WSJ: Malaysia needs China’s help to weather euro storm

The Malaysian Insider
Jun 20, 2012

KUALA LUMPUR, June 20 — Trade-dependent Asian countries including Malaysia will take a major hit if the euro zone economy collapses and will require China’s aid to hobble along, according to the Wall Street Journal (WSJ).

The newspaper highlighted the point that Malaysia has bank loans from Europe equal to 20 per cent of its gross domestic product (GDP), which it said was high for the region, and would be more troubled compared to financial hubs Hong Kong and Singapore, both of which have huge “rainy-day funds” to keep homes and businesses above water.

While China, the world’s biggest economy after the US, would be able to withstand the global slump due to its closed financial system, WSJ said Malaysia’s growth would be lessened.

“If China doesn’t open the stimulus floodgates, that would mean less of a boost for its neighbours, including commodity exporters such as Australia and Malaysia,” the paper said.

China is currently Malaysia biggest trade partner.

Malaysian rubber exports to China, used primarily to make tyres and gloves, totalled 43.2 per cent last year, significantly higher than its 3.6 per cent exported to the US or to the European Union (25.2 per cent).

Malaysia also exports 21.9 per cent of its palm oil to the Asian giant, compared with 5.7 per cent to the US.

Malaysia has reported a 4.7 per cent GDP growth for the first three months of the year, a third consecutive quarterly drop since it posted a 7.2 per cent increase in the second quarter of last year.

The international business paper reported that Asian countries were generally in better shape than in the West to deal with interest-rate cuts and government spending as they have learnt to weather a similar economic crisis in 2008.

But Asian economies stood at varying degrees of preparedness in dealing with a euro zone meltdown, with India, Vietnam and Japan likely to be among the worst hit.

Currencies would drop, shipping lanes would empty, and consumer and business loans would dry up, slowing down economies even further, the paper said.

WSJ predicted that such a scenario is still possible if Greece fails to live up to its commitment and quits the euro, or if Mediterranean neighbours Spain and Italy have to be bailed out, it said in its analysis titled “How Asia will fare if Europe cracks”, published yesterday.

“As we saw with Lehman (Brothers), when you get a seizure in the global financial system, nobody can hide from that in the short run,” the paper quoted Richard Jerram, the chief economist at the Bank of Singapore, as saying.

But he was reported saying that Asia is “well-positioned” to survive the Euro-crisis.

“A moderate recession in Europe doesn’t pose serious hazards here,” WSJ quoted Jerram as adding.

  1. #1 by Godfather on Wednesday, 20 June 2012 - 6:35 pm

    What good would “rainy day” funds be to BN if it were to be kicked out at the next GE ? They might as well spend all they can to buy the votes and to recycle the cash for campaign contributions.

  2. #2 by monsterball on Wednesday, 20 June 2012 - 8:53 pm

    Soon they will need help from Japan and if UMNO b continues to govern….we need to send Malaysian maids overseas to work and help their families.
    Mahathir is still blaming this and that but never ever admit he encouraged corruptions and stole 100 billions.
    His UMNO b must be voted out or Malaysians live happily like Maxicans….and all depend on UMNO b like beggars.

  3. #3 by Winston on Wednesday, 20 June 2012 - 8:54 pm

    Nothing will do.
    Malaysians have for five over decades put a rat into their rice storage bin.

  4. #4 by negarawan on Wednesday, 20 June 2012 - 10:54 pm

    Under UMNO, there is no hope. UMNO is increasing the country’s debt to unsustainable levels while robbing the country’s wealth for their personal gain in Swiss bank account, and some say Kazakstan.

  5. #5 by dagen wanna "ABU" on Thursday, 21 June 2012 - 8:01 am

    What fools. Obviously wsj knew nothing about umno’s ketuanan status. How dare wsj say that malaysia needs china! Ask cintanegara. Hehas the biggest book on economy in the universe – The Prinsip2 Ekonomi Pokok Rmbutan.

    Hello wsj, listen. WE ARE ON COURSE TO DOUBLING OUR INCOME IN 2020. My god. Ibrahim bin perkasa and you too the hairy monkey. Pegi protest kat wsj hq. This is too much.

  6. #6 by yhsiew on Thursday, 21 June 2012 - 9:58 am

    Does a government which indulges in profligate extravagant spending deserve help from China?

  7. #7 by waterfrontcoolie on Friday, 22 June 2012 - 7:57 am

    We have created the illusion for ourselves for so long, certainly the Pride of Ketuanan will not allow UMNO to ask for anything in the open. They are not really concerned with the trade as long as Petronas oozes. The ‘middle and educated; Malays must wake up and play their decisive role in the forthcoming GE!

  8. #8 by TheWrathOfGrapes on Friday, 22 June 2012 - 9:36 am

    In Monsoon-prone and sunny Malaysia, it has been raining every other day. UMNO has been dipping into the umbrella fund all this while…. whether it is raining or it is too hot under the sun….

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