After dramatically declining in the first half of 2015, global trade recovered but at a slower pace over the rest of the year, so that world imports grew by only 1.7 percent in 2015 compared to three percent in 2014.

According to a new World Bank Group paper, Global Trade Watch: Trade Development in 2015, global trade in 2015 reflected persistently weak demand and structural changes in world trade, compounded by falling commodity prices and China’s transition to a new growth path.

“This paper builds on our earlier research that showed the global trade slowdown began in the early 2000s but has become more evident since the great recession, and had both cyclical and structural determinants,” the authors said. “Now we have found that in the context of the broader global trade slowdown, 2015 appears to have distinct characteristics compared to previous years. And our estimates suggest that cyclical factors dominated in 2015, accounting for approximately two thirds of the trade slowdown.”

The authors found that while weak import demand was mostly concentrated in advanced economies in previous years, trade developments in 2015 can be traced to emerging economies. Emerging Asia which makes up more than a quarter of world trade was the epicenter of the global trade slowdown and the initial rebound. Other regions also played a role. In particular, trade developments in Latin America, Europe and Central Asia mostly reflected lower imports as recession hit commodity exporters such as Brazil and Russia.

In addition, the paper also says that lower commodity prices and China’s transition to a new growth path were two mutually reinforcing factors that created weak import demand in emerging economies.  Lower commodity prices reduced commodity producers’ incomes leading those countries to import less from all other regions, including China. At the same time, China’s gradual shift from investment to consumption and the decline in its industrial production reduced China’s imports from other regions, including commodity producers. If China’s imports had not fallen in 2015, world merchandise import volume growth would have been 2.1 percent instead of the actual 1.7 percent.

China’s transition is affecting the pattern of production and trade in East Asia and beyond, and the impact can also be seen in changes in manufacturing and services trade. Manufacturers, particularly in East Asia, suffered significant declines in export quantities but are now recovering. Since the slowdown was concentrated in China’s industrial sector, which is both more import intensive and more strongly linked to global value chains, the impact on trade was magnified. However, in the longer term, rebalancing from investment to consumption is also likely to create opportunities.

“We could see gains in global trade going forward as a result of China’s transition. Rebalancing from investment to consumption is likely to create opportunities for exporters of final goods and may eventually boost upstream intermediate and capital goods sectors that are now adversely affected,” according to the authors. “In addition, China’s increasing demand for services could spur growth in the global services sector.”

The move from investment to consumption is already shifting China’s demand from goods to services. Part of this demand is being served by cross-border imports and consumption abroad, in which growth is already visible. China’s share of services in imports has grown—from around 15 percent at the beginning of 2011 to close to 22 percent in the first half of 2015.