Depth report

　　

Over the past few months, as the trade war between the United States and China has escalated, other export-dependent Asia-Pacific economies have watched while worrying that their exports will be affected.

    In recent days, the above concerns have become a reality, as the effects of China’s slowing growth have touched every corner of the region. Asian companies, economists and governments have begun to warn about the following risks: China may reduce demand for everything, from Australian iron ore, Korean cars to Thai beach vacations.

    In the suburbs near Singapore's CBD business district, there is a factory that produces speakers and air fresheners for customers in the region.

    The company was founded by Joyce Seow's father Poh Eng Seow in the 1970s. Today this company, Watson EP Industries, has more than 350 employees. The company also has factories in China and Vietnam with an annual turnover of US$40 million (approximately £31 million).

    Seow believes that opening a factory in China at the beginning of this century is the reason for his company's amazing growth. But now, China is also the cause of the troubled family business.

    Joyce and her father only recently discovered that their speakers produced in China are likely to be levied 25% tariffs when they are sold to the United States. The list recently released by Washington shows that a 25% tariff will be imposed on US$200 billion worth of Chinese goods.

    In fact, these tariff policies have not yet taken effect and are currently only under consideration, but Joyce and her father are very worried that these tariff policies will affect their company.

    Joyce said: "We are very upset and don't know what will happen in the future. This makes us feel very uncomfortable. For our American customers, the threat of tariffs will directly affect their profits."

    Joyce pointed out that the reason why they moved production to China was first of all because their Western customers insisted on doing so in order to reduce labor costs.

    She stated that they were involved in this war.

    According to an analysis by DBS, the largest bank in Southeast Asia, Singapore is a unique trade-dependent country, so it is likely to be one of the countries in Asia most affected by the Sino-US trade war.

    According to this analysis report, if China and the United States implement a 25% trade tariff policy, Singapore’s economic growth this year may drop by 0.8% and next year it will drop by 1.5%.

    South Korean automaker Hyundai recently announced a sharp decline in third-quarter profits and blamed this on weak sales in the company's two largest overseas markets, China and the United States. The day before, Seoul announced a number of stimulus measures, including tax cuts, aimed at boosting growth and creating jobs. In September 2018, South Korea’s exports fell by 8% year-on-year, the largest drop in more than two years. Finance Minister Kim Dong-yeon warned that the country’s economic prospects may deteriorate due to increasing external risks.

    In Japan, Canon, a photocopier and camera company, has expressed concern that if the US-China dispute continues and slows the growth of the world’s two largest economies, it may have a knock-on effect on the global economy.

    Canon CFO Toshizo Tanaka said: “One of the concerns is how long this trade war will last. A more serious question is whether this will become a catalyst for the economic slowdown, not only in China and the United States. There are other parts of the world."

    In Taiwan, analysts warned that due to Taiwan's economic reliance on exports of high-tech electronic products to the mainland, the reduction in regional trade volume and the slowdown in Chinese consumption pose great risks to the Taiwanese economy.

    Iris Pang, an economist for ING Greater China, said: “With this slowdown in manufacturing, wages and job reliability are actually at risk.” She said that despite the gross domestic product (GDP) ) Growth may be affected "soon", but the government has not taken measures to respond.

    However, Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest foundry manufacturer and one of Taiwan's most important companies, told analysts that its mainland customers have not changed their behavior due to the trade dispute. Mainland customers account for about 10% of TSMC’s sales.

    CC Wei, president of TSMC, said: "In the short term, we have not seen any impact."

    The World Bank (World Bank) estimated in the “East Asia and Pacific Economic Update” (East Asia and Pacific Economic Update) published earlier that in two years, a one-percentage drop in China’s GDP growth rate will cause the overall development of Asia-Pacific developing countries. The growth rate fell by 0.5%.

    The World Bank stated that China’s growth crisis will cause it to reduce its imports of bulk commodities, which account for a large proportion of Mongolia, Myanmar, Laos, Malaysia, Thailand and Vietnam’s exports. This “makes these countries extremely vulnerable to China’s economic fluctuations. influences".

    Thailand found that in September 2018, the number of tourists from China decreased by 15%. China is Thailand’s largest source of foreign tourists, and Thailand’s military government is now trying to attract Chinese back.

    Although the decline in tourists was partly attributed to a cruise accident in July, officials worry that the economic slowdown may also be hindering the arrival of tourists. The July accident killed at least 47 people and caused some groups to cancel their trips.

    Kiatipong Ariyapruchya, senior economist at the World Bank in Thailand, said: "In recent years, tourism has been a huge driving force for growth, but the tourism industry has fluctuated, and the industry has been slowing down recently."

    Australia is one of the developed economies with the closest ties to China. In 2017, slightly more than one-third of Australia's A$100 billion (US$71 billion) merchandise exports went to China. Australia is one of the lowest cost iron ore and coal producers in the world.

    There is no clear sign that the Australian economy is being damaged, but analysts said that if the slowdown in China's growth continues for a long time, Australia will be hit. The International Monetary Fund (IMF) predicts that Australia's GDP will grow by 3.2% in 2018, the highest in many years.

    Saul Eslake, an economist and researcher at the University of Tasmania, said: “If China’s economy slows down further, Australia is still vulnerable, and it’s not just because of China. It accounts for a high percentage of our exports, and it’s also because China actually determines the prices of the same products we export to other markets such as Japan, South Korea, and Taiwan."