Friday 22 January 2021
 
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ANALYSIS

Decoupling of economies affects Asian trade: report

DUBAI, 10 days ago

A gradual decoupling of economies, changing supply chains and free-trade initiatives will have both positive and negative consequences for foreign trade developments in Asia, said a report.

The Covid-19 pandemic and the ongoing trade war made 2020 an ‘annus horribilis’ for the world economy, said the report released Atradius, a global provider of trade credit insurance, surety and collections services.

 For Asia, it was less so. The recession in most economies was less severe than in the rest of the world, due to successful containment measures and firm fiscal and monetary policies. Both factors will also play a role in the growth opportunities (which are reasonably good) for the region in 2021.

The initiated growth recovery is positive for foreign trade, but economic policies pursued by China and the new US administration have an impact as well.

Key points

•    Economic recovery has started in most Asian countries, with underlying growth strongest in Vietnam and China. India has the weakest starting position.

•    Thailand, Malaysia and China have supported their economies with more fiscal stimulus than other countries in the region. However, the Chinese authorities will restrain themselves now, in order to avoid a further increase of macro leverage.

•    The new Five-Year-Plan means China will focus even more on domestic, consumer-led growth than before, and less on exports. Despite the external pillar in the ‘dual circulation’ strategy, China’s aim to be less reliant on foreign technology and better equipped to external shocks will strengthen the international trend of decoupling of economies.

•    With a new administration, the US will maintain a tough approach to China, albeit one that is more predictable and less confrontational. By working together with the EU, Japan and other allies, the Biden administration – avoiding the Trump administration’s confrontational attitude – will probably be more successful in persuading China to introduce changes in trade, competition and other relevant areas.

•    Regional supply chains are changing because of rising wage costs in China and changing trade policies. Covid-19 will probably accelerate this process, because dependence on only one country has proven problematic. Based on relative attractiveness, Vietnam, Malaysia and Singapore stand out as the countries best positioned, but in different sectors. – TradeArabia News Service
 




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