Asia electronics sector vulnerable to US-China trade row — Moody’s

Asia’s electronics sector, including that of the Philippines, is expected to bear the brunt of trade tensions between the US and China, a new report by Moody’s Investors Service showed.

In a report, Moody’s said Asia is vulnerable to a further escalation in US-China tensions over trade and technology transfer.

“Additional US restrictions on China would affect the rest of Asia indirectly through regional supply chains. Electronics and the manufacturing sectors have the most exposure to further US actions,” Moody’s said.

In terms of economies, Moody’s identified Taiwan, Malaysia, and South Korea as the most exposed, as well as Hong Kong and Singapore to a lesser extent.

“Economies with high intermediate goods exports, especially high electronic component parts exports to China, are the most exposed to additional US restrictions on Chinese exports, investment and purchases of technology supplies,” Moody’s said.

In its “Evolving trade patterns–Asia: Exports still drive growth, as intra-regional links increasingly defines how Asia trades” report, Moody’s said the Philippines’ exports to the US and China as percentage of gross domestic product in 2017 were lower compared to other countries in Asia at 2.9 percent and 2.2 percent, respectively.

However, the country’s electronic parts exports as percentage of total exports to China in 2016 was among the region’s largest at 41.1 percent.

“China is more and more at the center of Asia’s trade activity, in part shaping the region’s supply chains and increasingly a source of demand for final goods from Asia, especially for consumption goods,” said Joy Rankothge, Moody’s vice president and senior analyst.

“Accordingly, the region is vulnerable to a further escalation in tensions between the US and China over trade and technology transfers. Additional US restrictions on Chinese exports, investment and purchases of technology supplies would have an impact the rest of Asia through supply chains,” Rankothge added.

The country’s electronics sector had earlier aired concern about the possible impact to the industry of a looming trade war between the US and China.

Data from the Semiconductors and Electronics Industry of the Philippines Inc. indicated that China and the US each accounted for more than 12 percent market share of the $32.7 billion all-time high export performance last year.