ASEAN likely to benefit from US-China trade war
Updated : Friday, December 28, 2018 2:57 PM (GMT+0700)

A trade war waged bythe US is likely to deliver a further blow to China’s economy in 2019, but theAssociation of Southeast Asian Nations (ASEAN) may benefit from the disputebetween the world’s two biggest economies, according to Japan’s Kyodo News.

Illustrative image - Source: EPA-EFE/VNA

If the US-China trade tension is prolonged, the Chineseeconomy may face significant downward pressure as weakening consumer andbusiness sentiment could weigh on the country’s household spending andinvestment.

Meanwhile, some ASEAN member nations are expected to becomean alternative destination for foreign direct investment instead of China astheir economies grow steadily on the back of robust domestic demand.

China’s economy grew by 6.5 percent in the third quarter of2018, the lowest since the first quarter of 2009 when the world economysuffered from the aftermath of the global financial crisis the previous year.

Though Chinese President Xi Jinping has pledged to enforcelarge-scale fiscal stimulus measures, including tax cuts, the country’s leadersmay have to accept an economic slowdown of about 6 percent the next year,analysts said.

Given economic data like production, corporate profits, thejob opening-to-application ratio, retail sales and exports, China's economyfell into a stagnant phase in August 2018, said Kaori Yamato, senior economistat the Mizuho Research Institute in Tokyo.

The economy would remain sluggish for an extended period if adownturn in exports, triggered by a series of tariff paybacks with the US,negatively affects investment and consumption in the country, Yamato noted.

So far, the US, one of the world’s major markets, has imposedtariffs of up to 25 percent on 250 billion USD worth of Chinese imports – oraround half of the goods the US imports from China annually. In response, Chinahas introduced tariffs on more than 80 percent of all US imports.

At their meeting in Buenos Aires on December 1, ChinesePresident Xi Jinping and US President Donald Trump agreed to hold off onlevying tariffs on each other’s imports and attempt to conclude talks abouttechnology and intellectual property rights issues within 90 days.

However, the US warned that if at the end of this period oftime, the parties fail to reach an agreement, the 10-percent tariffs will beraised to 25 percent, meaning trade strains rekindled.

The gap between what the US wants from China and what Chinawill be willing to give the US is very big and the trade tension is likely tocontinue another year, said Malcolm Cook, a senior fellow at the ISEAS-YusofIshak Institute in Singapore, adding that the trade war will hurt China morethan the US.

Jeff Kingston, Director of Asian Studies at Temple UniversityJapan, expressed concerns that the slowdown in the world’s second biggesteconomy would drag down the economies of ASEAN nations that have suppliedcomponents to manufacturers in China.

China has been the regional engine of growth, so if itweakens, the consequences would be severe, Kingston emphasized.

But other analysts are rather optimistic about the outlookfor the ASEAN economies, as several major economies, particularly Japan, havebeen accelerating investment in Southeast Asia amid the escalating US-Chinatrade war.

A number of foreign companies have been recently moving theirproduction bases from China to the ASEAN region because the goods they make inChina face heavy US tariffs and are not in much demand in the US.

According to a recent survey of more than 5,000 Japaneseenterprises operating in Asia-Pacific conducted by the Japan External TradeOrganization (JETRO), 57.4 percent of responded firms are eager to expand theirbusiness in the ASEAN region within the next one or two years, compared with48.7 percent that are keen to do so in China.

Source: VNA

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