KUALA LUMPUR, Aug 8 — A strong Malaysia-China economic relationship is expected to help the country face and overcome the adverse effects of a recession in the United States, said Capital Dynamics Asset Management Sdn Bhd.
Its managing director Tan Teng Boo said China is set to introduce aggressive policies to shore up its economy on the back of the latest developments in the United States, helping cushion the impacts of a possible global recession.
He believes Malaysia’s economy will grow relatively better than other countries due to its links with China.
Tan opined that Bursa Malaysia’s FBM KLCI would be able to end the year at the 1,600 level, and the ringgit between 4.4 to 4.5, as United States recession risks are set to induce monetary policy change in the world’s largest economy.
“China has always been an important country to the world and Malaysia, not just for businesses and investments but also for the nation’s economy and foreign policies,” he told reporters during a media conference today.
He described the United States recession as potentially unprecedented and very much different from previous crises, with the United States government having limited policy space, and may cut its interest rates significantly starting this year.
“I will not be surprised if the United States cuts interest rates to near zero again,” he highlighted.
Tan said with a 2024 budget deficit estimated at 7 per cent of gross domestic product, the United States has limited means to launch fiscal stimulus to boost its economy.
He opined that Bank Negara Malaysia may retain its overnight policy rate at the current 3 per cent to ensure the monetary policy remains conducive to sustainable economic growth, amid a narrow rate differential should the United States start cutting interest rates this year.
Tan said China is in an excellent position to make use of fiscal measures to support the economy, and it has plenty of room to loosen its monetary policy.
He added that with the decoupling already ongoing with the United States, the resilient Chinese economy will be able to safely sail through another United States-led financial crisis, just like in 2008 and 2009.
Tan said China saved the global economy in 2009 with its massive fiscal stimulus and again in 2022 to 2023 from a cost of living crisis, by not taking a fiscal bazooka stimulus.
“We may see China save the global economy for the third time,” he said.
China has been Malaysia’s largest trading partner since 2009, making up 14 per cent of exports.
Tourist arrivals from China in Malaysia reached nearly 1.2 million in five months of 2024, a 200 per cent increase in the same period last year.
— Bernama
