China slowdown casts a long shadow on Singapore exports

Trade is too dependent on the Mainland.

China’s slowing economy casts a long shadow on Singapore’s export-intensive economy, a report by Deutsche Bank revealed.

Although China’s headline growth is still at a robust 7%, Deutsche Bank chief economist Taimur Baig noted that underlying indicators show that China’s growth is well below its 20-year trend.

This spells trouble for export-oriented Asian countries like Singapore, particularly as economic dependence on China has intensified over the past few years.

“A regression of Singapore’s exports to real GDP growth in China, Eurozone, and the US, run with data from 1996-2006, show an overwhelming dependence on the US economic cycle, with estimates on China and EU failing to be statistically significant. But the when the sample is extended through 2014, the regression shows China’s growth becoming a significant determinant of Singapore’s export demand (both including and excluding oil),” Baig said.

“Since China is presently growing 2.5 percentage points below its long term trend, the regression result would suggest that Singapore’s exports face a 6% downside. Strikingly, for Hong Kong, Indonesia, and Singapore, a 1% reduction in Chinese growth means 1% or higher downside to their respective growth outlook,” the report added.