Entries for 'Asia Pacific'

The RMB has made marked progress in its global use, especially in cross-border investments. However, it is far behind the USD and EUR in global payments, reserves, FX trading, and trade finance. To promote the global use of RMB, China needs to further open up its financial sector.

The widening of the current account deficit has led to a decline in official reserves to critical levels. Reviving the IMF program is necessary to ensure that Pakistan can meet its financing obligations

China's State Council unveiled a plan to promote retirement savings, which is sorely needed, given inadequate public and employer pensions. This new retirement savings plan will help deepen China's financial markets and reduce volatility.

China’s FX market has grown and changed significantly. This China Spotlight looks into China’s FX market structure and how it shapes the RMB exchange rate.

Despite weak domestic demands, we expect a moderately narrower current account surplus in 2022, due to rising energy prices. Moreover, under the relatively stable headline numbers, the structure of China's current account is undergoing significant changes.

Russia’s war on Ukraine has caused a strong surge in commodity prices, as well as uncertainty regarding global growth and the outlook for inflation. We have revised down our growth forecast for the ASEAN-5 and South Korea. Rising inflation will prompt central banks to begin policy normalization in ’22. Current account dynamics will be driven by relative exposure to commodities. Risks stem from an uncertain outlook for China and higher energy prices.

The direct impact of the war in Ukraine on China's economy is minor due to the relative sizes of these economies. However, the indirect impact of global consumer and investor confidence can be profound and complicated. We expect the war to reduce China's GDP growth by 0.2 points.

China’s 2022 budget seems rather tepid with a narrower fiscal deficit and flat new debt. Once the deficit in the government fund account and special transfers are considered, the consolidated fiscal deficit could reach 8.1% of GDP in 2022, lending strong support to economic recovery.

China's local government (LG) bonds have ballooned since 2018 as LGs were given ever greater bond quotas to finance deficit spending. The recent real estate slump exacerbated the risks as local governments depend heavily on land revenues. LGs are increasingly reliant on CG-LG transfers.

Russia’s invasion of Ukraine has triggered a number of severe sanctions. China, an important partner, has maintained a deliberately neutral stance. While Russia-China trade is important, financial links remain minimal. China could mitigate Russia’s loss of access to global payment systems. Furthermore, with 40% of reserves frozen, holdings in China are critical. The Bank of Russia (CBR) may need to get creative with FX interventions.

China’s economy slowed down markedly in 2H2021 due to energy shortages, tougher regulations, and a housing slump. Though policies are turning more supportive of growth, the outlook for 2022 is still highly uncertain. We expect China’s GDP to grow about 5% in 2022.

Despite having over $2 tln of net foreign assets per IIP, China runs over $100 bln investment losses a year. This China Spotlight looks at the reasons behind this. China earned a reasonable return on its foreign assets but paid a hefty cost for its foreign liabilities.

This note explains the interest rate tools at PBoC’s disposal and China’s interest rate transmission mechanism.

China’s latest census revealed an alarming deceleration in population growth. The birth rate in 2021 fell to a 72-year record low. The rapidly aging population is having a profound impact on savings, investment, and economic growth. This note looks into China's demographic challenge.

Beijing took a series of bold regulatory and economic policies in 2021. Though good for long-term sustainability, the intensity of these policies is hurting near-term growth. Better communication and some policy easing can relieve the near-term pains.

2021 was a tumultuous year for China’s economy, which was disrupted by the housing slump, energy shortage, and regulatory storms. We expect policies will be significantly more pro-growth in 2022.

Once a key driver of China's economic growth, real estate is now seen by many as a cancer of the economy. Real estate and construction together account for 14.5% of China's GDP and 20% of employment. This note examines the role of real estate, particularly housing, in China's economy. 

China’s total foreign assets doubled in the past 11 years to $9 tln by mid-2021. However, considering the size of China’s GDP and the investments in its own assets in HK, China’s financial integration with the world still has a long way to go. 

Inflation is rising due to higher food and energy prices, deglobalization, and supply chain disruptions. In addition, the recent increases in global CPI stem from widespread monetary easing and expansionary fiscal policy. Inflation may exceed central bank targets through 2022 and into 2023. 

The result of higher oil prices is a shift in purchasing power from oil consumers to producers. Oil exporters are getting a boost to their terms of trade, leading to wider CA and fiscal surpluses. Higher energy prices will hurt several EMDEs that remain heavily dependent on petroleum imports.