KUALA LUMPUR: Malaysia will likely gain indirect benefit from China's recent stimulus measures, which includes interest rate cuts and property market support measures, as a stronger economy spurs demand for goods and services and more disposable income for travel, said economists.
IDEAS Malaysia economist and assistant research manager Doris Liew said that the property market support measures in China, such as reduced mortgage rates and downpayment requirements, could free up funds for consumers to spend on other goods and services.
"This could potentially boost demand for Malaysian exports, including food products, and increase tourism revenue," she told Business Times.
Tourists from China were among top five tourist arrivals for Malaysia for the January to June period, bringing in 1.44 million tourists.
"While China's economic stimulus could have some positive implications for Malaysia, the immediate impact is likely to be muted.
"A broader and more comprehensive approach is needed in China to address both domestic and external factors affecting trade and investment," she said.
Liew explained however that the overall weakness of the Chinese economy, coupled with high unemployment rates, particularly among young people, may limit the effectiveness of the stimulus.
She said that consumers may remain cautious about spending due to uncertainty about their future financial stability.
She added that People's Bank of China (PBoC) efforts to inject liquidity into the stock market through refinancing and collateralisation measures are unlikely to significantly boost business and consumer sentiment in the short term.
While these actions can provide a temporary lift to stock prices, she said they do not address the underlying economic issues that are driving the slowdown.
The PBoC has trimmed the reserve requirement ratio for major banks by 50 basis points from 10 per cent to 9.5 per cent, providing about 1 trillion yuan in long-term liquidity.
Meanwhile, the one-year medium-term lending facility was cut by 30 basis points to 2.0 per cent.
For the property market, the central bank will slash the downpayments for the second home purchases from 25 per cent to 15 per cent and existing mortgage rates for around 50 basis points.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Business Times China's demand is likely to remain instrumental in driving global growth.
"Given that China is also a major trading partner for Malaysia, the recovery in China's economy would be positive for Malaysia. This includes sectors such as tourism, manufacturing, palm oil, oil and gas," he said.
However, he said the impact to Malaysia will take sometime due to the weaknesses in the country's real estate markets as bulk of China's citizen wealth resided in the property sector.
Therefore, he said the sharp fall in house prices would have serious impact to China's wealth, which in turn, have an adverse impact to consumption and investment.
"So what we are seeing now is the China's authority shift in their stand to become more proactive at promoting growth whereby such act should be positive for confidence building among the businesses, investors and households. "There will be time lag for policy move to be transmitted into the economy but eventually, it should be able to turnaround the growth momentum," he added.
Total exports value to China fell 2.2 per cent to RM120.98 billion for the January to August period this year.