Asian EMAX Growth Slows to Trend Levels, Tech Exports Driven by Prices Hit Record High
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Asian EMAX Growth Slows to Trend Levels, Tech Exports Driven by Prices Hit Record High
JPMorgan believes Asian Emerging Markets (EMAX), after nearly 6% high-speed growth for four consecutive quarters, will see growth rates revert to trend levels starting from Q2. Although tech IP output has cooled, nominal tech exports remain robust driven by price factors, with South Korea's monthly exports first breaking the $100 billion milestone.
- EMAX growth falls back from near 6% highs; Q2 PMI shows slowing growth rates for some economies.
- South Korea and Taiwan tech IP output cools, but nominal exports continue to climb due to price effects, with South Korea's single-month exports exceeding $100 billion.
- China PMI shows moderate demand recovery, but transmission mechanism remains weak; Q2 GDP growth expected to slow significantly compared to Q1.
- Under US tariff policy evolution, most Asian economies may face final tariff levels comparable to initial estimates, presenting a 'running on the spot' state.
- BoJ faces fiscal concerns and political pressure; weaker yen supports exports, raising Q2 and H2 growth forecasts.
- Thailand's growth prospects improve with 2026 GDP forecast significantly raised, but current account may turn deficit; Indonesia faces trade deficit risks.
Report interpretation
Overview
This report tracks the latest macroeconomic data and policy trends in major Asian and Oceania economies. The core view is that Asian Emerging Markets (EMAX), after a strong recovery in 2025, are seeing growth momentum integrate from 'overheating' to 'trend-based'. Although June PMI data shows slowing growth in some countries, upside risks remain. While the tech sector faces output volatility, it benefits from strong price effects, with nominal exports hitting new highs frequently, bringing ample profits to regional enterprises and fiscal space for governments. Additionally, the report deeply analyzes the potential impact of US tariff policies on Asia, as well as structural changes and policy expectations for key economies such as China, Japan, and ASEAN.
Core views
Growth Integration and Tech Export Resilience: After nearly 6% high-speed growth for four consecutive quarters, EMAX regional economic growth is expected to slow down to more sustainable trend levels starting from Q2. June manufacturing PMI showed significant declines in South Korea and Indonesia, while Thailand steadied and recovered, reflecting differences in performance across the region. Although South Korea and Taiwan tech IP output fell from high levels, this is partly attributed to temporary factors such as product generational transitions. More importantly, nominal tech exports continued to grow rapidly driven by strong price effects, with South Korea's monthly nominal exports breaking the $100 billion mark for the first time. This situation of rising volume and prices enhanced the profitability of regional tech companies and brought additional fiscal space for policymakers. Moderate Economic Repair in China and Policy Limitations: China's latest PMI data shows a moderate recovery in demand, stabilizing after the weak period of April-May, with production remaining in expansion and domestic orders improving marginally. However, the economic transmission mechanism remains weak, with employment, inventory, and unfilled order indices still reflecting cautious corporate attitudes, and export orders showing uneven performance as the rush-ahead effect fades amid ongoing tariff uncertainty. Although energy and input cost declines relieved upstream pressures and supported margins, weak downstream pricing power remains the main constraint. The report expects Q2 GDP growth to slow significantly from Q1's strong pace, then modestly recover in Q3 and Q4 along with manufacturing resilience, global AI demand, and improved fiscal execution. On the policy front, fiscal policy will play a bigger role in 'Six Networks' and urban renewal investment, but if data misses expectations, support scope may expand after the Political Bureau meeting in late July. Tariff Impact and Country Differentiation: Regarding US tariffs, the report points out that the final tariff levels faced by most Asian economies may be comparable to the initially expected IEEPA level, presenting a 'running on the spot' state. If tariffs eventually fall back to IEEPA levels, Bangladesh and China will face the highest relative tariffs, while EMAX economies will be the lowest, with India and Japan in between. Only Pakistan, Philippines, and Sri Lanka may face tariff levels below IEEPA levels. In Japan, fiscal concerns and political pressure curbing the central bank's rate hike led to a weaker yen and rising government bond yields, but Tankan survey shows strong growth momentum and rising inflation expectations, so the report raised Japan's Q2 and H2 growth forecast. In ASEAN, Thailand's growth prospects improved, 2026 GDP forecast was significantly raised, but current account may turn into deficit; Indonesia needs to monitor foreign exchange reserve data as it saw its first trade deficit since 2020 in May.
Analysis framework
The report adopts an analysis framework combining high-frequency data tracking and macro fundamentals. First, determine turning points of short-term growth momentum through PMI, tech IP output, and import/export data, distinguishing the contribution of 'volume' versus 'price' to exports. Second, assess the interaction between external shocks and internal policy space combined with policy context (such as US tariff law evolution, expectations for China's Political Bureau meetings, BoJ political pressure). Finally, reveal structural opportunities and risks within the region through country comparisons (such as differentiation between Thailand and Indonesia, differences between China and India). This methodology emphasizes finding structural highlights driven by price effects, policy backing, or specific industrial cycles against the backdrop of slowing total growth rates.
Methodology notes
Distinguish between real volume growth and terms of trade effects when analyzing export data.
The report notes that South Korea's record-high nominal tech exports were driven not just by sales volume, but by strong price effects. This analysis helps identify the true source of corporate profit improvement, avoiding being misled by nominal high growth.
Dynamic Evolution and Equivalence Analysis of Tariff Policies
The report analyzes the evolution path of US tariffs from Section 122 to Section 301, pointing out that although mechanisms differ, the final tariff burden on most Asian economies may return to similar levels, helping investors understand the substantive impact of policy uncertainty.
Identify turning points where economic growth returns from 'overheating' to 'trend-based' through PMI and high-frequency indicators.
The report uses marginal changes in PMI data (e.g., declines in South Korea, Indonesia, stabilization in Thailand) to confirm the integration process of growth momentum in the EMAX region, reminding investors to pay attention to risks and opportunities during the speed change period.
Key data
- Korea Monthly Nominal Exports>$100 BillionFirst time breaking this threshold, driven by tech product price effects
- EMAX Previous Quarter Growth Rate~6%High-speed growth for four consecutive quarters, expected to slow from Q2
- Thailand 2026 GDP ForecastSignificantly RaisedSpecific values not detailed, but report explicitly mentions significant raise, while expecting current account to turn deficit
- Indonesia Trade StatusTrade Deficit in MayFirst time since 2020, need to monitor foreign exchange reserve changes
- China Q2 GDP ExpectationSignificant SlowdownCompared to Q1's strong performance, Q2 growth expected to decline, mild recovery in Q3/Q4
Impact & implications
For Asian markets, the normalization of growth rates does not mean recession, but a return to reasonable intervals from abnormal highs. Strong nominal exports in the tech industry and improved corporate profitability will provide fiscal buffers and stock market support for relevant economies (such as South Korea, Taiwan). For Chinese investors, vigilance is needed regarding sentiment fluctuations caused by Q2 data slowdown, but policy floor expectations (especially the July Political Bureau meeting) may provide downside protection. For ASEAN, Thailand assets' attractiveness may increase due to raised growth, but attention must be paid to exchange rate pressure from worsening current accounts; Indonesia needs to closely monitor the depletion of foreign exchange reserves due to trade deficits. Overall, the Asian economy shows certain resilience under the shadow of tariffs, but internal differentiation intensifies.
Risks
- Final implementation level of US tariff policy higher than expected, especially for high-tariff economies like China and Bangladesh.
- China downstream demand recovery fails to meet expectations, leading to sustained deflationary pressure.
- India faces rainfall shortage risks brought by El Niño, affecting agriculture and overall growth.
- Indonesia trade deficit continues to widen, leading to foreign exchange reserve depletion and currency volatility.
- Japan fiscal concerns intensify, leading to loss of control of government bond yields or excessive JPY volatility.
What to watch
- China June foreign exchange reserves, CPI, and credit data.
- Indonesia foreign exchange reserve data to be released next week.
- Policy statements at China's Political Bureau meeting in late July.
- Subsequent progress of US Section 301 investigation and final tariff rulings.
- Specific scale and continuity of Thailand's current account deficit.