WebUY staff, a Singapore-based online grocery retailer, offloads containers filled with goods shipped from China.
Singapore – Vincent Xue operates an online grocery retailer, providing fresh produce, canned food and easy-to-package materials for local consumers who are conscious of Singapore’s cost-conscious.
WebUY Global Sources registered with Xue’s NASDAQ are primarily from suppliers in China. Since the second half of last year, a third of his suppliers have been holding excess inventory in China, offering up to 70% of sudden discounts.
“China’s domestic market is too competitive. Some large F&B manufacturers struggled to stop inventory due to weak drugs in consumer demand,” he said in Mandarin, translated by CNBC.
Xue has also become busy after invading Southeast Asian countries after sealing off its partnership with Chinese e-commerce platform Pinduoduo.
“Every week there are around five to six containers with pindoo doo orders,” Xue said, and Webuy Global will help deliver the last mile to customers.
While domestic consumption remains a concern when sudden tariffs block exports to the US to China, excessive capacity has led to prices for Chinese producers staying in the defruit territory for more than two years. Consumer inflation remains near zero.
Still, the country is doubling its manufacturing industry, and this production overdrive is rippling across global markets, stimulating Asian anxiety that Asian unrest could squeeze local industries, experts said.
“We’ve seen a lot of effort into the development of our business,” said Eswar Prasad, senior professor of trade policy and economics at Cornell University.
However, in the case of an inflation-equipped economy, economists say the influx of low-cost Chinese products has silver lining. It lowers consumer costs. This could provide central banks with some relief to revive growth against the backdrop of growing trade tensions while also balancing lower costs of living.
Nick Maro, the leading economist at the Economist Intelligence Unit, said markets such as Australia where manufacturing bases are limited could ease China’s cheap imports and reduce inflationary pressures.
Emerging growth risks and suppressed inflation could pave the way for more rate reductions across Asia. This is expected to further separate regional central banks from the Fed and bring additional easing.
Investment Bank forecasts that the Reserve Bank of India will offer an additional fee reduction of 100 basis points for the remainder of the year. The Philippines and Thailand central banks each cut 75 basis points, while Australia and Indonesia can cut 50 basis points, while South Korea can cut 1/1.
“China Shock”
In Singapore, rising costs of living were one of the hot button issues during the city-state election campaign that led to a poll held last month.
Nomura economists said the country’s core inflation rate might be surprising at the bottom of the MAS forecast range, citing the impact of influx of cheap Chinese imports.
City-states don’t just witness the effects of disinflation as low-cost Chinese products are exposed to flooding.
“The penetration across Asia is likely to be pervasive,” added Economist Nomura, who predicted that Asian countries will sense the impact of the accelerated “China shock” over the next few months.
The Asian economy is already wary of China’s overcapacity, with some countries imposing anti-dumping obligations to protect local manufacturing production, even before Trump’s drastic tariffs roll out.
In the late 1990s and early 2000s, the world economy experienced the so-called “China shock” when a surge in cheap Chinese imports helped to keep inflation low while keeping costs down for local manufacturing.
A set of varieties appears to be ongoing as Beijing focuses on exports to offset the drag on domestic consumption.
China’s exports to the ASEAN block rose 11.5% year-on-year in the first four months of this year, as shipments to the US fell 2.5%, according to official customs data. In April alone, China’s transport to ASEAN skyrocketed 20.8%. This is because exports to the US plummeted by more than 21% compared to the previous year.
These products often reach discounts. Goldman Sachs economists estimate that Chinese products imported by Japan over the past two years have been around 15% cheaper than products from other countries.
India, Vietnam and Indonesia have imposed a variety of protectionist measures to provide some relief to domestic producers from fierce price competition, particularly in sectors facing overcapacity and cheap imports.
In many countries, the influx of Chinese products is a trade-off between lower inflation and negative impacts on local production, but countries such as Thailand can face double-edged swords.
Thailand will likely be the most intense due to the “Chinese shock,” and while economists Nomura predict that this year will even slip into deflation, India, Indonesia and the Philippines will also see inflation below central bank targets.
