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Mr. Koshy Mathai, Mr. Geoff Gottlieb, Mr. Gee Hee Hong, Sung Eun Jung, Jochen M. Schmittmann, and Jiangyan Yu
China’s trade patterns are evolving. While it started in light manufacturing and the assembly of more sophisticated products as part of global supply chains, China is now moving up the value chain, “onshoring” the production of higher-value-added upstream products and moving into more sophisticated downstream products as well. At the same time, with its wages rising, it has started to exit some lower-end, more labor-intensive sectors. These changes are taking place in the broader context of China’s rebalancing—away from exports and toward domestic demand, and within the latter, away from investment and toward consumption—and as a consequence, demand for some commodity imports is slowing, while consumption imports are slowly rising. The evolution of Chinese trade, investment, and consumption patterns offers opportunities and challenges to low-wage, low-income countries, including China’s neighbors in the Mekong region. Cambodia, Lao P.D.R., Myanmar, and Vietnam (the CLMV) are all open economies that are highly integrated with China. Rebalancing in China may mean less of a role for commodity exports from the region, but at the same time, the CLMV’s low labor costs suggest that manufacturing assembly for export could take off as China becomes less competitive, and as China itself demands more consumption items. Labor costs, however, are only part of the story. The CLMV will need to strengthen their infrastructure, education, governance, and trade regimes, and also run sound macro policies in order to capitalize fully on the opportunities presented by China’s transformation. With such policy efforts, the CLMV could see their trade and integration with global supply chains grow dramatically in the coming years.
International Monetary Fund. External Relations Dept.
For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.
International Monetary Fund. External Relations Dept.
For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.
Mr. Alfred Schipke

Abstract

With a combined population of more than 350 million people, frontier and developing Asia, which includes countries such as Vietnam, Cambodia, and Bangladesh, is located in the world’s fastest-growing region and has favorable demographics. The countries share a number of common macroeconomic, financial, and structural challenges. This book addresses issues related to economic growth and structural transformation, as well as the risk of a poverty trap and rising income inequality.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia has rebounded fast from the depth of the global crisis. Initially, the region was hit extremely hard, with output in most countries shrinking by more than even those nations at the epicenter of the crisis. But starting in February, Asia’s economy began to revive. Exports and industrial production began to increase again, first slowly, then at a rapid rate. Now Asia is leading as the world pulls out of recession (Figure 1.1).

International Monetary Fund. Asia and Pacific Dept

Abstract

Is the recovery from the global financial crisis now secured? The crisis that stalled Japan’s growth miracle in 1990s may provide some clues. This chapter explores the parallels between the two crises and draws potential implications for the current global recovery. On two occasions during Japan’s crisis, “green shoots” withered as the economy was buffeted by severe external shocks aggravated by a still-fragile financial system, forcing policymakers to intervene with more aggressive support. A sustainable recovery took hold only when spillovers from a favorable external environment reinvigorated private demand and the financial and corporate sector problems at the heart of the crisis were adequately addressed. Japan’s experiences suggest three possible lessons for policymakers today. First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook. Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery. And third, while judging the best time to withdraw policy support is difficult, clear medium-term plans may help.

International Monetary Fund. Asia and Pacific Dept

Abstract

In recent years, despite relatively flat investment in most of the region, corporate savings have risen in Asia, more than in other regions. Since Asian households have not reduced their savings to the same extent, the increase in corporate savings has led to higher private savings in the region. Decisions over retained earnings are related to the strength of corporate governance and the degree of financial market development, particularly in Asia. Hence, reforms in these areas must be further deepened to reduce private savings, contribute to higher private consumption, and help regional rebalancing in the coming years.