Malaysia to Reap Indirect Gains from Chinaโs Economic Stimulus Measures, Say Economists
Malaysia is poised to gain indirect benefits from Chinaโs recent economic stimulus measures, which include interest rate cuts and property market support initiatives. Economists suggest that these moves could drive demand for Malaysian goods and services, while increasing disposable income for Chinese consumers to travel, potentially boosting tourism revenue for Malaysia.
Boost to Exports and Tourism
According to Doris Liew, an economist and assistant research manager at IDEAS Malaysia, the measures introduced in Chinaโsuch as reduced mortgage rates and lower downpayment requirementsโcould free up funds for consumers to spend on other sectors, including food products and travel. She noted that tourists from China accounted for 1.44 million arrivals to Malaysia between January and June 2024, making China one of the top five sources of tourists.
“This could potentially boost demand for Malaysian exports, particularly in sectors like food products, and enhance tourism revenue as more Chinese tourists visit Malaysia,” said Liew.
However, she pointed out that the immediate impact on Malaysia might be muted due to underlying economic challenges in China, such as high unemployment rates, particularly among young people. “Consumers may remain cautious about spending, even with these new measures, due to concerns about future financial stability,” she added.
China’s Broader Economic Challenges
Liew highlighted that Chinaโs economic weaknesses, including its sluggish property market and high unemployment, may dampen the effectiveness of the stimulus measures. While the People’s Bank of China (PBoC) has taken steps to inject liquidity into the stock market and lower the reserve requirement ratio for major banks, these measures may not have an immediate effect on boosting business and consumer sentiment.
“The stimulus measures could provide a temporary lift to stock prices, but they donโt address the deeper economic issues that are contributing to the slowdown,” Liew explained.
The PBoC has cut the reserve requirement ratio for major banks by 50 basis points, from 10% to 9.5%, injecting around 1 trillion yuan in long-term liquidity. In addition, the one-year medium-term lending facility rate was reduced by 30 basis points to 2.0%.
Impact on Malaysiaโs Key Sectors
Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, echoed Liewโs sentiments, stating that Chinaโs demand remains crucial for driving global growth. With China being a major trading partner for Malaysia, the recovery in Chinaโs economy would benefit key sectors such as tourism, manufacturing, palm oil, and oil and gas.
“Chinaโs economic recovery would be positive for Malaysia, particularly in sectors that rely on Chinese demand. However, the full impact will take time to materialise, especially given the structural issues in Chinaโs real estate market,” said Dr. Afzanizam.
He noted that a significant portion of Chinese citizens’ wealth is tied up in the property sector, and the sharp decline in house prices could negatively impact consumer confidence and spending. “Chinaโs shift towards a more proactive stance on promoting growth is encouraging, but it will take time for these policies to fully translate into economic recovery,” he added.
Slow Recovery in Trade
Despite the stimulus measures, Malaysiaโs exports to China have faced challenges. Total export value to China fell by 2.2% to RM120.98 billion for the January to August period in 2024. Economists believe that while the long-term outlook is positive, a full recovery will depend on the effectiveness of Chinaโs economic policies and how they address domestic issues like unemployment and a weakened real estate market.
In summary, while China’s economic stimulus is likely to have positive effects on Malaysiaโs exports and tourism, the immediate benefits may be limited. Both countries will need to navigate broader economic challenges to fully capitalise on these opportunities.
