Economic recovery

In 2022, as global supply chains normalise and inflation gradually decreases, there is room for cautious optimism in the global economic outlook, but much will depend on countries’ fiscal policies and the extent to which the US Federal Reserve adjusts its interest rates. Economics professor Zhang Rui predicts that if investments of economic giants such as the US, the EU, Japan and China continue to rise, the global economy will expand, but emerging countries will need to be wary of increasing their debt burdens.

Hefty civil servant pay cuts and desperate measures to get more money in regional coffers portend headwinds in China’s economy. The “triple pressures” it currently faces — demand contraction, supply shocks and weakening expectations — will see China needing to right severe imbalances and do more than just pushing for high-quality development.

The recent virtual summit commemorating 30 years of ASEAN-China dialogue relations was held without a representative from Myanmar, the second time in a month that Myanmar was absent from the ASEAN family. The Myanmar issue is likely to pull ASEAN on many sides in the days to come, but the fact that the summit went on and concluded with some deliverables speaks for the strength of ASEAN-China relations.

China was the only major economy to expand in 2020 as the Covid-19 pandemic swept across the world. But its regulatory whirlwind over the past year has created uncertainties and headwinds for the economy. Caixin tells us the five key things to watch for as the world’s second-largest economy ploughs through the final quarter of the year.

In the face of some turbulence in China’s economic indicators lately, academic Xu Le looks at certain bright spots amid falling aggregate demand and aggregate supply for a realistic gauge of China’s economic prospects in the coming months.

While China’s latest third quarter year-on-year growth rate of 4.9% is still considered strong, some international commentaries have recently revisited the idea that “China’s economy is collapsing”. Taking a hard look at the situation of power cuts, a depressed property sector and the fact that state media saw fit to rebut these conjectures, Yang Danxu notes that there is some truth to slowing growth in the Chinese economy. However, the larger question is not how many percentage points drop here and there, but if downward momentum will shake the nation’s resolve to make structural adjustments for the good of the long-term health of the Chinese economy.

Erik Baark takes a bird’s eye view of the structure of energy supply and demand in China, analysing how macro issues led to the September 2021 rash of power cuts across China. He notes that China's continued development needs energy, and a shift from heavy industries to services or high-tech fields does not mean that the country's energy needs will decrease. The Chinese government is looking to new and renewable energy resources to take the place of the old, but transitioning to new energy sources is not an easy process, especially when different actors are trying to protect their own terrain and a mindset change is necessary. It will be a tall order for the Chinese government to get local governments, old power grid corporations and the public to align with new policies and thinking. All this means that power cuts will not be going away anytime soon.

Negotiations on the investment agreement between the EU and China were concluded at the end of last year but the European Parliament recently passed a resolution to freeze any consideration or discussion of the agreement. This was following retaliatory sanctions from China after the EU's round of Xinjiang-related sanctions. NUS academic Cai Daolu sees the suspension as a economic and trade relationship hiccup in the short run. But if prolonged, it would turn into a missed opportunity, not just for EU and China, but for the global economy as well.

The People’s Bank of China (PBOC)'s announcement that it will raise the reserve requirement ratio (RRR) for foreign currency deposits by 2% confirms that it will intervene decisively when necessary to prevent a sharp appreciation of the RMB. Too much is at stake: with raw materials in short supply, the RMB’s appreciation will not reduce imported inflation and may at the same time affect exporters.