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Trade

Exchange rates exert limited influence on China’s exports

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Roll-on wheels load cars for export at a dock in Lianyungang, China, 24 December 2023 (Photo: Reuters/CFOTO/Sipa USA).

China’s export value and sophistication has grown rapidly. The country shifted from labor-intensive goods to more technologically sophisticated products. Exchange rate impact on exports also analyzed.

China’s Rapidly Evolving Exports Landscape

Since the 1990s, the value and sophistication of China’s exports have seen significant growth. In 1995, China’s total exports were valued at US$224 billion, with textiles, electronics, and machinery being the major export categories. By 2021, China’s total exports had surged to US$3.7 trillion, with the share of textiles falling and the share of electronics and machinery rising significantly.

Technological Advancements Accelerated by the Pandemic

The COVID-19 pandemic accelerated China’s production of technologically advanced products. Exports of serums and vaccines, which were less than US$1 billion in 2019, rose to over US$25 billion in 2021, primarily due to exports of Chinese-made COVID-19 vaccines.

Impact of Exchange Rates on China’s Exports

Studies have shown that more sophisticated goods from China are less affected by exchange rate appreciations, indicating that the country’s export landscape has evolved significantly over the years. Before joining the WTO in 2001, China largely exported labor-intensive manufactured goods, but foreign direct investment influx and exchange rate reforms have had a profound impact on the country’s export dynamics and sophistication levels.

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Trade

Getting Vietnam’s economic growth back on track

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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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Trade

Thailand’s post-pandemic economic recovery still trailing behind

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Thailand’s economy is struggling to recover from the impact of the COVID-19 pandemic, with slow growth in GDP and GDP per capita. The government has implemented short and long-term policies to address economic challenges.

## Thailand’s Economic Slowdown

Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures, unlike other ASEAN countries. The Thai economy was severely affected by the pandemic, causing a slow economic recovery. The country’s large informal economy and dependence on tourism made it particularly susceptible to the impacts of the pandemic. While economic growth in 2023 was driven by activities in the travel sector, the manufacturing sector continued to contract, and merchandise exports continued to decline.

## Government’s Economic Policies

The new government’s short-term economic policies include providing a one-time digital cash payment to approximately 50 million residents, debt relief measures, and efforts to cut energy and electric train costs. Long-term economic measures consist of new free trade agreements, green industry projects, and a land bridge project. However, these measures have faced criticism from Thai economists due to significant fiscal implications and rising public debt-to-GDP ratio.

## Challenges in International Trade and Industrial Policies

Thailand’s new government is looking to boost international trade through free trade agreements. However, concerns are raised regarding the effectiveness of FTAs in driving global value chains and boosting trade. Additionally, industrial policies that emphasize domestic value added are being reconsidered in light of evidence that it runs counter to development from engaging in global value chains. The success of Thailand’s economic growth goals will depend on how supply-side constraints are addressed and resolved.

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The United States and China’s complex cooperation and rivalry continue

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The US-China relationship in 2023 had complex economic and technological dynamics. While trade remained substantial, there’s also intensified technological competition, as both countries seek to enhance communication and cooperation in 2024.

Economic and Technological Dynamics

The world has witnessed a complex tapestry of economic and technological dynamics between the United States and China, with 2023 marking a period of continued economic interdependence and technostrategic rivalry. Despite a nominal dip in US imports from China, bilateral trade volumes remained substantial. US exports to China totalled US$135.8 billion and imports stood at US$393.1 billion for January–November 2023.

Economic Relations and Tensions

Policymakers, cognisant of the perils inherent in economic decoupling, have started to eschew such a course. High-level meetings and initiatives offered a positive glimpse of potential bilateral relations. In contrast, the high-tech landscape in 2023 was tense. The United States reinforced its global stance against China’s ascendancy, supported by US political parties.

Future Prospects

Moving into 2024, the US–China economic and technological relations are poised to undergo a shift, characterised by enhanced communication, selective cooperation, and balanced management of both interdependence and competition. There is a mutual understanding among senior officials of the potentially devastating repercussions associated with misunderstandings and miscalculations in the US–China relationship. 2024 is expected to witness increased economic dialogues between Beijing and Washington.

Source : The United States and China’s complex cooperation and rivalry continue

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