How China's economic slowdown will affect Singapore

The Lion City is very susceptible.

According to DBS, the industries for externally oriented services will also be affected. Trade dependent industries such as the wholesale trade and transportation services will likely be weighed down by the moderation in intra-regional trade. 

Even the real estate segment may feel the pinch as Chinese buyers account for 5.2% of the total number of buyers in the property market. However, the tourism industry will likely bear the brunt of a China slowdown amongst the services cluster.

Here's more from DBS:

China is the second largest tourism market for Singapore and it is also one of the fastest growing. Total tourist arrivals from China registered 1.6 million in 2011 and it has been growing at a rapid pace of 14.4% per annum compared to the industry-wide average of 5.9% over the last decade.

If Chinese tourist arrivals start to decline, the effect will be felt across the entire tourism value chain from the hotels to retail outlets, casinos as well as the F&B business.

Singapore GDP growth will slow no doubt if China decides to aim for lower growth. Yet, inflation will spike again from April next year when the COE effects lapses. Underlying cost pressure within the economy remains high.

With inflation risk lingering, room for monetary policy maneuvering is limited despite the slower growth. Juxtaposed against the belief of policymakers that a continued appreciation in the Sing dollar will complement the existing restructuring of the economy, the Monetary Authority of Singapore is unlikely to deviate from the current exchange rate policy stance in the near future.

China has presented both enormous opportunities as well as challenges for the island state over the last few decades. While Singapore has benefited greatly from a strategy of engagement with this East Asian dragon over the years, it has also made itself susceptible to the economic cycle within China. Any change in China’s economic policy will impact Singapore.