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.
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.
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.
Thailand’s post-pandemic economic recovery still trailing behind
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.
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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