Welcome!

News Feed Item

ASEAN Region Vulnerable to China Hard Landing Shock Waves, Says IHS

The ASEAN region is more vulnerable to a China hard landing than the US and EU, according to new analysis released at the World Economic Forum in Manila from economists at IHS Inc., (NYSE: IHS), the leading global source of critical information and insight. The risk of a China hard landing will also be discussed at the IHS Forum in Singapore from 10-12 June.

“A hard landing in the Chinese economy is one of the key risks facing the global economy in 2014-15 and our economic model shows that there is a one in three risk of this scenario happening in the next three years,” Rajiv Biswas, Asia Pacific chief economist for IHS, said speaking from Manila.

Using the state of the art IHS “Global Link” model, IHS found that a Chinese hard landing scenario would lower world GDP growth by 0.1 percentage point in 2014 and 0.5 percentage point in both 2015 and 2016.

Japan’s real GDP would be 1.1 percent lower by 2018, while Australia’s real GDP would be down 2.2 percent. By the end of 2016, the level of world GDP is 1.2 percent lower than had China not experienced a hard landing.

ASEAN region particularly vulnerable

“ASEAN as a region is particularly vulnerable to a China hard landing scenario due to the rapid growth in bilateral trade and investment with China over the last decade,” Biswas said.

“ASEAN exports to China have grown at an average pace of 20 per cent per year over the last decade. That has helped cushion ASEAN from weak growth in the key export markets of the US and EU during the global financial crisis, but it has also created greater vulnerability to a China hard landing,” he said.

Significant impact on Malaysia and Indonesia

The impact on the Malaysian economy would be significant, as exports account for a high share of the country’s total GDP, and China is its largest export market. In the China hard landing scenario, Malaysian real GDP is 3.7 per cent lower than the baseline case by 2018.

Indonesia would also suffer some transmission shocks due to the impact of weaker Chinese demand for commodities as well as adverse terms of trade effects due to declines in world commodity prices. Indonesian GDP growth would be down 1.8 per cent by 2018 compared with the baseline case.

Manufacturing supply chain vulnerable to shocks

“ASEAN nations are increasingly integrated into the East Asian manufacturing supply chain, and manufacturing sectors would be hit by shock waves from the impact of a China hard landing on Chinese consumer demand,” Biswas said. “Asian commodity exporters would also suffer from a slump in Chinese demand for commodities, which would also push commodity prices lower.”

Price of coffee, oil and copper among commodities affected

Prices for several commodities would fall in the China hard landing scenario. Comparing the scenario with the IHS baseline forecast, aluminum prices would be 2.1 per cent lower in 2014 and 13.5 per cent lower in 2015; copper prices would be 2.2 per cent lower in 2014, but 16.8 per cent lower in 2015; and iron ore is expected to be 7.4 per cent lower in 2014 and 29.7 per cent lower in 2015. Prices for cotton, coffee, and, to a lesser extent, wheat would also be affected.

A China hard landing would have direct implications on oil prices and oil exports to China, with world oil prices expected to be about $10 per barrel lower on average in 2015 than in the base case.

Emerging market exchange rates affected

Asian emerging market exchange rates would also be affected. Because several emerging markets are highly dependent on China as an export market, and due to risk aversion in global financial markets due to a China hard landing, global financial investors would back away from riskier emerging markets. This puts pressure on some emerging market currencies and causes some countries to raise interest rates to prevent further capital outflows.

The net result of a China hard landing is a weaker growth path worldwide over the next three to four years, with the most severe transmission effects being to other economies in the Asia-Pacific.

China hard landing scenario assumptions and background

The IHS China hard landing scenario assumes a severe tightening of credit conditions, a crash of the housing market and default by major real estate developers, and also assumes a drop in confidence by domestic and international investors.

This is followed by cutbacks in fixed investment and consumption, a slowing of real exports of goods and services, and significant erosion in domestic demand, causing China to experience deflation in 2015. Rather than holding near 7.5 per cent as expected in the IHS central case forecast for the Chinese economy, China’s real GDP growth downshifts to 6.6 per cent this year and 4.8 per cent in 2015 in the hard landing scenario, before gradually reviving.

While the impacts by country and region vary significantly, the scenario developed using a new, state-of-the-art IHS “Global Link” model of the world economy, has a one in three probability of occurring.

About the IHS Global Link Model

The IHS “Global Link” model is the most comprehensive global macroeconomic model commercially available. It covers 68 countries - 95 per cent of global GDP - that are linked with financial flows, trade flows and key commodity prices to give a complete view of the direction of economy. The model incorporates macroeconomic indicators and key sectoral and commodity price data from IHS practices specializing in trade, energy, commodities, consumer markets and risk.

IHS Forum Singapore 10-12 June: Complimentary press passes

The IHS China hard landing scenario will be a topic for discussion at the IHS Forum Singapore on 10-12 June 2014.

Members of the press can now register for a complimentary pass to the IHS Forum in Singapore, held at the Swissôtel The Stamford, 2 Stamford Road, Singapore. To register, please send an email with your name, title and outlet details to [email protected].

A full agenda and additional information can be found: http://ihsglobalevents.com/forum/singapore2014/

A media work room and TV floor space will be provided as well as access to key speakers such as IHS Asia Pacific Economist Rajiv Biswas other IHS experts.

About IHS (www.ihs.com)

IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs more than 8,000 people in 31 countries around the world.

IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. © 2014 IHS Inc. All rights reserved.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
SYS-CON Events announced today that Synametrics Technologies will exhibit at SYS-CON's 22nd International Cloud Expo®, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Synametrics Technologies is a privately held company based in Plainsboro, New Jersey that has been providing solutions for the developer community since 1997. Based on the success of its initial product offerings such as WinSQL, Xeams, SynaMan and Syncrify, Synametrics continues to create and hone inn...
"We started a Master of Science in business analytics - that's the hot topic. We serve the business community around San Francisco so we educate the working professionals and this is where they all want to be," explained Judy Lee, Associate Professor and Department Chair at Golden Gate University, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
DevOps promotes continuous improvement through a culture of collaboration. But in real terms, how do you: Integrate activities across diverse teams and services? Make objective decisions with system-wide visibility? Use feedback loops to enable learning and improvement? With technology insights and real-world examples, in his general session at @DevOpsSummit, at 21st Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, explored how leading organizations use data-driven DevOps to close th...
"I focus on what we are calling CAST Highlight, which is our SaaS application portfolio analysis tool. It is an extremely lightweight tool that can integrate with pretty much any build process right now," explained Andrew Siegmund, Application Migration Specialist for CAST, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"Evatronix provides design services to companies that need to integrate the IoT technology in their products but they don't necessarily have the expertise, knowledge and design team to do so," explained Adam Morawiec, VP of Business Development at Evatronix, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
The 22nd International Cloud Expo | 1st DXWorld Expo has announced that its Call for Papers is open. Cloud Expo | DXWorld Expo, to be held June 5-7, 2018, at the Javits Center in New York, NY, brings together Cloud Computing, Digital Transformation, Big Data, Internet of Things, DevOps, Machine Learning and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding busin...
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
There is a huge demand for responsive, real-time mobile and web experiences, but current architectural patterns do not easily accommodate applications that respond to events in real time. Common solutions using message queues or HTTP long-polling quickly lead to resiliency, scalability and development velocity challenges. In his session at 21st Cloud Expo, Ryland Degnan, a Senior Software Engineer on the Netflix Edge Platform team, will discuss how by leveraging a reactive stream-based protocol,...
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
"Digital transformation - what we knew about it in the past has been redefined. Automation is going to play such a huge role in that because the culture, the technology, and the business operations are being shifted now," stated Brian Boeggeman, VP of Alliances & Partnerships at Ayehu, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Nordstrom is transforming the way that they do business and the cloud is the key to enabling speed and hyper personalized customer experiences. In his session at 21st Cloud Expo, Ken Schow, VP of Engineering at Nordstrom, discussed some of the key learnings and common pitfalls of large enterprises moving to the cloud. This includes strategies around choosing a cloud provider(s), architecture, and lessons learned. In addition, he covered some of the best practices for structured team migration an...
The dynamic nature of the cloud means that change is a constant when it comes to modern cloud-based infrastructure. Delivering modern applications to end users, therefore, is a constantly shifting challenge. Delivery automation helps IT Ops teams ensure that apps are providing an optimal end user experience over hybrid-cloud and multi-cloud environments, no matter what the current state of the infrastructure is. To employ a delivery automation strategy that reflects your business rules, making r...
You know you need the cloud, but you're hesitant to simply dump everything at Amazon since you know that not all workloads are suitable for cloud. You know that you want the kind of ease of use and scalability that you get with public cloud, but your applications are architected in a way that makes the public cloud a non-starter. You're looking at private cloud solutions based on hyperconverged infrastructure, but you're concerned with the limits inherent in those technologies. What do you do?
As many know, the first generation of Cloud Management Platform (CMP) solutions were designed for managing virtual infrastructure (IaaS) and traditional applications. But that's no longer enough to satisfy evolving and complex business requirements. In his session at 21st Cloud Expo, Scott Davis, Embotics CTO, explored how next-generation CMPs ensure organizations can manage cloud-native and microservice-based application architectures, while also facilitating agile DevOps methodology. He expla...
In a recent survey, Sumo Logic surveyed 1,500 customers who employ cloud services such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). According to the survey, a quarter of the respondents have already deployed Docker containers and nearly as many (23 percent) are employing the AWS Lambda serverless computing framework. It’s clear: serverless is here to stay. The adoption does come with some needed changes, within both application development and operations. Tha...