Earlier today Andrew blogged about the potential fallout from the Eurozone crisis on our other export markets, such as China.
Europe buys about one fifth of Chinese exports, so it is a key market for China. As Andrew explained, this means that problems in the Eurozone could reduce growth and confidence in China, and have a knock-on impact on demand for UK exports.
But, the crisis in the Eurozone is only one of many factors influencing Chinese growth. The Chinese economy is in a state of flux, and undergoing massive structural change. There is significant potential for Chinese domestic demand to grow, especially if they move forward in the way agreed at the recent G20 summit:
Emerging market economies commit to adopting macroeconomic policies to enhance the resilience of their economies and those in surplus will adopt macroeconomic policies to move towards more domestic-led growth, thus supporting the global recovery and financial stability.…China will rebalance demand towards domestic consumption by implementing measures to strengthen social safety nets, increase household income and transform the economic growth pattern. These actions will be reinforced by ongoing measures to promote greater exchange rate flexibility to better reflect underlying economic fundamentals, and gradually reduce the pace of accumulation of foreign reserves.
The latter paragraph mentions allowing greater exchange rate flexibility, this could provide a significant boost to exports.
As I mentioned earlier today, emerging economies (and non-EU markets) offer great potential for UK exporters. Many of these economies are growing rapidly, and have large, increasingly affluent populations. China is only one example.
There are real challenges ahead, as the potential downsides of the Eurozone crisis make only too clear, but there are plenty of opportunities to grow exports too.