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The Four Asian Tigers Are Not Immune to US-China Trade War

  • Chen Gong
  • Sep, 2019
  • 663
  • US-China trade dispute


Since the trade war erupted between China and the United States, much focus has been on the impact on both countries. As China and the United States dominate the world’s economy, being the top two biggest national economies in terms of size, the impact of U.S.-China trade friction will be far greater than what is seen in each individual country. The negative effects of China’s economic slowdown and the imposition of additional tariffs have spilled over to neighboring countries and regions, among which the Four Asian Tigers - the developed economies of Taiwan, Hong Kong, Singapore, and South Korea - are the most affected.

According to a recent Reuters report, Taiwan’s export orders fell 4.5 percent year-on-year to $38.5 billion in June, the eighth consecutive month of contraction. The global economy is weakening as a result of the U.S.-China trade dispute and customers are more conservative when placing orders. In particular, machinery orders fell the most, down 22.3 percent, while electronics orders fell 4.3 percent. In terms of export destinations, U.S. orders in June have increased by 6.8 percent year-on-year, but demand in other major markets has deteriorated. Data shows that orders from mainland China fell 14.6 percent in July after falling 13.9 percent in June, while orders from European and Japanese buyers fell 5.3 percent and 7.9 percent respectively. Mainland China has contributed to the largest decline in orders, showing that the economic and trade situation there has also slowed. The decline in demand has seriously impacted Taiwan. When customers (in this case, the United States) stop importing from mainland China, the impact of the slowdown in demand will be transmitted all the way to the parties upstream. As one of the Four Asian Tigers, Taiwan with its strong electronic manufacturing ability will inevitably face the impact of slowing demand. In light of this, the Standard Chartered Bank has recently revised its forecast for Taiwan’s GDP growth this year down to 2.1 percent from 2.4 percent at the beginning of the year.

Like Taiwan, Hong Kong is highly dependent on China; one can even say that their economic fortunes are closely tied to China’s economy. For Taiwan, data in April this year showed that the country’s exports to the mainland and Hong Kong accounted for 37 percent of its total exports, compared with 13.4 percent to the United States. Hong Kong also showed a similar situation, but due to having a different industrial structure from Taiwan, the impact on Hong Kong is evenly distributed among investment, real estate, trade, and other sectors. For example, Debenham Thouard Zadelhoff (DTZ) recently pointed out that capital from mainland China continues to be tight due to the trade war. Since the third quarter of last year, China’s share of large-value properties having turnover of more than HK$1 billion has been zero. Jones Lang LaSalle Incorporated (JLL) also noted that uncertainty over the trade war between China and the United States has slowed Chinese companies’ expansion activities in Hong Kong. In terms of trade, Hong Kong’s Standard Chartered Bank said in a recent report that as long as existing punitive tariffs remain in place, Hong Kong’s trade volume as a re-export center will decline. The bank also cut its Hong Kong’s GDP growth forecast for this year from 2.2 percent to 1.4 percent. In terms of financial investment, the decline is also reflected in the number of mergers and acquisitions (M&A).

The South China Morning Post pointed out that the total transaction volume of M&A in Hong Kong in the first half of the year was $45.8 billion, a year-on-year contraction of 14 percent. This is because a series of effects affected the sentiment of enterprises with regards to M&A, and most are adopting a wait-and-see attitude to determine how long the U.S.-China trade war will last. Many shelving their relevant financing plans in the meantime. Due to the close economic and trade relations between Hong Kong and the mainland, under the impact of the U.S.-China trade war, corporate investment, entrepot trade, and overseas expansion of the mainland are becoming more cautious, and this has affected Hong Kong as well.

The situations of the other two tigers, Singapore and South Korea, appear gloomy as well. In general, Singapore and South Korea are both regarded as barometers of Asia-Pacific and global trade. Although they are less dependent on China, they are still affected by the U.S.-China trade war.

According to recent data, Singapore’s GDP in the second quarter increased by only 0.1 percent from the same period of the previous year, far below the 1.1 percent forecast quoted in a Reuters poll. In addition, the country’s non-oil products domestic expo...

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