Taiwan and other small foreign trade-oriented Asian economies might suffer more from a heightening trade dispute between the US and China if a ripple effect spreads, S&P Global Ratings said yesterday.
The trade dispute has the potential to spill into other aspects of ties between the world’s two biggest economies, which is likely to elevate regional geopolitical risk, the ratings agency said in a report.
“[The] impact of the dispute on smaller Asian economies that are dependent on international trade — including Taiwan, Malaysia and [South] Korea — could be more significant than it is for the US and China,” the report said.
“The elevation of cross-strait tension with Taiwan is one possible spillover of the growing trade spat,” S&P Global Ratings credit analyst Kim Eng Tan (陳錦榮) said in the report. “Both China and the US have made unusual naval maneuvers in the seas around Taiwan recently as relations between the governments in Beijing and Taipei grew colder.”
China might also face a setback in deleveraging its highly indebted corporate sector if economic uncertainties rise owing to the trade tension, the ratings agency said.
If economic growth weakens significantly, Beijing might face greater resistance to measures to rein in domestic financial risks, it said.
In addition, a slowing economy could reverse China’s policy tightening and efforts to repair its financial stability could stagnate, the report said.
Nevertheless, the credit ratings for most Asia-Pacific sovereign economies are likely to remain unchanged in the next one to two years, the firm said.
As of June 30, there were 18 sovereign ratings with stable outlooks, two with positive outlooks — Japan and the Philippines — and one with a negative outlook, Australia, it added.
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