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UOB is committed to building lasting relationships with our customers, through product and
market expertise, and our promise to always do what is right.
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Credit RatingsMalaysia Indonesia Thailand China
Long Term RatingAAA
(RAM)AAA (Fitch)
AAA (Fitch)
Baa1
(Moody’s)
A+ (Fitch)
AAA
(CCXI)
Outlook Stable Stable Stable Stable
Short Term
RatingP1 (RAM) F1+ (Fitch) F1+ (Fitch) F1 (Fitch)
• RAM = Rating Agency Malaysia Berhad
Updated as of May 2019
Corporate Profile
Honorable
We act prudently to fuel our customers’
success. We maintain the highest
professional and moral standards in all
our dealings – with our customers and
with each other.
Enterprising
We were built with an enterprising
spirit. We demonstrate this today
through thought leadership, keen
insight and a forward-looking
mindset.
United
We work as a team. Every one of us
is united to reach individual and
corporate goals through cooperation,
mutual respect and loyalty.
Committed
We are committed to performance.
We are accountable for ensuring
that UOB is a trusted source of
stability, security and strength.
Our Values
• CCXI (China Chengxin Int’l Credit Rating
Co)
2
Leading Bank in Asia
UOB has understanding of Asian markets, corporate culture and business mindsets, which is matched by few. Our strong foothold inSingapore, Malaysia, Indonesia, Thailand and China is well-placed to create greater access and growth in this region, for our customers.
JapanIncorporated in 1972
1 Branch
PhilippinesIncorporated in 1999
1 Branch
ChinaIncorporated in 2007
12 Branches & 4 Sub-branches
TaiwanIncorporated in 1995
1 Branch
Hong KongIncorporated in 1995
4 Branches
VietnamIncorporated in 1995
2 Branch
Received In-principle foreign-owned
subsidiary bank license in 2017; Officially a
foreign-owned subsidiary as of 2 July 2018.
ThailandIncorporated in 2005
152 Branches
MyanmarIncorporated in 2015
1 BranchIndiaIncorporated in 2009
1 Branch
MalaysiaIncorporated in 1993
45 Branches
HQ SingaporeIncorporated in 1935
43 Branches
IndonesiaIncorporated in 1956
178 Branches
South KoreaIncorporated in 1983 as
representative office
1 Branch
BruneiIncorporated in 1974
1 Branch
Branch Banking in ASEAN (as of May 2019)
Branches Singapore Malaysia Thailand Indonesia Total
UOB 43 45 152 178 418
DBS 28 0 0 37 65
OCBC 42 46 0 336 424
HSBC 12 62 1 62 137
SCB 12 32 1 99 144
CITI 9 11 2 10 32
BranchBranch with Transaction Banking presence
3
Nine megatrends for 2019 & beyond
4Source: Various sources, UOB analysis
Rise of digital and data10 years after the iPhone was launched
The Fourth Industrial Revolution
Aggregation of static, flow and behaviour data
Rise in anti-globalisation sentiments Disruption of trade flows (US-China tariffs)
Nationalism vs Globalisation
Trade diversion, product substitution and reshoring
Human disengagementEvolution of ways we communicate-
Hi-Tech, Hi-Touch and Hi-Trust
AgileLearn, re-learn, unlearn
Discomfort is new norm; need to challenge
existing norms
Banking – regulation to
digitalisation10 years after Lehman -
shifting towards the Asian banking model
Next 10 years banks will see on their
digital/data journey
Blurring boundaries Convergence of industries
Increasing ecosystem collaboration
Inflation & dis-inflationInflation of asset prices and dis-inflation
of goods and services
Empowerment of the EastRise of China and ASEAN
Rise of the middle-income consumer
Belt Road Initiative
Made in China 2025
Growing importance
of ESGEnvironment, Social and
Governance
US-China trade balance
19 22 28 34 41 55 65 71 70 92 104 111 122 124 116 116 130 110102 134 163211
260306
340 356310
383417 444 459 486 504 487
526493
-83-111 -135
-176-219
-251 -275 -285-240
-291 -313 -334 -337-363
-388 -372 -396 -382-400
-300
-200
-100
0
100
200
300
400
500
600
700
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
US$’ bn
Exports to China Imports from China Balance
China
entered
WTO in
2001
Trade balance
Since 2001, the US
has been running
a trade deficit with
China. The
in 2017.
5Source: TradeMap
deficit rose
to almost
US$400bn
Explaining the trade imbalanceResult of successful outsourcing policy over last 30 years
US-China Trade
Tension
10-25% tariffs
implemented
to reduce trade
imbalance
20181971 – 72
Improving US-China
relations amid Cold War
President Richard Nixon
became the first President
to step foot into China
2008
China becomes
largest US
foreign creditor
China bought
about $300 bn
US treasuries
2000 – 01
Normalising trade relations
• In 2000, US-China
Relations Act of 2000
signed
• In 2001, China joins the
World Trade Organisation
2015
‘Made in China
2025’ announced
Movement
towards skilled
labour
1990s
6
Shift of US companies
into China
Companies such as Microsoft
and Motorola shifting
production to China due to
lower costs of production
Source: Council of Foreign Relations Organisation
312
218 185
U.S. China U.K. U.S. China India
2,220
606
366
U.S. Germany China
229
111
36
China India U.K.
21,340
14,200
2,970
China’s proportion of global GDP
Biggest economies in the World relative to China in GDP (USD bn)
Sleeping giant awakensThe West dominated the world over the last two centuries
33% 11% 4% 16%
1820 19621900 20187
Since withdrawing from the TPP, US is left with only 21 free trading partners
Canada
Mexico
Australia
South KoreaJordan
Israel
Morocco
Oman
Chile
Peru
Colombia
Bahrain
US
Chile FTA 2014
Peru TPA 2009
US- Colombia TPA 2012CAFTA-DR (Dominican Republic-
Central America FTA)
North American FTA 1989
Morocco FTA 2006
Jordan FTA 2010
Israel FTA 2010
Bahrain FTA 2006
Oman FTA 2009
KORUS FTA 2012
Singapore FTA 2004
Australian FTA 2005
Vietnam
Vietnam BTA 2001
Singapore
Costa Rica, Dominican Republic, El Salvador,
Guatemala, Honduras, Nicaragua, Panama
FTA : Free Trade Agreement
TPA: Trade Promotion Agreement
BTA: Bilateral Trade Agreement8Source: Newswire
9
US Tariff: Chinese Exports to US
Breakdown of US$250bn Tariff Items (25%)
by Sectors
Breakdown of US$300bn Tariff Items (10%) by Sectors
(1 Sep)*
Source: Trade Map, UOB Analysis. *Tariff on some items have been deferred to 15 Dec 2019.
47
3
14
40
68
100
0 50 100 150
Others
C&I
O&G
CG
TMT
IND
US$bn 34
7
27
90
115
0 50 100 150
Others
C&I
O&G
IND
CG
TMT
US$bn
0
10
Implications of the Trade Tension
The substitution and
replacement of a product
with a different product.
When a country or
company exports a
product at a price that
is lower in the foreign
market than the price
in the domestic market.
Reshoring Product Substitution
Moving the
production and
manufacturing
of goods from one
country to another.
Trade Diversion
DumpingDiverting trade from
one country to another.
11
Chinese Exporters See Trade Dispute Continuing Post-Trump
How long do you expect the US-China trade dispute to continue? (% of respondents)
Source: Financial Times
0
20
40
60
80
100
March April May June
Legend
I don’t know
It won’t end – this is the
permanent state of bilateral
relations
It will continue until Donald
Trump leaves office
It will end within 12 months
It will end within 6 months
Motorcycles and electric motors
Trailers and semi trailers
Spark ignition engines
Motor vehicles + other transport equipment
12
Overview: Industrial Goods Exports from China to US
Parts and access of Motor Vehicles
Parts + access,
nesoi, of indust.
vehicles + tractors
11.8 3.7 2.9
2.9
2.4
2.1
All values in USD bn
Total value: ~USD 100bn
13
Overview: Industrial Goods Exports from US to China
All values in USD bn
Total value: ~USD 37.5bn
Cross country cars and
station wagons, 11.0
Machine parts and tools,
9.1
Non ferrous ores, powders
and concentrates, 8.2
Machinery,
2.7
Wood and related
products, 3.5
Paper and paper related products, 0.8
Batteries
and trans-
formers,
0.6
Coal
and
lignite,
0.4
Textile related products, 0.2
Rubber and related products, 0.1
Air-
craft
s,
0.3
Ferrous products, 0.2
beneficiaries
14
Parts and Accessories of Motor / Industrial Vehicles
(including ignition engines, trailers and semi-trailers)
Trade Diversion Product Substitution Reshoring Dumping
• Chinese companies affected by tariffs while US companies seek alternate sourcing from SEA
• Example: Chongqing Bona Auto Parts Co., Ltd
Chinese manufacturer exporting a full range of car parts to US buyers
Exports fell by 20% after tariffs were implemented
• Example: Foreign Parts Distribution Inc.
US company that mainly imports car parts (steering and suspension) from China
Looking to move sourcing away from China to avoid tariffs
e.g. Thailand, Malaysia, Vietnam
• Some trade is being diverted to Vietnam – Vietnam’s trade with the US grew by 32.3% in 5M19 vs. same period last year
Trade
Diversion
Reshoring
• Example: Chinese Motor Company
Reshoring of Chinese auto parts companies to other parts of ASEAN
Express interest to relocate to Vietnam
• Example: Thai Rubber Company
Will continue to operate their three factories in China but make Vietnam their primary factory to avoid tariff costs and
maintain the company’s global expansion trajectory
Rubber and metal parts suppliers who supply directly to Chinese customers may suffer from reduced sales
15
• Accelerate localisation of US-made cars in China
Example: Ford Motor Co.
To further localise its China operations as part of its efforts to seek a turnaround in the
world’s largest automotive market
Move is expected to accelerate the re-organisation of its business in China
Ford’s premium arm Lincoln will roll out its first China-made model later this year, with
another two models to join the localised lineup by 2021
• Risks on dealerships heavy reliant on US models
Example: Ford Motor Co.’s China business lost
$128 million in the first quarter as sales plunged 36%
Localisation of US-made Cars
Table: Top 4 US-to-China Exporter in 2017
Brand Number of Vehicles Exported
BMW (X5/X6) 106,971
Mercedes 72,198
Ford Motor 45,145
Fiat Chrysler 16,545
Cost of sales rose 11% in 1Q19.
China sales grew the slowest in
history
Bolstering the Changzhou facility at
a total investment of $100 million.
Anticipates $100 mio cost increase from
steel and machinery parts
Decline in US soybean exports affecting
sales
Only 30% are international
sales, not heavily hit by U.S.
export tariffs
BRI opportunities and
competitive price of equipment
may spark more demand
Source: Nikkei Asia, Bloomberg, Financial Times, China Daily
Chinese Heavy Machinery to Replace US Machinery
5
Belt & Road Initiative: SEA Infrastructure Growth Story Drives
the Chinese Machinery Equipment Segment
Top 5 ProjectsEst. Size
(US'B)
MY Refinery and Petrochemicals Complex 27
ID Kayan River Hydropower Project 18
TH Chiang Khong – Ban Phachi Railway Line 12
ID Jakarta-Surabaya High-Speed Railway 12
SG North South Corridor 5
Source: Press Search, UOB analysis, BCG trade database
China's Belt & Road
initiatives
Covering 65 countries, 4.4
billion people and ~40% of
global GDP
Seeks to enhance regional
connectivity by developing
an unblocked network and
distribution infrastructure
between China and Rest of
the World
Regional transportation &
infrastructure network to
facilitate sustainable socio-
economic development in
South East Asia
China-Indochina Peninsula
Economic Corridor
China Pakistan Economic
Corridor (CPEC)
Bangladesh-China-India-
Myanmar Corridor
China-Mongolia-Russia
Economic Corridor
New Eurasian Land
Bridge Economic Corridor
China-Central Asia-
West Asia Corridor
Transportation Construction Energy
# of projects
Size (US'B)
8 3 1
15 8 8
5 2 1
~25B ~37B ~3B
~30B ~2B ~23B
~36B ~1B ~2B
6
Trade flows to Malaysia post tariff
Source: Trademap.org
In 2018, China increased its steel export to Malaysia
while decreased its total export post tariff
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
-
1,000.00
2,000.00
3,000.00
4,000.00
2014 2015 2016 2017 2018
Malaysia import from China(LHS)
China export to world(RHS)
‘000 ‘000
tons
7% 14
%
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
2017
201814%
15%
16%
15%
Flat, Long, Semi and Stainless are categories that
contribute to the export growth
‘000
tons
Trade Friendly Agreements Anti-Dumping Duties
Indonesia • Indonesia-Australia Comprehensive Economic Partnership
Agreement
• Obtained U.S. import tariff exemption for 161 steel
products
• Tariffs on colour-coated steel sheet imports from Vietnam and China
• Indonesian Iron and Steel Industry Association (IISIA) lodged a formal
complaint with the industry ministry over a sudden increase in boron-infused
steel which is exempt from import tariffs
• Extend 11.93% tariff on H and I sections on April 24
Thailand • Obtained U.S. import tariff exemption for steel pipes • Tariffs on hot-rolled coil imported from South Korea and on certain cold
rolled steel from Vietnam
• Extended a safeguard measure for non-alloy and non-coil coated steel
sheets
• Federation of Thai Industries (FTI) is calling on the government to protect
local steel makers
Malaysia • Australia – Malaysia free trade agreement • Tariffs on cold-rolled stainless steel imports from China, South Korea, Taiwan
and Thailand
• Safeguard duties for steel concrete reinforcing bar (rebar) and steel wire rods
& deformed bar in coils for 2017 – 2020
• Anti-dumping duties on HRC from China, Indonesia for 2015 – 2020
Vietnam • Signing of the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP) and the
upcoming signing of the free trade agreement between
Vietnam and the EU
• Tariffs on imported cold-rolled stainless steel products from China,
Indonesia, Malaysia, Taiwan, steel billets and steel bars
• U.S. imposed duties of more than 500% on cold-rolled steel and over 200%
on corrosion-resistant steel made in Vietnam with Chinese origins
China • China's new tax rebate for steel exports has increased
from 0% to 9% and 9% to 13%, depending on the steel
products
• 25% tax on steel exported to U.S.
Steel Protectionism- Rising with more AD measures
Longer term implications for China’s manufacturing
1
2
3
Most companies will keep
their existing production
facilities in China
Low-end manufacturing likely to move out of China due to the rising labour costs:
• Manufacturers were already looking to shift out of China to Southeast Asia due to the rising
labour cost in China. Rising trade tensions will help to accelerate this process.
Low-end
manufacturing likely
to shift out of China
Complex tech supply chains will remain in China in the long-term:
• Companies engaged in the production of goods and supply of services cannot just be picked up
and moved. It takes years to renegotiate contracts and to move physical equipment.
• A shift in the entire supply chain will take at least 5 years and will require sourcing for labour and
training employees.
Higher-end
manufacturing to
remain in China
Major changes not expected in the short-term:
• It is a complicated process for countries to shift facilities outside of China.
• Global brands with diverse production locations will make changes to their production line to avoid
exporting to US from China but will still maintain their existing production facilities in China.
20
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publication. Any opinions, projections and other forward-looking statements regarding future events or performance of, including but not limited to, countries, markets or companies are not
necessarily indicative of, and may differ from actual events or results. The views expressed within this publication are solely those of the author’s and are independent of the actual trading
positions of United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees (“UOB Group”). Views expressed reflect the author’s judgment as at the date of this
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or information in this publication.
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Contacts
Ivan Cheng
Head of Business Insights
21
United Overseas Bank Limited
Company Registration No.: 193500026Z
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UOB Plaza
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Tel: (65) 6221 2121
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MCI (P) 092/04/2018
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