Hong Kong named as the most vulnerable APAC country to Chinese trade decline

Most of the region’s exports are being absorbed by China.

Hong Kong is the most vulnerable country, having the greatest exposure to a slowdown in Chinese demand amongst Asia-Pacific countries following Mongolia and Singapore, according to a report from Moody’s.

The report attributed this to the high concentration of Hong Kong’s exports that are absorbed by China.

Singapore, Vietnam, Taiwan, Korea and Malaysia are also vulnerable to the protracted US-China trade dispute as they are key nodes in the manufacturing of intermediate products, especially electronics.

“Given the uncertain outlook for growth and trade policy, as well as generally tighter financing conditions, slower investment growth will amplify the trade slowdown, especially in Hong Kong, Singapore, Taiwan, Vietnam and Mongolia,” Christian de Guzman, Moody’s vice president and senior credit officer, said.

Investment growth across APAC has slowed considerably in the second half of 2018 amidst a noticeable decline in private sector activity. In Q4, Singapore along with Taiwan saw softer private investment which was also observed in Korea which was hit by declines in facilities investment.

“Overall, we expect the largest deceleration in real GDP growth in 2019 in Mongolia, Singapore, Korea, Vietnam and Hong Kong. These economies are amongst the most trade-oriented and most reliant on Chinese demand,” de Guzman added.

On the other hand, India, Cambodia and Bangladesh are less exposed to the slowdown that threatens the rest of their regional neighbours given their stronger reliance to trade outside APAC.