ASEANPERSPECTIVES：THECHINACHANNEL0118

1、economics emerging asia asean perspectives the china channel 18 january 2013 leif eskesen economist the hongkong and shanghai banking corporation limited, singapore branch abc global research trade between the asean-5 and china has exploded, and it flows both ways cross-border investments are also o

2、n the rise, and tourists are flying in this interdependence will grow, and the benefits will be enjoyed by all two-way flows, two-way benefits chinas continued expansion has brought great benefits to the asean-5 (indonesia, malaysia, philippines, thailand and vietnam) as well as to their giant neigh

3、bour. this two- way winning engagement will get better still as these economies continue to charge ahead. trade in goods between asean-5 and china has enjoyed a five-fold rise as a share of gdp over the past 15 years, and now totals more than usd200bn a year. its flowing in both directions, and cont

4、rary to popular belief three of the asean-5 indonesia, thailand, and vietnam actually have trade deficits with china. the goods traded are also now higher value-added in nature. although china is a relatively small investor in the five compared with singapore and japan, investment flows have risen s

5、ignificantly too, with a promise of more to come. so far only malaysia has made much of an impact in the other direction. chinese tourist visits to the five countries more than doubled over the past five years. its not just the headcount. chinese visitors spend more in thailand, for example, than ja

6、panese, americans and germans together. however, only thailand and vietnam run a tourist surplus with china as more and +65 6658 .sgmore asean-5 holiday-makers head north. these trade, investment, and tourist flows between the view hsbc global research at: http:/ issuer of report: the hongkong and s

7、hanghai banking corporation limited singapore branch mica (p) 038/04/2012 mica (p) 063/04/2012 mica (p) 206/01/2012 disclaimer the notable exception being malaysia (chart 16). cumulatively, china has ploughed more than usd4bn in fdi into the asean-5 economies since 2008, outstripping the usd2.5bn fl

8、owing in the other direction. the main beneficiaries of chinese fdi have been indonesia, thailand, and vietnam, which account for around 75% of chinas fdi into the asean- source: ceic, hsbc estimates chinas outward fdis have generally concentrated on resources, manufacturing (metals and mineral prod

9、ucts), wholesale it is generally the case across asian countries. of course, there are more tourists from china, but they also spend a lot per visitor. data for tourism revenue for asean-5 visitors in china is not available. 10 8 0 0 economics emerging asia 18 january 2013 chart 26. the great wall o

10、f chinese tourists chart 27 has increased their share in total arrivals abc 6000 5000 4000 3000 2000 tourist visits from china (thousand persons) 6 4 2 share of chinese visitors (% of total # of visitors) 1000 0 200120032005200720092011 2000 indonesia 2005 malay sia 2011 philippines asean-5thailandv

11、ietnam source: ceic, hsbc estimates chart 28. thailand has seen a big inflow tourist visits from china source: ceic, hsbc estimates chart 29. china has also received many asean tourists visits to china from asean-5 2000 (thousand persons) 1500 (thousand persons) 1500 1000 500 0 1995 1997 1999 2001 2

12、003 2005 2007 2009 2011 1000 500 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 indonesia thailand malay sia vietnam philippines indonesia thailand malay sia vietnam philippines source: ceic, hsbc estimates chart 30. only thailand has a tourist surplus with china source: ceic, hsbc estimates chart 3

13、1. chinese tourists spend quite a bit 1500 tourism balance with china (thousand persons) 2000 2011 tourism receipts by country (million us$) 1000 500 0 -500 -1000 1500 1000 500 c hina germany japan u sa 1995 1997 1999 2001 2003 2005 2007 2009 2011 indonesia malay sia philippines thailandvietnam indo

14、nesiamalay siathailand source: ceic, hsbc estimatessource: ceic, hsbc estimates 11 nz hkg philippines australiathailand japan malaysia indonesiasingapore korea taiwan 0.5 0.4 0.3 0.2 -0.1 0.1 0.0 1 economics emerging asia 18 january 2013 the rebalancing reward trade between china and the asean-5 is

15、set to grow further as these economies climb the global economic ladder successful rebalancing of growth in china could deliver significant benefits to asean-5 exporters china also stands to benefit from the rise of the asean-5, especially if they can engineer more investment-led growth abc increasi

16、ng interdependence the trade and investment interdependence between china and the asean-5 will only grow further as these economies continue to climb up the global economic ladder. looking further ahead, china is expected to claim the top spot from the us over the next few decades and the asean-5 ec

17、onomies will also move up several spots.1 this will clearly have implications for the magnitude of cross-border trade and investments as this new southern silk road emerges. however, lets for now focus only on the prospects for the next 5-10 years. starting with asean-5 exports to china, the prospec

18、ts are generally quite favourable given the existing strong ties, including through trade agreements. moreover, these trade linkages could strengthen and benefit the asean-5 even further if china successfully rebalances its economy toward more so far the exports of the asean-5 economies to china hav

19、e benefitted from chinas position as an assembly hub for exports to the rest of the world, including to the us and europe which are now struggling with stagnant economies. this is why asean-5 exports to china have been highly correlated with chinese exports to the world (chart 32). chart 32. correla

20、tion of exports to china w/chinas exports correlation: one-quarter lagged 2000-05 2006-11 source: ceic consumption led growth. continued support through this channel will, therefore, depend on the extent to which us and europe recover, and if china can diversify its for further details on this, see

21、these pieces by our colleagues: the world in 2050, 11 january 2012, by karen ward, and consumer in 2050, 15 october 2012, by karen ward and frederic neumann. 12 exports away from the us and europe towards other faster growing markets, including other ems. the good news is that the latter part of the

22、 process is already under way, and has a lot further 2 economics emerging asia 18 january 2013 to go as trade between emerging markets increasingly begin to dominate global trade flows in coming years and decades. asean-5 exports also benefitted from chinas heavy investment-led growth model, which h

23、elped pump up exports of capital goods and commodities to china. but, can this continue? the answer is, yes, although maybe not to the same extent as in the past. the strong investment story in china has been rooted in domestically oriented investments in basic infrastructures and housing, but it ha

24、s also been closely related to the vertical trade integration that fuelled chinas rise as an exporter. the domestically oriented investments may not grow at quite the same pace we have seen in the past, but as our chief china economist, qu hongbin, has noted, chinas basic investment needs are still

25、quite substantial as the urbanisation drive continues and the need for better connectivity across china is met. moreover, chinas investment demand will likely be held up by the continued shift towards the manufacturing of higher value-added products. this will, in turn, require more investments in p

26、roductivity enhancing machinery and technology, supporting higher-value added capital goods imports from asean-5 exporters such as malaysia. what will be an important driver of asean-5 exports is also the extent to which china can fire up private consumption as a source of growth. as discussed earli

27、er, asean-5 exports of consumer goods to china have so far been relatively small, although they have picked up in recent years. but if china successfully rebalances its economy over the medium term, the associated consumption-led growth presents tremendous opportunities for asean-5 exporters, which

28、have a relatively however, the benefits will also flow from the asean-5 to china. these economies are expected to see their potential growth rate creep up over the medium term as structural policy reforms and infrastructure investments lift their currently low investment ratios. this will support ch

29、inese exports of capital goods and investments to the region, including infrastructure related projects. the favourable demographics in many of the asean-5 countries, especially in indonesia, the philippines and vietnam, will help keep the consumption story alive for many years. this, in turn, will

30、lift chinese exports of both lower and higher value-added consumer products. increased affluence will bolster consumption growth as more people make it above the magical middle- income threshold.2 trade between china and the asean-5 is also likely to be shaped by a reallocation of asias manufacturin

31、g base and supply chain. as china moves up the value-added chain, partly as it is becoming less competitive in lower-value-added manufacturing segments, this presents opportunities for the asean-5. countries with ample and cheap labour, in particular indonesia and vietnam, are likely to increasingly

32、 take over the manufacturing and supply chain previously residing in china. in turn, this could see china exporting more higher-value added intermediates to these asean-5s and the asean-5 exporting more final goods to china. the bottom line is that the prospects for trade and investment between chin

33、a and the asean-5 are very good. it will especially get a lift if china can successfully rebalance its growth towards private consumption, and the asean-5 can get more traction on the investments needed for them to tap into their already very strong growth potentials. abc strong foot print in consum

34、er products. for further details, see consumer in 2050, by our colleagues karen ward and frederic neumann, 15 october 2012. 13 9 economics emerging asia 18 january 2013 asean-5 macro economic framework abc 200720082009201020112012e2013f gdp growth (% y-o-y) indonesia malaysia philippines thailand vi

35、etnam 6.3 6.3 6.6 5.0 8.5 6.0 4.8 4.2 2.5 6.3 4.6 -1.5 1.1 -2.3 5.3 6.2 7.2 7.6 7.8 6.8 6.5 5.1 3.9 0.1 6.0 6.1 5.3 6.2 6.0 5.0 6.1 4.8 4.9 4.6 5.5 cpi, average (% y-o-y) indonesia malaysia philippines thailand vietnam 6.7 2.0 2.9 2.2 8.3 9.8 5.4 8.2 5.5 23.1 4.9 0.6 4.2 -0.8 7.0 5.1 1.7 3.8 3.3 9.2

36、 5.4 3.2 4.7 3.8 18.6 4.3 1.7 3.1 3.0 9.3 5.1 1.7 3.9 3.2 9.5 current account balance (% of gdp) indonesia malaysia philippines thailand vietnam 2.4 15.4 4.7 6.2 -9.9 0.0 17.1 2.1 0.8 -11.8 2.0 15.5 5.6 8.3 -6.3 0.7 11.1 4.5 3.1 -3.3 0.2 11.0 3.1 1.7 0.1 -2.4 4.6 3.8 0.7 2.5 -1.4 3.7 5.3 4.6 -0.6 po

37、licy rates indonesia malaysia philippines thailand vietnam 8.00 3.50 5.25 3.25 8.00 9.25 3.25 5.50 2.75 9.00 6.50 2.00 4.00 1.25 8.00 6.50 2.75 4.00 2.00 10.00 6.00 3.00 4.50 3.25 14.00 5.75 3.00 3.50 2.75 7.00 6.50 3.50 3.75 3.25 8.00 fx, domestic currency vs. usd, end-year indonesia malaysia phili

38、ppines thailand vietnam 9,419 3.33 41.4 29.5 16,017 10,950 3.55 47.5 34.7 17,483 9,400 3.41 46.4 33.3 18,200 8,991 3.13 43.9 30.2 19,498 9,068 3.16 43.9 31.5 21,034 9,670 3.06 41.2 30.6 20,900 9,700 2.99 39.5 29.8 21,000 source: ceic, hsbc estimates growth is expected to remain steady, except in tha

39、ilandinflation to rise modestly, but remaining flat in vietnam 7 5 3 1 -1 gdp (%y/y) 25 20 15 10 5 0 cpi (%y/y) -3 200720082009201020112012e2013f -5 200720082009201020112012e2013f indonesia thailand malaysia vietnam philppines indonesia thailand malaysia vietnam philppines source: ceic, hsbc asean-5

40、 quarterly forecast source: ceic, hsbc 1q112q113q114q111q122q123q124q12e1q13f2q13f3q13f4q13f gdp growth (% y-o-y) indonesia malaysia philippines thailand vietnam 6.4 5.0 4.9 3.2 5.4 6.5 4.3 3.6 2.7 5.7 6.5 5.7 3.2 3.7 6.1 6.5 5.2 4.0 -8.9 6.4 6.3 5.1 6.3 0.4 4.1 6.4 5.6 6.0 4.4 4.7 6.2 5.2 7.1 3.0 5

41、.4 5.4 5.3 5.6 17.0 5.5 5.9 4.8 4.6 6.0 7.5 6.0 4.5 4.5 4.3 5.5 6.2 4.8 4.7 4.1 4.5 6.4 4.9 5.8 4.0 4.7 cpi, average (% y-o-y) indonesia malaysia philippines thailand vietnam 6.8 2.8 4.5 3.0 12.8 5.9 3.3 4.9 4.1 17.1 4.7 3.4 4.7 4.1 22.0 4.1 3.2 4.7 4.0 21.3 3.7 2.3 3.1 3.4 17.2 4.5 1.7 2.9 2.5 11.0

42、 4.5 1.4 3.5 2.9 5.9 4.4 1.3 3.0 3.2 6.8 4.6 1.3 3.6 3.1 7.2 5.2 1.6 3.8 2.8 9.6 5.1 1.9 3.9 3.0 11.1 5.7 2.0 4.5 3.7 9.9 policy rates indonesia malaysia philippines thailand vietnam 6.75 2.75 4.25 2.50 12.00 6.75 3.00 4.50 3.00 14.00 6.75 3.00 4.50 3.50 14.00 6.00 3.00 4.50 3.25 14.00 5.75 3.00 4.0

43、0 3.00 13.00 5.75 3.00 4.00 3.00 10.00 5.75 3.00 3.75 3.00 8.00 5.75 3.00 3.50 2.75 7.00 5.75 3.00 3.50 2.75 7.00 6.25 3.25 3.50 3.00 7.00 6.50 3.50 3.50 3.25 7.00 6.50 3.50 3.75 3.25 8.00 source: ceic, hsbc estimates 14 economics emerging asiaabc 18 january 2013 notes 15 economics emerging asia 18

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