China trade key to regional recovery, but Asean economies still struggling: Moody's

CHINESE trade demand has jump-started recovery in the Asia-Pacific (APAC), although exports alone will not save South-east Asian economies.

That's according to a report on Wednesday from Moody's economists Steven Cochrane and Sonia Zhu, who called exports to China "a critical lifeline to the APAC region".

Vietnam, Malaysia, Taiwan and Indonesia were named key beneficiaries of the Chinese demand.

In particular, Vietnam and Taiwan - where manufacturing has close links to China - outperformed the region and have rebounded to pre-pandemic levels.

Meanwhile, Singapore posted a 7.9 per cent year-on-year increase in non-oil domestic exports (NODX) to China in January, according to figures on Wednesday. That's even as NODX to China dipped to S$26.4 billion in 2020, from S$28.7 billion in 2019.

China's growing trade demand came as planners targeted export-oriented manufacturers, suppliers and ports in their Covid-19 recovery strategy.

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"This focus on getting the production side of the economy back on track effectively allowed manufacturing to spark China's recovery beginning in the second quarter of last year, and to lift surrounding Asian economies in the second half of 2020 as they eased up on many movement restrictions," the Moody's economists wrote.

Still, the report warned that "this trade alone is not enough to guarantee full economic recovery", especially with markets such as Indonesia, the Philippines and Malaysia struggling to contain coronavirus outbreaks that could affect industry activity.

"Regional trade between China and the rest of APAC also depends upon stable demand for goods from Europe and North America," the economists added.

As such, most of South-east Asia is not expected to resume pre-pandemic output until early-2022. Thailand and the Philippines, which are highly dependent on travel, tourism and hospitality, will be the last to recover, the Moody's report projected.

Even so, longer-term economic challenges in the region include fiscal positions, household and corporate debt, structural changes in supply chains and industry digitalisation, and the loss of employment and income from the Covid-19 downturn.