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
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, will discuss how VPaaS enables you to move fast, creating scalable video experiences that reach your...
More and more companies are looking to microservices as an architectural pattern for breaking apart applications into more manageable pieces so that agile teams can deliver new features quicker and more effectively. What this pattern has done more than anything to date is spark organizational transformations, setting the foundation for future application development. In practice, however, there are a number of considerations to make that go beyond simply “build, ship, and run,” which changes ho...
"We have several customers now running private clouds. They're not as large as they should be but it's getting there. The adoption challenge has been pretty simple. Look at the world today of virtualization vs cloud," stated Nara Rajagopalan, CEO of Accelerite, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
SYS-CON Events announced today that China Unicom will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. China United Network Communications Group Co. Ltd ("China Unicom") was officially established in 2009 on the basis of the merger of former China Netcom and former China Unicom. China Unicom mainly operates a full range of telecommunications services including mobile broadband (GSM, WCDMA, LTE F...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life sett...
In his general session at 18th Cloud Expo, Lee Atchison, Principal Cloud Architect and Advocate at New Relic, discussed cloud as a ‘better data center’ and how it adds new capacity (faster) and improves application availability (redundancy). The cloud is a ‘Dynamic Tool for Dynamic Apps’ and resource allocation is an integral part of your application architecture, so use only the resources you need and allocate /de-allocate resources on the fly.
Is your aging software platform suffering from technical debt while the market changes and demands new solutions at a faster clip? It’s a bold move, but you might consider walking away from your core platform and starting fresh. ReadyTalk did exactly that. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, will discuss why and how ReadyTalk diverted from healthy revenue and over a decade of audio conferencing product development to start an innovati...
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
“We're a global managed hosting provider. Our core customer set is a U.S.-based customer that is looking to go global,” explained Adam Rogers, Managing Director at ANEXIA, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management solutions, helping companies worldwide activate their data to drive more value and business insight and to transform moder...
The vision of a connected smart home is becoming reality with the application of integrated wireless technologies in devices and appliances. The use of standardized and TCP/IP networked wireless technologies in line-powered and battery operated sensors and controls has led to the adoption of radios in the 2.4GHz band, including Wi-Fi, BT/BLE and 802.15.4 applied ZigBee and Thread. This is driving the need for robust wireless coexistence for multiple radios to ensure throughput performance and th...
SYS-CON Events announced today that Secure Channels will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. The bedrock of Secure Channels Technology is a uniquely modified and enhanced process based on superencipherment. Superencipherment is the process of encrypting an already encrypted message one or more times, either using the same or a different algorithm.
I’m going to cry tonight, long and hard. I’ll do so as I remember and mourn Jeremy Geelan. I knew Jeremy for almost 20 years, from the time he showed up one day at Cloud Expo’s headquarters in Bergen County, New Jersey, and went to work. The show wasn’t called Cloud Expo then, of course – it was still known as Java Edge, a pioneering event that grabbed developers, architects, and enterprise IT users alike for twice-yearly confabs. Jeremy didn’t have a job there, or even a job offer. He was s...