Emerging economies in Asia have been fairly sheltered from Eurozone contagion, but are highly integrated with one another. And with some predicting a hard landing for China, economies like those of Hong Kong and Mongolia that thrived during China’s boom cycles are most at risk of contagion during the bad, according to Maplecroft’s Emerging Powers Integration report.
Hong Kong has been chosen as the destination for China’s offshore yuan market and is also heavily dependent on trade with the country. China is Mongolia’s biggest trading partner. In the past two decades, Mongolia has derived 51% of its foreign investment from China. Moreover its exports to China accounted for 69% of its GDP in 2009.
But Mongolia is actively trying to cut its exposure to China. As the Tavan Tolgoi coal mine case points out, the Mongolian government voted to build a railroad to Russia over China even though the latter was only 200 km away.
The index considers trade data and foreign direct investment data to determine integration risk. This map from Maplecroft shows the 20 countries most at risk of contagion from China.