Quora Answer: How Will China’s Economic Slowdown Affect Singapore?

The following is my answer to a Quora question: “As China faces continued economy slowdown in the near future, as of 2019, how will this affect Singapore?  Is it positive, or negative, for Singapore?” 

Based on foreign trade data, GDP growth and many other indicators, China’s economy is slowing down, and this might continue for the next few months, at least.  The good news is that gradual slowdown is preferable to a hard landing.  I contend that the reason has less to do with the trade war, and more to do with the fact that borrowings are 300% or more of GDP.  These borrowings provide some liquidity to companies, but this level of leverage is not sustainable. 

From a Singapore perspective, we must remember that China accounts for about a third of global growth, and about two-thirds of Asia-Pacific growth.  This means that market sentiment will be negatively affected.  The majority of countries will delay investment due to this market uncertainty, and this will impact the demand for goods and services.  This is one of the reasons Singapore-linked corporations such as Singtel and SIA have been selling bonds.  This prevents capital flight, and keeps funds locked up in the economy, and prevent the currency from losing value. 

Whilst the economy will likely slowdown in tandem to softening demand from China, it does not affect the underlying value of assets.  This would be a good time to consolidate, and hunt for bargains.