Nishad Majmudar, assistant vice-president at Moody’s Investors Service, said such tensions, against the backdrop of increased competition between China and the US and its regional allies, would create fault lines that could carry long-lasting credit effects.

He said these fault lines reflected the formation of political alliances and the reconfiguration of Asia’s economy, trade and financial relationships.

“Economic and financial relationships across the region could diverge along four fault lines — geopolitical, technology and manufacturing, trade, and financial. Geopolitical fault lines reflect the political and security alliances centred around competition between the US and China,” he said in a statement.

Nishad said these alliances could determine shifts in international business strategies over time. “This can have credit implications in terms of economic competitiveness, cross-border investment policies, and the development of export markets,” he said.

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,” Nishad said.

“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 added.