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Asia and Pacific > China, People's Republic of

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Cover IMF Working Papers
Energy Security and The Green Transition
Jaden Kim, Augustus J Panton, and Gregor Schwerhoff
The current energy crisis has raised important policy questions on how to strengthen short-term energy security while remaining firmly committed to the green transition, a challenge amplified by the recent consensus at COP28 to transition away from fossil fuels. This paper examines the historical determinants of the security of energy supply and analyzes the green transition implications for energy security. Looking back, we find that the diversification of energy trade partners, or the lack thereof, was the main factor that underpinned energy security dynamics within and across countries over the last two decades. Looking ahead, the green transition is expected to have a net positive effect on energy security provided investments are aligned to address new challenges posed by the increased reliance on renewables.
Keywords:
Energy security; energy independence; green transition; climate mitigation; geo-political risks; country diversification indices; diversification of energy trade partner; risks from reliance; market concentration; Non-renewable resources; Renewable energy; Natural gas sector; Electricity; Metals; Global; Europe
Cover IMF Staff Country Reports
Suriname: Fourth Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Extension of the Arrangement, Augmentation of Access, Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Suriname
International Monetary Fund. Western Hemisphere Dept.
Despite a very challenging socio-political environment, the authorities continue to prioritize fiscal discipline and macroeconomic stability in their policy actions. An agreement-in-principle at the technical level has been reached on the debt treatment with China that is in line with other creditors and consistent with debt sustainability objectives. The formal debt exchange with private external bondholders has been finalized in November with high participation rate.
Keywords:
credit system Supervision Act; revised banking; government fuel tax; State decree; profit and loss projection; International reserves; Exchange rates; Monetary base; Caribbean
Cover IMF Working Papers
The Return of Industrial Policy in Data
Simon Evenett, Adam Jakubik, Fernando Martín, and Michele Ruta
This paper introduces the New Industrial Policy Observatory (NIPO) dataset and documents emergent patterns of policy intervention during 2023 associated with the return of industrial policy. The data show that the recent wave of new industrial policy activity is primarily driven by advanced economies, and that subsidies are the most employed instrument. Trade restrictions on imports and exports are more frequently used by emerging market and developing economies. Strategic competitiveness is the dominant motive governments give for these measures, but other objectives such as climate change, resilience and national security are on the rise. In exploratory regressions, we find that implemented measures are correlated with the past use of measures by other governments in the same sector, pointing to the tit-for-tat nature of industrial policy. Furthermore, domestic political economy factors and macroeconomic conditions correlate with the use of industrial policy measures. We intend for the NIPO to be a publicly available resource to help monitor the evolution and effects of industrial policies.
Keywords:
Industrial Policy; Trade Policy; Data; NIPO database; Policy instrument; policy tool; policy activity; policy measure; Imports; Exports; Export subsidies; Securities; Global; North America; Central Asia; Asia and Pacific; South Asia
Cover IMF Working Papers
Getting to Know GMMET: The Global Macroeconomic Model for the Energy Transition
Benjamin Carton, Christopher Evans, Dirk V Muir, and Simon Voigts
This paper presents GMMET, the Global Macroeconomic Model for the Energy Transition, and provides documentation of the model structure, data sources and model properties. GMMET is a large-scale, dynamic, non-linear, microfounded multicountry model whose purpose is to analyze the short- and medium-term macroeconomic impact of curbing greenhouse gas (GHG) emissions. The model provides a detailed description of GHG-emitting activities (related to both fossil fuel and non-fossil-fuel processes) and their interaction with the rest of the economy. To better capture real world obstacles of the energy transition, GMMET features a granular modelling of electricity generation (capturing the intermittency of renewables), transportation (capturing network externalities between charging stations and electric vehicle adoption), and fossil fuel mining (replicating estimated supply elasticities at various time horizons). The model also features a rich set of policy tools for the energy transition, including taxation of GHG emissions, various subsidies, and regulations.
Keywords:
Climate mitigation policy; policy coordination; GHG price; fossil gas price; GHG-emitting activity; sectors in the United States; greenhouse gas; Non-renewable resources; Electricity; Greenhouse gas emissions; Inflation; Fuel prices; Global
Cover IMF Working Papers
Divided We Fall: Differential Exposure to Geopolitical Fragmentation in Trade
Shushanik Hakobyan, Sergii Meleshchuk, and Robert Zymek
This paper assesses differences in countries’ macroeconomic exposure to trade fragmentation along geopolitical lines. Estimating structural gravity regressions for sector-level bilateral trade flows between 185 countries, we find that differences in individual countries’ geopolitical ties act as a barrier to trade, with the largest effects concentrated in a few sectors (notably, food and high-end manufacturing). Consequently, countries’ exposure via trade to geopolitical shifts varies with their market size, comparative advantage, and foreign policy alignments. Introducing our estimates into a dynamic many-country, many-sector quantitative trade model, we show that geoeconomic fragmentation—modelled as an increased sensitivity of trade costs to geopolitics and greater geopolitical polarization—generally leads to lower trade and incomes. However, emerging markets and developing economies (EMDEs) tend to see the largest impacts: real per-capita income losses for the median EMDE in Asia are 80 percent larger, and for the median EMDE in Africa 120 percent larger, than for the median advanced economy. This suggests that the costs of trade fragmentation could fall disproportionally on countries that can afford it the least.
Keywords:
Geoeconomic fragmentation; trade barriers; gravity; emerging markets and developing economies; trade model; trade cost; trade fragmentation; foreign policy alignment; Plurilateral trade; Trade balance; Trade agreements; Income; Middle East and Central Asia; Sub-Saharan Africa; Asia and Pacific; Global; Africa
Cover IMF Working Papers
Inflation Dynamics in the Gulf Cooperation Council (GCC): What is the Role of External Factors?
Fozan Fareed, Abolfazl Rezghi, and Charlotte Sandoz
Inflationary pressures have intensified in the Gulf Cooperation Council (GCC) in 2021-2022, mainly driven by a pick-up in tradeable goods inflation. Despite this increase, inflation remained relatively contained as compared to regional comparators. This paper aims to provide a comprehensive analysis of inflation dynamics in the region, with a focus on external factors because of GCC’s high reliance on international trade. Using a Global Vector Autoregressive model with quarterly data from 1987 to 2022, we find that external factors such as the imported inflation from main trading partners, mainly driven by China, and nominal effective exchange rate (NEER) are the main drivers of inflation in the GCC region. Additionally, we find that the direct pass-through of international commodity price shocks such as oil and raw agricultural materials is somewhat limited, after controlling for trading partners’ inflation, which can be explained by the prevalence of subsidies and administered prices in the region. Overall, since external factors are the main drivers of domestic inflation in the GCC, an increased focus on diversification, promoting food security, and ensuring prudent central bank policies, including through effective liquidity management frameworks, can play a key role in managing this impact.
Keywords:
Inflation; external shocks; GCC; panel data; GVAR.; GCC inflation; inflation dynamics; GCC country; GCC economy; inflation in GCC; Nominal effective exchange rate; Oil prices; Supply shocks; Food prices; Global
Cover IMF Staff Country Reports
Gulf Cooperation Council: Economic Prospects and Policy Challenges for the GCC Countries
International Monetary Fund. Middle East and Central Asia Dept.
The GCC region’s non-hydrocarbon growth momentum remains strong, driven by higher domestic demand, increased gross capital inflows, and reform implementation. Oil production – which depends on OPEC+ decisions – will be subdued in the near term. Inflation is contained and current account surpluses are high. Fiscal balances remain healthy, supported by fiscal reforms and high oil prices. The primary non-oil deficits are expected to decrease to 24 percent of GDP by 2028, with higher non-oil revenue reflecting sustained fiscal and structural reforms and contained expenditures. High global uncertainty is weighing on the outlook.
Keywords:
Gulf Cooperation Council; GCC Countries; OPEC; GCC country; centrality indices; policies in the GCC; GCC net; GCC's acceleration; financial market; Inflation; Oil prices; Climate finance; Financial statements; Global; Middle East
Cover IMF Staff Country Reports
Sri Lanka: First Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of Nonobservance of Performance Criterion, Modification of Performance Criteria, Rephasing of Access, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Sri Lanka
International Monetary Fund. Asia and Pacific Dept
As part of the IMF-supported arrangement Sri Lanka has undertaken significant reforms to pave the way out of a deep economic and debt crisis. The economy is showing tentative signs of stabilization, supported by rapid disinflation and a significant fiscal adjustment. Tax revenues have increased but not as much as initially projected, and reserves accumulation has slowed, including due to slow progress on debt restructuring. Continued ownership of reforms is essential to rebuild fiscal credibility and to improve governance and reduce corruption vulnerabilities. The authorities reached agreements in principle (AIPs) with official creditors on debt treatments consistent with program parameters and are in good faith discussions with their private creditors.
Keywords:
Sri Lankan authorities; arrangement Sri Lanka; authorities' effort; revenue administration reform; IMF staff estimate; headline inflation; invitation of the authorities; Sri Lanka rupee; Credit; Debt restructuring; Global; Asia and Pacific; Middle East; South Asia
Cover IMF Working Papers
Feeling Rich, Feeling Poor: Housing Wealth Effects and Consumption in Europe
Mr. Serhan Cevik and Sadhna Naik
Households across Europe are struggling with a double crisis—the worst inflation shock since the World War II and a sudden correction in house prices. There is a rich literature on how housing price cycles affect consumer spending, finding mixed results with a wide range of consumption responses to changes in housing wealth. In this paper, using quarterly data on 20 countries in Europe over the period 1980–2023, we analyze the dynamic relationship between inflation-adjusted housing wealth and consumer spending and obtain statistically significant and economically intuitive results. Household consumption responds positively and swiftly to changes in real house prices and gross disposable income as expected. Using the estimated coefficients, we can deduce that the average quarter-on-quarter decline of -1.96 percent in real house prices in the first quarter of 2023 in Europe could dampen consumer spending by about -0.51 percentage points in real terms on a cumulative basis over a horizon of eight quarters.
Keywords:
House prices; wealth effects; consumer spending; Europe; housing price cycle; housing wealth effect; household consumption growth; property price dataset; price unit; consumer spending growth; depressing housing price; cost of capital; housing prices in the CEE region; house price movement; house price cycle; housing wealth; Housing prices; Disposable income; Housing; Private consumption; Income
Cover IMF Working Papers
How Far Has Globalization Gone? A Tale of Two Regions
Rodolfo Campos, Samuel Pienknagura, and Jacopo Timini
We study the evolution of trade globalization in a set of countries in Latin America (mostly the largest ones) and Asia over the past 25 years. Relying on structural gravity models, we first estimate a proxy of trade globalization that captures the ease of trading internationally with respect to trading domestically. Results indicate that the evolution of trade globalization since the mid-1990s has been similar between the two regions, but very heterogeneous within them. Trade globalization has been particularly strong in agriculture, mining and manufacturing, but has lagged in services. The paper also documents that trade globalization has been particularly strong in agriculture, mining and manufacturing, but it lagged in services. Within region heterogeneity is associated to a set of trade policy instruments, including tariffs, non-tariff measures, WTO membership. and trade agreements. Next, we quantify the economic implications of the estimated globalization trends. Simulations of a multi-sector trade model point to heterogeneous long-term impacts of globalization on GDP—some countries exhibiting substantial gains and others experiencing large losses—, with no single sector playing a preponderant role.
Keywords:
Trade; Globalization; Structural gravity; Latin America; Asia; trade globalization; globalization trend; IMF working paper 23/255; model point; globalization process; Trade policy; Manufacturing; Agricultural sector; Tariffs; Caribbean; Asia and Pacific; Global