CHINA’S slowing economic growth is denting demand for goods and natural resources from Southeast Asia which, in turn, is hitting demand for Chinese exports in the ASEAN region, the biggest market for China outside the United States and Europe.

    This loop effect has dimmed prospects for a second-half recovery across Southeast Asia, with currencies at multi-year lows and depressed stock markets squeezing income and investment. It also complicates China’s efforts to revive growth in its economy, the world’s second largest.

    The region’s exports have dragged as Chinese demand for Indonesian coal, Malaysian electronics and Thai auto parts has slumped, with China heading for its weakest growth since 1990.

    The 10 economies in the Association of South East Asian Nations (ASEAN) took nearly US$160 billion of China’s exports in January-July, according to Chinese trade data — around the same as Japan, South Korea and Taiwan combined.

    Sharp falls in stock markets and capital flight from Southeast Asia are further battering confidence and pushing up funding costs, hobbling growth in a region where recent expansion has been fuelled by cheap debt.

    “Sentiment was already very fragile in Southeast Asia going into the China turmoil,” said Fred Neumann at HSBC bank. “Global financial volatility and higher funding costs are exerting a bigger drag on growth than many people had anticipated.”

    The Philippines was the bright spot, with annual growth picking up to 5.6 percent in the second quarter from 5 percent in the first three months. But growth slowed across the region’s four other main economies.

    Capital Economics, a consultancy, calculated that annual growth among Southeast Asia’s five main economies slowed to 4.3 percent in the second quarter from 4.4 percent in the first.

    “It’s the weakest since Q3 of last year, which doesn’t sound that bad, but Thailand’s growth was still being dragged down by the political crisis back then,” said economist Dan Martin.

    (SD-Agencies)