Comparative studies between Hong Kong and Singapore have usually generated keen interest, both because of the obvious commonalties between the two economies, but also because of their pointed differences. Notwithstanding some concerns about longer term growth sustainability due to low total factor productivity (TFP) growth, especially in Singapore, it was generally acknowledged that both economies had in place strong macroeconomic fundamentals and robust financial systems with solid prudential

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... egulations. Despite this, they both suffered from contagious fallout from the East Asian crisis of 1997-98. This study examines Hong Kong's and Singapore's trade and investment linkages with the crisis-affected Asia-5 economies (Indonesia, Malaysia, the Philippines, Thailand and Korea). It then undertakes a formal empirical analysis to test the statistical and quantify the economic significance of the demand/export-induced trade spillover channel. Following this, attention is turned to the competitiveness-driven trade spillover channel, investigating the degree of similarity of comparative advantage and export structures of the regional economies. The overall analyses of trade and direct investment links suggest that Singapore's web of close trade and investment complementarities with Malaysia in particular, but also the other regional economies, underpinned the transmission of the regional shocks from the Asia-5 economies to the city-state. Singapore's competitive export structures with the Asia-5 economies, especially in parts and components, may also have been an important factor in spreading the crisis to Singapore. In other words, Singapore was affected by trade linkages which operated through both an income effect mainly via falls in aggregate demand in other regional economies, but also due to a price or competitiveness effect via the appreciation of the Singapore dollar vis-à-vis regional