FXstreet.com (Barcelona) - According to Analyst Daniel Martin at Capital Economics, “China’s development as a manufacturing giant has hurt the terms of trade of most Asian economies. However, the development of a sophisticated Asian production network with China at its heart should favor the region.” Moreover, low-wage Asian countries are well positioned to benefit from rising wages in China, as producers seek alternative low-cost production bases in the region.

More worrying, “The rest of the emerging world has missed out on China’s boom, and may even have been hurt by Chinese competition.” Martin warns. Manufacturing exporters have been on the wrong side of global terms-of-trade shocks. Eastern Europe is the region that exports least to China, and its export basket is similar to China’s. However, it has the advantage of proximity to Western Europe’s market. Mexico is in much the same position with regards to the US.

Looking forward, “Eastern Europe (ex-Russia) and Mexico have less to lose from Chinese rebalancing, and should remain solid performers over the medium-term. However, other emerging regions, notably Latin America, Africa and the Middle East, will struggle to develop manufacturing networks that can rival Asia’s.” he suggests.