Moody warns of financial fault lines in APAC as geopolitical tensions rise
18 Jan 2023 03:29pm
The research firm says US-China competition over technological advancement will mean governments will continue to regulate how sensitive technologies, such as semiconductors and renewable energy technology, are transferred and adopted across borders.
Assistant vice-president and analyst Nishad Majmudar said these fault lines - which reflect the formation of new political alliances and the reconfiguration of Asia’s economic, trade and financial relationships - may pressure international companies, investors, and financial institutions to reshape or build redundancy into their operations.
"Economic and financial relationships across APAC could diverge along four fault lines - geopolitical; technology and manufacturing; trade, and financial. Geopolitical fault lines reflect the political and security alliances centered around competition between the US and China,” he said in a statement.
Nishad said these alliances may drive shifts in international business strategies over time and could have credit implications in terms of economic competitiveness, cross-border investment policies, and the development of export markets.
US-China competition over technological advancement will mean governments will continue to regulate how sensitive technologies, such as semiconductors and renewable energy technology, are transferred and adopted across borders.
Closer scrutiny of foreign investments and data localisation efforts could become prevalent, raising regulatory and operational costs for multinational companies.
"Trade fault lines will reflect a regionalisation of trade flows. While APAC trade has flourished under a rules-based international trade order, the inception of major regional trade agreements, and the absence of the US and India from these accords, will increase China's centrality to regional trade.
"Financial fault lines will form as capital and banking flows align with geopolitical norms.
"While the US dollar remains central to international trade, the threat of US sanctions may induce sovereigns, central banks and companies to diversify the currencies in which they raise funds, invest their reserves, or invoice merchandise trade,” he commented. - Bernama
