THE recent coronavirus outbreak in China has triggered a series of drastic measures by the Chinese government either to halt or slow down the spread of the virus.
As the factories grind to a halt, we, in Malaysia, should be very worried about how this crisis will impact out wallets.
China is both our main import and export partner as 16% of all our exports and 19% of all our imports are to and from China. It is our largest trading partner.
Our economy is intrinsically tied to China’s.
In 2005, we depegged the ringgit from the old fixed exchange rate within 24 hours of China doing the same. Anything that affects China, affects us
Many of our national assets are now in China’s hands, such as Proton; while some others remain in our hands but run on Chinese money, such as the rail projects.
Back in 2003, when the SARS outbreak ravaged China, the country was only Malaysia’s fourth largest trading partner, with Malaysian exports to China worth a mere RM25.8bil or 6.5% of total exports.
However, the SARS outbreak even with its relatively short lifespan of 30 months, managed to trim about 0.15% of Malaysia’s GDP in 2003. By 2019, China had become our largest trading partner, and Malaysian exports to China are valued at RM138.9bil or 13.9% of total exports.
Alliance Bank Malaysia chief economist Manokaran Mottain expects a dramatic 0.2% to 0.3% cut in our GDP as a result of the outbreak.
Finally, Malaysia is a vital member of the five Asian nations that make up the global supply chain (South Korea, Singapore, Malaysia, the Philippines and Vietnam), which are highly dependent on China.
Over the past two decades, change in trade composition between Malaysia and China has resulted in a premature deindustrialisation on Malaysia’s part, with China providing cheap imports for goods we used to make ourselves. With that link gone, we may be facing a serious problem of shortages.
The fact that China is also Malaysia’s largest investor makes the threat ever more real.
It is not well-advised and even short-sighted for the Economic Affairs Minister Datuk Seri Mohamed Azmin Ali to say that the 2019 novel coronavirus outbreak would not have any implications on Malaysia’s economy yet; nor for Primary Industries Minister Teresa Kok to claim the impact of the virus would only be temporary.
It remains unknown as to how long it would take before the virus is contained or eradicated to safe levels, allowing unrestricted travel to resume. As it is, the effects are being felt already, with the most conspicuous hit being the tourism industry.
With the government taking on such a lax attitude, many important decision-makers may be lulled into a false sense of security.
While blind public panic is not desired, we must also begin formulating a contingency plan for a partial or complete collapse of the Chinese economy.
Datuk Dr Mah Hang Soon
MCA deputy president