fitch Revises Outlook on Kaduna State to Negative on Sovereign Rating Action; Affirms at 'B'
  4. Fitch Downgrades Lagos State to 'B' on Sovereign Rating Action; Outlook Negative
  5. Further Multi-Notch Sovereign Downgrades Are Probable in 2020
  6. Various Rating Actions On Nigerian Banks By S and P Following Sovereign Downgrade; Outlooks Stable
  7. Three Ratings Agencies, Now One Message
  8. Fitch Downgrades Nigeria to 'B'; Outlook Negative
  9. Nigerian Banks at Severe Risk from Oil Price Slump, Coronavirus
  10. Moody's Assigns Ratings to Dangote Cement Plc's DMTN Program and Proposed Series 1 Notes
  11. Macroeconomic Review Q1 2020: Steering a Fragile Economy in the Face of Uncertainties
  12. Fitch Downgrades 3 Nigerian Banks to 'B', Places All 10 Banks on Negative Watch
  13. Nigeria Long-Term Rating Lowered To ''B-'' On Weakening External Position
  14. Coronavirus to Weaken Sovereign Fiscal Positions; Track Record Matters
  15. Fiscal Space Limited for Many Sovereigns
  16. Rating Actions Taken On Several Corporate Issuers With Exposure To Nigeria
  17. Outlooks On Six Nigerian Banks Revised To Negative After Same Action On Sovereign
  18. Nigeria's Outlook Revised To Negative On Falling Foreign Exchange Reserves

 Proshare Nigeria Pvt. Ltd.

Related News - Nigeria Economy    

1.       COVID-19 and the Construction Sector

2.     The Lockdown - Food Scarcity and Social Unrest Looming

3.     April 2020 Headline Inflation Will Cross 13.0% - FDC

4.     Nigerian Economic Update: A Throw of the Dice

5.     Guidelines and Recommendations: Reopening the Nigerian Economy

6.     GDP By Income and Expenditure Approach Q4 2019 - Household Final Consumption Declined by -2.40%

7.     Ahead of Tomorrow on WebTV: Discussions on COVID-19; Reinventing Nigeria's Economy

8.     Nigeria Weekly Update: Short and Long Currency Cycles

9.     Nigeria Needs A National Strategy To Integrate Factor Endowment Into A Plan - Prof. Utomi

10.  A Surprising Boost to the FAAC Payout; April Payment Amount to N781bn

11.   Ahead of Tomorrow on WebTV: Discussions on Repositioning Nigeria's Economy Beyond COVID-19

12.  Impact of Privatization on Nigeria's Economy

13.  Can Africa Afford COVID-19 Lockdowns? - Chukwuma Soludo

14.  COVID-19; Nigeria Needs To Relax Foreign Exchange Management To Boost Industrialization - Dr. Yusuf

15.  Nigeria's Economy After Oil: How Should We Prepare?

16.  The Disruptive Impact of COVID-19

17.  Nigeria's Impending Recession

18.  Roadmap to Rebooting Nigeria's Economy from COVID-19

19.  Coronation Weekly: Interest Rate Conundrum

20. Headline Inflation Increases By 12.26% YoY In March 2020; 0.06% Higher Than February 2020 Rate

21.  Ahead of Tomorrow On WebTV: COVID-19 and The Strategic Implications to Business Planning

22. #Coronanomics: The Changing Scale of Edtech, Healthtech, and Virtual Work Space In Nigeria

Related Reports/Articles

1.      COVID-19 and AGM by Proxy: Lessons from GTBank Approach

2.     #Coronanomics: How Tech Businesses Can Sustain Productivity

3.     The End of an Epoch: A New Beginning for Capital Markets in the 21st Century - Bruce Fenton

4.     Nigeria's Post COVID-19 Economic Outlook - Economics Associates

5.     Which Emerging Markets Are in Most Financial Peril?

6.     Global Monthly - World Bank Group

7.     World Economic Outlook 2020 - The Great Lockdown

8.     COVID-19: Economic, Tax and Other Fiscal Stimulus Measures in Nigeria

9.     COVID-19: Crisis And Opportunity

10.  COVID-19: Nigeria Economic Impact and Implications for CPG - McKinsey and Company

11.   The Economics of a Pandemic: The Case of COVID-19 - London Business School

12.  The Impact of The COVID-19 Pandemic in Nigeria - UNDP Nigeria

Proshare Nigeria Pvt. Ltd.

Coronanomics Discourse-WebTV Videos

1.      Social Bonds: A Viable Way For The Capital Market Support To Nigeria's Economy Post COVID-19 - Patrick Ezeagu

2.     COVID-19: Time For Nigeria To Diversify Its Revenue Base Through Agro, ICT - Ayuli Jemide

3.     Post COVID-19: Nigeria Must Prioritize Agro and Manufacturing, To Drive Productivity - Ray Echebiri

4.     Post COVID-19: States Should Rethink Their Economic Models To Drive Productivity - Teslim Shitta-Bey

5.     Economy & Politics: Nigeria Needs a Post COVID 19 Long-Term Plan - Boason Omofaye

6.     Economy and Politics: Nigeria Needs Economic Pragmatism and Robust Institutions - Dr. Temitope Oshikoya

7.     Economy and Politics: How Nigeria Can Address Its External Illiquidity - Ayo Teriba

8.     Economy and Politics: Nigeria Must Deregulate Its Petroleum Sector Post COVID 19 - Boniface Chizea

9.     Market Review: Transparency in Economic Management Key to Nigeria's Stability Amidst COVID 19 - Pandemic - Gbite Oduneye

10.  Economy and Politics: Coordinated Policy Key to Effective Nigerian COVID 19 Tax and Fiscal Stimulus - Yomi Olugbenro

11.   Market Review: FG Should Explore Tax Breaks and Other Incentives o Curtail Massive Job Losses - Tunji Andrews

12.  Market Review: Businesses Need to Reassure Their Customers Through A Well-Structured Communication Strategy - Dr. Tunji Olugbodi

13.  Economy and Politics: Nigeria Needs to Invest in Agro-Industrial Parks, To Boost Manufacturing - Femi Awofala

14.  Market Review: States Need Integrated Economic Policies Post COVID 19 - Teslim Shittabey

15.  Economy and Politics: Advertising Agencies Need Service Providers to Boost Communications Post COVID 19 - Lolu Akinwunmi

16.  Economy and Politics: Government and Businesses in Nigeria Need to Invest More in Digital Technology - George Ashiru

17.  Market Review: Nigeria Needs a Robust Regulatory Framework for Virtual AGMs - Bayo Olugbemi

18.  Market Review: Nigeria Must Deploy Data to Effectively Mitigate COVID 19 Risks - Babajide Ogunsanwo

19.  Market Review: Investments in Storage Facilities and Packaging Key for Nigeria's Agro Sector - Ade Adefeko

20. Market Review: Deregulation of Downstream Sector, Way Forward for Nigeria - Olugbenga Odusanya

21.  Economy and Politics: CBN Should Reduce the CRR and MPR - Marcel Okeke

22. Economy and Politics: Insurance Should be Integrated into Nigeria's COVID 19 Fiscal Measures - Ekerette Ola Gam-Ikon

23. Market Review: COVID 19, An Opportunity for Companies to be Empathetic to Consumers - Lampe Omoyele

24. Economy and Politics: Nigeria must Drive a Harmonized Tax Plan Post COVID 19 - Taiwo Oyedele

25. Market Review: Governance in Nigeria Should Consider Process, Accountability and Transparency Post COVID 19 - Soji Apampa

26. Market Review: FG Should Integrate the Capital Market in its Economic Sustainability Plan - Charles Fakrogha

27. Economy and Politics: Liquidity, Titling and Tech Adoption, Key for Growth of Real Estate in Nigeria - Hakeem Ogunniran

28. Economy and Politics: Why Nigeria Should Explore a N20trn Development Bond - Tope Fasua

29. Market Review: Nigeria Needs More Project Based Funds to Attract Investments - Ebo Ayodeji

30. Market Review: NIPC Working with States to Boost Their Attractiveness for Investments - Yewande Sadiku

31.  Economy and Politics: Nigeria Fintech Industry Attracted About $50m Investments in Q1,2020 - Babatunde Obrimah

32. Nigeria Needs to Align its National Database to Deepen Social Investments - Laoye Jaiyeola

33.   Post COVID 19: Time for Nigeria to Restructure its Fiscal Framework - Zeal Akaraiwe


 Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

Related News