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China is the leading maker of personal computers and smartphones globally, but it continues to rely heavily on imported components from the US and the rest of the world. Photo: EPA

While the meagre 0.1 per cent rise in exports in the first six months of 2019 was bad news for China, it was even worse for many of its trading partners, with a flat performance by the world’s second large economy causing ripples through the tightly integrated supply chains created by globalisation.

A decline in Chinese exports automatically dampens its demand for imports of components used in finished exports and that, in turn, hurts every other economy that sells to China.The biggest drop in first half exports was to the United States, with which China has been fighting a trade war for the past year. Exports to the US contracted by 8.1 per cent, a sharp reversal from the 13.5 per cent rise during the first half of 2018, according to the China’s General Administration of Customs.

But the decline in exports paled in comparison to the near 30 per cent drop in Chinese imports from the US, which range from raw materials to agriculture products, aircraft and semiconductors. The contraction was not only another indication of declining demand for American products, but more tellingly, a sign of weaker consumption worldwide.

Processing imports, where part of the production process is contracted out to a firm in a different country, are sinking as the trade war takes a toll on the global economy, with economists even warning of a recession if tensions escalate. China’s overall imports slid 4.3 per cent in first half of 2019, compared with a 19.9 per cent rise a year earlier.

Raymond Yeung, ANZ’s chief economist for Greater China, pointed out that supply chains are so intricately interwoven that it was no longer a zero-sum game where one market’s decline was another economy’s gain.SUBSCRIBE TO SCMP TODAY: INTL EDITIONGet updates direct to your inboxSUBMITBy registering for these newsletters you agree to our T&C and Privacy Policy

“When exports for one market drop, those for others also fall,” Yeung said.

For that reason, China’s first half exports to the European Union may have climbed 6 per cent, or US$11.12 billion, while those to the 10-nation Asean group increased 7.9 per cent, or US$11.84 billion. But both growth rates were well below the level in the first six months of 2018 after exports to the European Union grew 11 per cent, while those to Association of Southeast Asian Nations (Asean) states rose 16 per cent during the same period.

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