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Exchange rates exert limited influence on China’s exports



since the 1990s, China’s exports’ value and sophistication have increased significantly. Exports reached US$3.7 trillion in 2021, and exports of Chinese-made COVID-19 vaccines have risen, indicating strong technological advancement. Joining the WTO in 2001 led to an influx of foreign investment and increase in complexity of exported products. Exchange rate appreciation had varying impact on exports over time, but its impact on more complex goods is decreasing. The depreciation of the Chinese yuan may not significantly stimulate exports.

China’s Export Sophistication and Exchange Rate Dynamics

The Evolution of China’s Exports

China’s total exports have increased at an unprecedented rate since the 1990s. The value of China’s total exports skyrocketed from US$224 billion in 1995 to US$3.7 trillion in 2021. While textiles made up 30% of exports in 1995, that share fell to 13%, with electronics rising to 26% and machinery to 19% in 2021.

The Rise of Chinese Product Complexity

A study by Cesar A Hidalgo and Ricardo Hausmann found that China’s Country Complexity Index (CCI) climbed from 39th place in 1995 to 18th in 2021. The increase in the export of technologically sophisticated products, such as vaccines and serums, further displayed China’s growing product complexity and export sophistication.

Exchange Rate Dynamics and China’s Exports

Researchers at the Asian Development Bank have argued that China’s more complex goods are less affected by exchange rate appreciations, indicating that exports of more complex products are less influenced by price increases in importing countries. The historical data has shown that China’s export sophistication has made its exports less dependent on exchange rate changes.

China’s Accession to the WTO and Its Impact on Exports

China’s accession to the WTO in 2001 led to a surge of foreign direct investment and boosted China’s export capabilities. The combination of foreign technology and abundant labor led to the surge in exports, making China’s exchange rate less significant for its exports. However, the ongoing depreciation of the Chinese yuan may have minimal impact on China’s exports given its increasing export sophistication.

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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.

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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

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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.

Source : Getting Vietnam’s economic growth back on track

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