KUALA LUMPUR (May 17): Asian countries continue to rely on exports to generate economic growth with manufacturing-based economies and trans-shipment hubs Singapore and Hong Kong, most reliant on trade, said Moody's Investors Service today.

Moody's managing director for sovereign risk in Asia Marie Diron said, "The region's rising intra-regional trade linkages will increasingly define trade patterns in Asia, while the integration of the region in the global economy also shows in rising foreign direct investment (FDI), especially in manufacturing."

She added that since the global financial crisis (GFC), Asia's exports to the US and EU have remained largely flat as a percentage of GDP, whereas intra-regional trade has grown strongly.

"China is more and more at the center of Asia's trade activity, in part shaping the region's supply chains and increasingly a source of demand for final goods from Asia, especially for consumption goods," said Moody's vice president and senior analyst Joy Rankothge.

He added that the region is vulnerable to escalation of the US and China dispute over trade and technology transfers, as additional US restrictions on Chinese exports, investments and purchase of technology supplies would affect the rest of Asia through supply chains.

Moody's said Asia's electronics sector would be most vulnerable to further US action in the spat, in particular Taiwan, Malaysia and South Korea, given their economies' reliance on exports of these products and components to China.

Major trade hubs Singapore and Hong Kong would likely be affected too.

"Exports account for over 50% of GDP for a quarter of Asia's economies, highlighting their importance in generating economic growth across the region," it said.

Asia-China trade linkages have become more central to Asia's trade as China's merchandise imports from Asia rose more than six-fold from 2010 to 2017.

Asia's (excluding China) exports to the US and EU have largely flatlined since the GFC, Moody's said. However, these economies, "through direct exports and also through intermediate goods exports within Asia, where US and EU will be the ultimate destination for those goods, will continue as important sources of final demand for Asia's exports".

"They also remain key sources of FDI for Asia," it added.