KUALA LUMPUR (June 8): Asean countries, including Malaysia, are deemed the “chief beneficiary” of China’s transition amid the changing dynamics with the US and rising production costs in the world’s second largest economy, said Nanyang Technological University professor of economics Dr Tan Kong Yam.
However, there is also the risk of Asean economies becoming more dependent on China’s actions and performance, he said at the Maybank Invest Asean 2022 conference on Wednesday (June 8).
“Asean has benefited because the cost structure is favourable to us… Chinese factory costs are shooting up, so market forces are shooting more production into Asean,” he said.
“And former US president Donald Trump added another advantage with the trade war [against China]… and then now with the geopolitical supply chain scenario [including China lockdowns], uncertainty and instability, [all these] shifted even more to Asean,” he said.
Amid US sanctions on China imports, Tan said Asean has become the largest trading partner of China in 2022.
Citing data from China’s General Administration of Customs, Asean has superseded the EU (excluding the UK) with more than US$680 billion in total trade while the latter has US$640 billion, and the US was in third place with US$580 billion.
This indirectly translates to higher correlation between China’s and Asean’s economic performance, Tan pointed out.
According to a World Bank econometrics estimate, a 1% slowdown in China’s gross domestic product will translate to a 0.8% decline for Malaysia, compared with 1.3% for Singapore, 0.6% for Indonesia, 0.5% for Philippines and 0.4% for Thailand.
While Asean countries are benefiting from shifting of production away from China, concerns over US sanctions have grown with the world’s largest economy looking to impose tariffs on products produced in this region.
There is some reprieve — on June 6, the US decided to suspend tariffs on solar panels imported from Asean, which has been on the cards for months, while its trade investigation continues.