Speaker 1: Mhm.
Speaker 2: Welcome to Kobe time.
Speaker 1: A podcast series on markets and economies from DBS group research.
Speaker 1: I'm famous economist welcoming you to our 78th episode.
Speaker 1: Today it's just yours truly with a commentary on china's
Speaker 1: slowdown and what that means for the countries in Asean
Speaker 1: now clearly china matters
Speaker 1: while china's outlook faces numerous headwinds.
Speaker 1: Even a recent slowdown in trend growth has not dented.
Speaker 1: It's growing share of global output
Speaker 1: In current US dollars between 2010 and 2020 China's share
Speaker 1: of global GDP nearly doubled just astonishing.
Speaker 1: Barring a major setback china is actually on course to
Speaker 1: become the largest economy in the world before this decade
Speaker 1: is over. Although that's in aggregate terms is the per
Speaker 1: capita income would still be less than a quarter of
Speaker 1: that of the US.
Speaker 1: Now let's look at it from another angle. But using
Speaker 1: the same data
Speaker 1: China's nominal GDP was $17.5 trillion 2021
Speaker 1: Compared to $14.9 trillion dollars in the previous years.
Speaker 1: That means China's nominal GDP expanded on a year on
Speaker 1: year basis by $2.6 trillion dollars last year.
Speaker 1: That was 22% higher than the expansion of the US.
Speaker 1: As the largest contributor to global growth. China's 2022 outlook
Speaker 1: matters for the rest of the world, particularly Asean.
Speaker 1: But the key question is by how much
Speaker 1: we examined associations reliance on china's growth by running crowds
Speaker 1: regressions for each Asean country for the period 2005 to 2021.
Speaker 1: So 16 17 years worth of data
Speaker 1: with three independent variables on the right hand side there
Speaker 1: are real GDP growth rates of china. Real GDP growth
Speaker 1: rates of the U. S. As well as changing oil prices.
Speaker 1: So as you can see we're trying to get three
Speaker 1: really different drivers of growth.
Speaker 1: We run this exercise using both quarterly and annual data
Speaker 1: and find fairly similar results which is China matters for
Speaker 1: ASEAN growth and it matters more today than it did
Speaker 1: 10 years ago. But the us matters much more.
Speaker 1: The coefficient estimates vary. You can actually go through them
Speaker 1: in detail in our made 30 weekly a link for
Speaker 1: that is provided in the shows. But in all cases
Speaker 1: the US enters these regression results with a substantially greater
Speaker 1: magnitude than that of China.
Speaker 1: The reason for this is clear,
Speaker 1: china's trade linkages with the region are deep and growing
Speaker 1: but there is still largely a function of the global
Speaker 1: trade dynamic as opposed to china's domestic demand.
Speaker 1: Many goods produced in Asean countries are intermediate inputs in
Speaker 1: the supply chain which go to china for assembly. And
Speaker 1: the linkage also works in reverse. A large chunk of
Speaker 1: the region's imports are made in china inputs for Ottawa's
Speaker 1: electrical and electronic assembly.
Speaker 1: As long as global demand is holding up china's domestic demand.
Speaker 1: Headwinds will not cause regional trade to suffer greatly in
Speaker 1: our view.
Speaker 1: Now with respect to global demand. The US Outlook remains key.
Speaker 1: As power analysis, let's look at some data on trade
Speaker 1: data through April of this year show regional exports growth
Speaker 1: easing to around 10% on your on your basis
Speaker 1: quite strong given the wide range of adverse base effects
Speaker 1: in place and adverse factors in place.
Speaker 1: And PMS also have eased somewhat in the region.
Speaker 1: But I would say they're kind of modest easing, not
Speaker 1: sharp easing.
Speaker 1: Considering the wide ranging headwinds in place. We find the
Speaker 1: resilient export figures fairly encouraging
Speaker 1: but that's about trade. What about tourism? Haven't there been
Speaker 1: very large? Tourism flows from china in recent years. Yeah
Speaker 1: that's correct. The chinese made up for a very significant
Speaker 1: part of regional tourism in recent years and a resumption
Speaker 1: of tourism flow from china would be of course very
Speaker 1: supportive for the
Speaker 1: tourism dependent
Speaker 1: regions growth outlook
Speaker 1: spread.
Speaker 1: Given that such flows have trickled to a halt since
Speaker 1: the spring of 2020. The lack of upside in 2022
Speaker 1: won't really matter. As the base with respect to China
Speaker 1: is all but zero.
Speaker 1: Now granted the china's lord on dynamic is not helpful.
Speaker 1: But the key headache stemming from the high price of
Speaker 1: food and energy has little to do with china. The
Speaker 1: culprit being the war in Ukraine and other supply side constraints,
Speaker 1: some of which were compounded by the covid crisis.
Speaker 1: If anything, a slowing of chinese demand could help the
Speaker 1: commodities inflation outlook for the region.
Speaker 1: Additionally, headwinds are coming from rising interest rates, capital flow,
Speaker 1: volatility and pressure on regional currency markets yet again, these
Speaker 1: complications are a function of the U. S. Vets. Monetary
Speaker 1: policy direction with the PBOC a largely passive actor.
Speaker 1: So all in all we believe that between resumption of tourism,
Speaker 1: even with those from china and Russia being negligible.
Speaker 1: Uh secondly continued demand for exports. And thirdly moving past
Speaker 1: the pandemic, there are three good factors in place that
Speaker 1: tell us that asean growth could hold up this year
Speaker 1: even if the outlook for china remains beset with uncertainty
Speaker 1: and likely to disappoint.
Speaker 1: Our 2022 real GDP growth forecast for key Asian economies
Speaker 1: are as follows. We think Indonesia will grow by 4.8%
Speaker 1: this year,
Speaker 1: Malaysia by 5.5 Philippines. 7.5 Singapore 3.5 Thailand 3.5 in
Speaker 1: Vietnam 7.0.
Speaker 1: Not bad at all. Considering the circumstances, let's keep our
Speaker 1: fingers crossed. There are some downside risks but hopefully this
Speaker 1: commentary has shown that there are some mitigating upside risks
Speaker 1: as well.
Speaker 1: So that's it for our commentary today. Thanks for listening
Speaker 1: Kobe time was produced by ken Del Ridge from supply studios,
Speaker 1: daisy Sharma and violently provided additional assistance. All 78 episodes
Speaker 1: of the covid time podcast can be found on major
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Speaker 1: As for our research publications. Webinars you can find them
Speaker 1: all by googling dBS Research library
Speaker 1: have a great day.
Speaker 1: Mm hmm