ING Belgium is involved in the Royal Belgian Mission to China

ING Belgium presents a report on this occasion "Belgian business opportunities in a rebalancing Chinese economy", of which a small summary follows:

Belgium is a small, open economy. The aggregate export of goods and services accounted for 90% of the country’s GDP in 2014. External trade therefore plays a very important role in the Belgian economic cycle: generally, a recovery is kick-started by an increase in exports. This positive move then generates more activity and business confidence, creating more jobs, stimulating household income and eventually private consumption. As a consequence, it is not surprising to observe a close relationship between the evolution of international trade and Belgian activity.
However, developing the external trade of a country is challenging. The objective is to target the best product mix, which means being able to export goods that are increasingly demanded in growing markets. In this paper, we look more precisely at an important emerging market that constitutes an opportunity for the Belgian economy, China. Indeed, the larger China (including Hong-Kong and Chinese Taipei) has been Belgium’s most important Asian trade partner in the last three years.

This study is the symbiosis of long-lasting economic know-how developed by ING in Asia, and ‘classical’ studies of economic research in Brussels concerning Belgian external trade. It is divided into three sections: an economic outlook of China, an overview of China-Belgium trade and a summing-up of business opportunities and challenges for Belgium in China.

(1) China is currently experiencing an important reform of its growth model. The global financial crisis halted the export and investment boom and the authorities responded with a massive monetary stimulus to sustain growth and to clean up the excesses of the credit boom. China is slowly reforming the structure of its economy and expects to generate economic growth driven by private consumption. The transformation is, however, not easy to implement and there are many potential headwinds and issues to be resolved: property market overheating, shadow banking system, deleveraging risks. As far as the external position is concerned, one should also notice that China’s exchange rate regime is evolving towards a floating exchange rate regime and the Renminbi is not considered as overvalued anymore. The Chinese authorities are willing to enhance the internationalisation of their currency, notably by some relaxation in the capital controls.   

(2) For a very open economy like Belgium, the Chinese market constitutes an unique opportunity. In fact, China has been a strong driver of Belgian extra-EU exports for the last 15 years and remains our largest trading partner in Asia. As external trade plays a very important role in the Belgian economic cycle, the weakening of import growth from China that has been observed since mid-2013 has significantly impacted economic activity, either directly or indirectly. However, given that the world trade recovery should only take place from 2016 onwards, we expect export growth to be limited in 2015, before it accelerates again in 2016 and after. There are four sectors in which Belgium is very present in China: pharmaceutical products, vehicles, fuels and organic chemicals. Most of them should only see a limited recovery in 2015, followed by a strong growth acceleration after 2016. Despite this expected export growth, a trade deficit is likely to remain the rule given that Belgium’s service trade with China remains fairly limited.

(3) As China makes Asia Belgium’s main extra-European partner, it is a key country for exports and offers business opportunities. However, because Belgian exports to China are concentrated in very pro-cyclical sectors, the financial crises and turmoils recently have had a significant impact on export growth. This also means that in order to fully benefit from future business opportunities in China, Belgian exporters have to diversify. As this study shows, there are still significant challenges to Belgium fully benefiting from the growing opportunity that China represents. Modifying the export mix is certainly a long-term process. However, now that the financial crisis shock has slowly been reabsorbed, Belgian exporters have to get used to new Chinese realities.

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For more information:
Julien Manceaux, Senior economist : + 32 2 547 33 50, julien.manceaux@ing.be
Press department ING Belgium  + 32 2 547 24 84, pressoffice@ingbe
You will finde the report here.