Economic systems

The Chinese government has recently announced plans to establish a unified national market that is highly efficient, standardised, open and competitive. It would break down walls, raise the standards of the business environment within China and act as a buffer against external pressures. While the intention is good, NUS academic Lu Xi points to possible drawbacks and challenges.

Russia and China have a common interest in being less reliant on the dollar in the face of sanctions or anticipated sanctions. But are they moving at the same pace and will their efforts be significant enough to achieve self-reliance and precipitate a sea change in the global economic order?

A law recently passed by the Jokowi government regarding the relocation of the nation's capital to East Kalimantan has generated much controversy. ISEAS academic Leo Suryadinata notes that while there are objections relating to the conservation and ecology in Kalimantan, greater protests are coming from the anti-Jokowi camp that believe only a handful of wealthy people will benefit, and fear that the new capital will be controlled by foreign countries, especially China. Jokowi is in a race against time to move the capital before the next election.

The recent accelerated opening up of China’s capital market has presented a challenge to investment banks in China, which may have seen their role marginalised or bypassed by major foreign players who have international experience and are highly capitalised and better managed. Academics Pei Sai Fan and Peng Chang suggest how investment banks in China can compete and stay relevant.

Despite past macroeconomic stability, the US economy is beginning to see increased inflation across many sectors. Reports say that US consumer price figures for January due on Thursday could show core inflation rising to the fastest pace since 1982 at 5.9%. The situation is not helped by the government's recent move to issue additional debt which was mostly purchased by Fed banks. If the US government defaults on its debt, the global financial market will be affected. Higher interest rates to fight inflation in the US may also require that China and other Asian economies adjust their own domestic policies on interest rates and exchange rates.

China's 2021 quarterly economic figures showed a general weakening, falling to a low 4% in the fourth quarter. While international analysts are of the view that China’s economy is in rapid decline, Gu Qingyang thinks otherwise. But that does not mean China's road ahead in the new year will be smooth sailing. Policies will need to be tweaked to ensure a stable economic trajectory in 2022.

While China’s economy grew about 8% in 2021, the GDP growth target for this year is expected to be a more modest “above 5%”, taking into consideration various easing measures by the central bank and political considerations heading into the 20th Party Congress in autumn this year. Zaobao’s associate editor Han Yong Hong gives her assessment.

Claims that financial decoupling will occur between China and the US are not yet evident from the trade data, says NUS academic Christopher J. Voisey. In 2020, FDI inflows in China increased by 6% and the ease of doing business improved. And while there have been greater hurdles for Chinese companies seeking US listings, their stocks are often still available to foreign investors through alternative channels. Might some turbulence be par for the course as China seeks stronger autonomy and economic power?

So far, Fitch is the only one of the “big three” credit rating agencies to release a statement raising the possibility of a review of the US sovereignty rating with negative implications. Financial commentator Tan Haojun says that the three agencies are giving the US a lot of leeway that would probably not be given to other countries, when they should be impartial and fair in giving a rating.