Trade
Defying the ‘end of China miracle’ myth
China’s ‘China miracle’ has ended due to a real estate crisis, weak consumption, and export demand. However, recent data suggests recovery is gaining momentum with GDP and production growth. Despite concerns, the real estate sector’s impact on the financial system is expected to be contained. China is looking to stabilize the real estate sector with supply and demand side policies, and focus on alternative growth engines such as industrial innovation and boosting household consumption.
China’s Recovery and Economic Outlook
China’s earlier economic model of credit-driven growth is facing challenges due to a real estate crisis, weak consumption, and export demand. However, recent data indicates a recovery is gaining momentum, with real GDP growth reaching 5.2% in the first three quarters of 2023.
Concerns and Containment of Financial Risks
The real estate crisis has raised concerns, but the risks are expected to be contained. Limited bank financing for real estate developers, government monitoring of real estate prices, and low mortgage default rates are factors contributing to containing financial risks. Despite financial losses for investors, the risks are expected to be manageable.
Future Strategies for Sustainable Growth
To stabilize the real estate sector, selective credit allocation to developers and demand-side incentives for home buyers are being introduced. Furthermore, China needs to focus on investing in research and development, boosting household consumption, and creating conditions for the private sector to create more jobs and raise wages to ensure sustainable growth.
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
Trade
WTO ministerial trading in low expectations and high stakes
The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.
The World Trade Organisation’s 13th Ministerial Conference
The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.
Challenges in Dispute Settlement and Agricultural Trade Reform
However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.
Geopolitical Tensions and the Future of Trade Relations
The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.
Source : WTO ministerial trading in low expectations and high stakes
Trade
Getting Vietnam’s economic growth back on track
Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.
Vietnam’s Economic Roller Coaster
After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.
Trade Performance and Monetary Policy
Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.
Challenges and Prospects
Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.
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