The slowdown in Chinese economic growth has impacted markets across the globe. In this article, we will analyze how China, the world’s largest emerging economy, impacts the UK markets. The table below lists the major export commodities from the UK and the major export destination countries for the UK, all expressed in percentages.
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Basically, the turmoil in China affects:
The Chinese slowdown has led to a decline in the import of many goods and services. Further, the devaluation of the yuan has made imports very expensive for the country. Thus, the demand for goods such as luxury cars from companies like Ford (F), BMW (BAMXY), Bentley (RYCEY), and Tata Motors (TTM) has fallen. Plus, the consumption of oil and petroleum products has also fallen in China. Luxury brands like Unilever (UL) also face a fall in sales during these times.
Now, the UK’s major export is cars, and refined and crude petroleum. The Chinese slowdown has directly impacted the export, although only 3.7% of the UK’s exports are to China. Also, the demand for gold in China has again seen a dip, which impacts the gold exports from the UK.
Out of the 28 European Union nations, Germany has the strongest trade ties with China, especially in regards to export ties. Cars are the major export from Germany to China. The turmoil in China has increased the downside risk of Germany’s exports, which will affect Germany’s trading with the UK. Thus, trade with another country brings with it direct and indirect exposure to any country in the world. The impact of this can be seen in the iShares MSCI United Kingdom ETF (EWU).
For more information, see Germany Accelerated while France Recorded a Dip in Manufacturing.