Malaysia, Asean to benefit from recoveries in US, China
23 Apr 2021
Malaysian firms will need to navigate the US-China relationship, which is expected to remain competitive, says researcher
The economic recoveries in the US and China will benefit Malaysia and Asean markets with increased trade and investments despite the ongoing US-China tensions.
“Both the US and China are on a recovery path, though they each have their own challenges. Changes in markets and supply chain configuration will continue in view of the uncertain US-China relationship,” UOB Global Economics and Markets Research ED and research head Suan Teck Kin said yesterday at the Malaysia-China Chamber of Commerce webinar on “Navigating the Post-pandemic World: Economic Recovery in the US and China and the Implications for Global Trade and Markets”.
Suan said in terms of GDP, the US is doing relatively well though the recent surge in Covid-19 infection cases is expected to see growth remaining flattish in the first three months of this year compared to the previous quarter when economic activities were more vibrant.
“The pandemic has wiped out around 20 million jobs and careers last year, which means it might take 10 to 12 months for the US to recover,” he said.
On the import front, Suan said the US imported quite a bit from China within the first two months of this year, seeing 30.4% increase year-on-year (YoY) for the year-to-date (YTD) period.
“Whereas from Malaysia, the US has increased its number of imports by 8.1% YoY, which spells the recovery of the US will further be reflected on countries like Malaysia and the Asean region,” he said.
A similar impact could also be seen from China’s recovery. China’s labour market saw a surge in unemployment rate in 2020, according to Suan, much like the US.
“But there is a catch: China’s retail market added US$1 trillion (RM4.11 trillion) every three years since 2012, while US market increased from US$4 trillion to US$5 trillion in six years, which means that it is a matter of one to two years China can close the gap with the US in its size of domestic retail sales market,” he said.
Suan added that there has been a 28% rise in imports by China YTD and this presents opportunities for companies in Malaysia.
“Malaysian companies will need to navigate the US-China relationship, which is expected to remain competitive,” he said.
China is now Asean’s main trade partner accounting for 18% of total trade, while the US accounts for 10.5%.
Suan said the close and substantial trade links with the two major economies spell good news for Asean and Malaysia.
In terms of exports, Malaysia’s largest export market is China (12.5% to 15%), followed by Singapore and the US (below 10%) as of 2019.
Malaysia’s largest exports include machinery and transport equipment (45.2%), followed by miscellaneous manufactured items of 10.5% as of 2019.
Suan said despite the anticipated recovery following the vaccine rollout, it is unlikely tourism-related players are going to see the pre-Covid-19 inbound numbers within the next six to 12 months.
The country used to see two million visitors coming in every month, which has since fallen to 10,568 as of December 2020.
Suan said in a post-pandemic era, viruses and vaccines are still key in the economic recovery process.
“The earlier the situation is under control, the better the business prospects,” he said.
Source: The Malaysian Reserve