How Singapore may suffer big time from China's slowdown

China is Singapore’s second-largest export market.

According to Nomura, the risk of a China slowdown has re-emerged as its new leaders push to reform and rebalance China’s economy.

Nomura’s China Economist Zhang Zhi Wei forecasts China’s GDP will slow from 7.7% in 1Q2013 to 7.2% in 4Q2013. He believes that there is a 30% probability that China’s economy might grow below 7% in 2013. Indeed the latest liquidity crunch in China increases the downside risks to his growth outlook.

Nomura noted that as China is Singapore’s second-largest export market accounting for 11.8% of its NODX, China’s slowdown will have an impact on Singapore’s growth. In addition to direct effects, Singapore’s trade with its regional trading partners could be dampened if they were also affected by a slowdown in China.

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Other areas which could be impacted include the tourism sector, where China tourists account for 14% of total tourist arrivals in 2012. Chinese buyers made up about 5% of property purchasers in 2012.

Companies with direct exposure to China include the property developers Keppel Land, Capitaland and to a lesser extent UOL. DBS Bank has indirect exposure to China via its Hong Kong operations which comprise 8% of its total assets although the group points out that it lends more to HK companies with operations in China rather than to Chineseowned companies.