KUALA
LUMPUR— Malaysia’s steady pace of
economic growth may unravel if China, the world’s second-biggest economy, slows
faster than expected , a report in the Financial Times warned.
Citing
Moody’s Investor Service, the paper said the entire Southeast Asian region,
including Malaysia, was vulnerable to a sharp economic slowdown in China.
That’s
because China’s role in the economies of the region had risen sharply, it said,
pointing to data showing that 12.2 per cent of Asean’s total exports went to
China in 2013, up from 7.3 per cent a decade earlier.
The
situation looks even starker if Malaysia is singled out.
Data
from the Statistics Department shows that China is Malaysia’s biggest trading partner.
Total trade between the countries reached just over RM200 billion in 2013, a
12.5 per cent increase from the previous year.
Should
China’s manufacturing-heavy economy falters, its demand for Malaysia’s exports
will fall away. The sharper the slowdown, the bigger the potential dent on
Malaysia’s exports.
China’s
breakneck economic growth is already slowing. In the first quarter of 2014,
growth was the slowest in 18 months.
In
recent months the possibility of a banking crisis in China, caused by a poorly
regulated shadow banking sector, is muddying the economic outlook for the
country.
While
unprecedented strength in domestic demand was helping Asean economies grow,
there was a need to also consider the area’s increased linkages to China, the
Financial Times said in its report.
In
Malaysia, strong domestic demand has driven the economy and according to the
central bank will continue to underpin growth.
But the
sturdy domestic demand has come alongside a steep increase in household debt.
At 85 per cent of the entire economy in 2013, Malaysia’s household debt burden
is among the largest in Asia.
This
large burden could be a telling factor if the economy slows and interest rates
rise, putting an end to the days of free spending.
Some
may start to default on loan repayments but many more will have to start
watching their spending habits — a factor that will weigh on domestic demand.
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
No comments:
Post a Comment