The US-China trade war begins to impede Asian development


For many months, when the trade war between the US and China intensified, other export-dependent Asian and Pacific economies watched and worried about the domino effect of selling them.

In recent days, infection has become real because the slowdown in China has hit the region. Asian companies, economists and governments have begun to raise the risk of lower Chinese demand for everything from Australian iron ore to South Korean cars and Thai beach vacations.

While some managers say they do not see signs of slowing down yet, others are beginning to reflect the softening of their results.

Hyundai, the South Korean automotive group, recently announced a fall in profits for the third quarter, which blamed low sales in China and the United States, the two largest foreign markets.

This happened the day after Seoul announced stimulus measures, including tax cuts, to boost growth and create jobs. Exports of South Korea dropped by 8 percent in September year to year, the largest fall in more than two years, prompting Kim Dong-Yeon, finance minister, to warn the country's economic outlook may deteriorate due to growing external threats.

In Japan, Canon, a photocopier and camera maker, expressed concerns about the wave effect that a US / China dispute could have on the global economy if it were to drag, slowing growth in the two largest economies in the world.

"One of the concerns is how long this trade war will last," said Toshizo Tanaka, Canon's financial director. "A much more serious problem is that it becomes a catalyst for the economic slowdown, not only in China and the US, but in other regions of the world."

In Taiwan, analysts warned that the economy dependent on the export of advanced electronics technology to China was strongly exposed to the risk of shrinking the volume of regional trade and slower Chinese consumption.

"With this slowdown in the manufacturing sector, wages and job security are in real danger," said Iris Pang, an ING economist in China. Despite the fact that the increase in gross domestic product may happen "quite quickly", the government's response was lacking, she said.

However, Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker and one of the most important companies in the country, told analysts that Chinese company customers – who account for about 10 percent of sales – have not yet changed their behavior because of a commercial dispute.

"We did not see any impact in the short run," said CC Wei, managing director of TSMC.

The World Bank, in its East Asia-Pacific Asia study published this month, calculated that a fall in China's GDP by 1 percentage point would reduce the combined growth in developing Asia and Pacific countries by 0.5 percent after two years.

The bank said that the upward shock in China would result in a fall in imports of goods, which include a significant portion of exports from Mongolia, Myanmar, Laos, Malaysia, Thailand and Vietnam, and "leaving these countries highly exposed to fluctuations in China."

Thailand recorded a 15 percent drop in the number of guests arriving from China in September. China is the largest source of foreign tourists in the kingdom, whose military government is looking for ways to lure them back.

While the collapse partly resulted from a boat crash involving Chinese tourists in July, which killed at least 47 people and prompted some groups to cancel visits, officials voiced concern that the slowing economy could also discourage visitors.

"Tourism has been a strong driving force for growth in recent years, but it is going through ups and downs, and now it is slowing down," said Kiatipong Ariyapruchya, a senior economist at the World Bank in Thailand.

Australia has one of the most interconnected economies in China in the developed world, with just over a third of its $ 100 billion ($ 71 billion) of exports of goods flowing into the country in 2017. The country is one of the lowest costs in the world for iron ore and coal producers.

While there are no visible signs, the Australian economy is suffering – when the IMF forecasts GDP growth of 3.2 percent in 2018, the highest rate for several years – analysts say it would hit if China's slowdown were to continue.

"Australia remains susceptible to any significant slowdown in the Chinese economy – not only because of the bulk of our exports that China is taking, but also because China actually sets the prices we receive for our exports of the same products to other markets, such as Japan, Korea and Taiwan, "said Saul Eslake, economist and colleague at the University of Tasmania.

Report by Robin Harding, Kana Inagaki, John Reed, Jamie Smyth, Song Jung and Edward White


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