Impact of Slowdown to Asia Essay
The slowdown in China’s economy will ultimately impact Malaysia’s exports demand. China is Malaysia’s second largest export market, accounting for 15 percent of its export economy (Springfield, n.d.), Malaysia-China two-way trade topped $100 billion in 2014 (Kurlantzick, 2015). Both goods and services industries are affected in line with slowdown in China’s domestic demand, namely key export products such as …show more content…
The plunging price of oil reduced import price for China thus increased its current account surpluses. It also reduced the costs of industrial production and residential consumption. Meanwhile, negative implications would be deflation which led to excess capacities of energy-related industrial sectors. Besides, investment in industries particularly oil and gas production falls due to low oil prices, contracting China’s GDP growth (Wu, 2015).
Lower China economic growth contributes to lower demand for natural resources that has been supporting the price of oil (Stewart, 2015). As a major exporter of oil and gas, the low global oil price has also directly affected Malaysia. Malaysia’s exports down by 3.7 percent, year-on-year, with falling demand for crude oil and palm oil from China (Symonds, 2015).
As had seen in 2013, China’s slowdown has caused a lot of capital outflow from Malaysia due to oil prices, and this had depreciated Ringgit’s exchange rate (Philip, 2015). The recent RMB devaluation had caused RM to depreciate against USD by nearly 20% as of August 2015 due to falling oil and commodity prices (Foreign & Commonwealth Office, 2015).
6. Slump in commodities price
The fall in commodity prices had plunged China’s trade, production and demand. This contributes to a crisis of emerging market economies, where most are heavily dependent on commodity exports to China. Thus, the slump in commodities price had caused