Singapore face two major challenges in 2017 – with China and tightening capital outflow

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Large economies tightening their capital outflow should be a major concern for Singapore

By: Kumar Raj

According to Maybank KimgEng two immediate external risks await Singapore in 2017, the chief of which is countries in the region tightening their capital outflow to financial hubs like Singapore.

The research firm said that “impact on market liquidity from rising level of capital control in neighboring countries.”

Adding: “Central banks elsewhere in the region are taking measures to restrict capital flight which could have a bearing in the medium term for Singapore housing sales to foreigners, tourism and direct investment.”

Singapore also faces uncertain geopolitical risks due to its cooling-off in relations with China. The Hong Kong Customs and Excise Department has seized several of Singapore’s armoured vehicles which were enroute to Singapore after a military exercise in Taiwan. The Chinese government has lodged representation with its Singapore counterpart to respect the ‘One China police’.

Maybank KimEng which noted the “strong reaction from China’s Foreign Ministry opposing any form of official exchange or cooperation with Taiwan and urging Singapore to stick to Beijing’s ‘One China’ principle,” said:

“Singapore has historically maintained a neutral balancing act between trade blocs often at odds with each other. But with recent moves by other ASEAN countries trying to strengthen China ties in the face of a protectionist US, Singapore likely faces the tricky prospect of needing to reevaluate its relationship along ‘One China’ lines or possibly risk not making the most of regional growth opportunity. China has been amongst one of the largest sources of FDI as well and amongst one of the largest exports destinations for Singapore in recent years.”

– See more at: http://sbr.com.sg/economy/news/here-are-2-external-risks-awaiting-singapore-in-2017#sthash.9pNgsRMq.dpuf