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SHANGHAI, CHINA, June 15, 2018 – The ASEAN+3 region is growing strongly, and economies in the region should develop multiple engines of growth, including the services sector, to build resilience and sustain growth. This was highlighted by speakers at a seminar held in Shanghai today by the ASEAN+3 Macroeconomic Research Office (AMRO), the First Financial and Economic Research Institute, and Fudan University.
With the theme “ASEAN+3 Regional Economic Outlook: Resilience and Growth in a Changing World”, the seminar presented key findings of AMRO’s newly released ASEAN+3 Regional Economic Outlook (AREO) 2018 to set the context for discussion. The seminar was attended by representatives from government agencies, international organizations, research institutions, and the private sector. Mr. Feng Runxiang, Director of the International Department at the People’s Bank of China, Shanghai Head Office; Mr. Wu Jun, Deputy Director of Shanghai Municipal Financial Service Office; Mr. Kou Zonglai, Deputy Dean of School of Economics, Fudan University; and Mr. Qian Jun, Executive Dean of Fanhai International School of Finance, Fudan University; delivered the opening remarks at the seminar.
AMRO Chief Economist Dr Hoe Ee Khor presents key findings of AMRO’s flagship report, the ASEAN+3 Regional Economic Outlook 2018
In his presentation, AMRO Chief Economist Dr Hoe Ee Khor highlighted that with improving external demand, growth in the ASEAN+3 region, which includes 10 ASEAN members and China (including Hong Kong), Japan, and Korea, is expected to be sustained at 5.4% for 2018 and 5.2% for 2019. Growth in China is projected to remain robust at around 6.6% in 2018 and 6.4% in 2019, supported by further expansion in private consumption and services, including the internet economy, as well as strong policy efforts to safeguard macroeconomic and financial stability.
The ASEAN+3 region is facing two near-term risks: faster-than-expected tightening in global financial conditions and an escalation of global trade tensions. If these risks materialize, there would be spillovers to the region through capital outflows, higher borrowing costs, and slower trade and investment flows.
In the case of China, near-term risks to growth and domestic macroeconomic stability have diminished compared to the previous years. The major domestic risks mostly pertain to corporate and local government debt, financial leverage, and state-owned enterprise reform. On the external front, risks associated with capital outflows and the exchange rate have diminished but trade tension with the United States remains a threat to China’s exports. A simulation of a limited US-China trade war in the AREO 2018 shows that both countries could lose about 0.2 percentage point of growth within the first year. There would also be collateral damage to the whole of Asia due to the strong production networks between China and the countries in the region. Going forward, mitigating macroeconomic and financial risks and pursuing further reforms ought to be the main policy priorities.
To enhance resilience, policymakers in the region should continue to build policy space, particularly in monetary policy, in anticipation of tighter global financial conditions ahead. Fiscal policy should support structural reforms to enhance growth potential while macroprudential policy can help safeguard financial stability.
Moderated by Ms. Yang Yanqing, Deputy Editor-in-Chief of the First Financial Daily, the discussion panel comprised Mr. Tu Guangshao，Vice Chairman & President of China Investment Corporation; Mr Li Yang, Chairman of National Institution for Finance & Development; Mr Kou Zonglai, Deputy Dean of School of Economics, Fudan University; Mr Qian Jun, Executive Dean of Fanhai International School of Finance，Fudan University; Mr Wu Xinbo, Director at the Center for American Studies, Fudan University；Mr Zhang Wenlang，Chief Macro Analyst of Everbright Securities; and Dr Hoe Ee Khor, AMRO Chief Economist.
Panelists discuss ASEAN+3 regional economic outlook and issues related to China’s economy. From left to right: Ms. Yang Yanqing, Mr Qian Jun, Mr. Tu Guangshao，Dr Hoe Ee Khor, Mr Li Yang, Mr Wu Xinbo, Mr Kou Zonglai，and Mr. Zhang Wenlang.
The panel noted that the region has successfully pursued a manufacturing-for-exports strategy over the past few decades, Many ASEAN+3 countries had achieved impressive growth by plugging into global trade, attracting foreign direct investment to help develop their manufacturing sectors, generating jobs and lifting wages. China has embraced global trade, absorbed technologies and generated new ones, and applied these to produce better and cheaper products.
Currently this strategy has been put to the test by trade protectionism, changes in trade and production networks, and technology. They will reduce the labor intensity of manufacturing activities, raise the bar for participation in global value chains, and require higher-quality human capital, infrastructure and ecosystems. Technological shifts are double-edged – countries need to build capacity for technology absorption quickly, yet manage the pace of technology absorption, to balance economic gains from productivity improvements against the impact on employment and income.
The panel suggested that ASEAN+3 countries respond by strengthening regional integration to generate more self-sustaining growth from within the region. Improving connectivity and promoting intra-regional investment and trade integration would help countries to leverage on growing intra-regional demand for goods and services, and strengthen resilience. Accelerated integration of goods, services and factor markets would also help raise the region’s growth potential.
In this context, the region is benefiting from China’s transition towards higher-quality growth underpinned by economic rebalancing toward a consumption-led growth model and strengthened reforms. It has boosted demand for consumer products, and lifted the services sector including tourism for many countries. The Belt and Road Initiative (BRI) has the potential to drive regional integration further. Pooling expertise and resources, the BRI would boost investments, improve infrastructure, and support economic activities.
“China has moved up the technology ladder in manufacturing rapidly, and has also established leadership positions in various aspects of the increasingly digitalized services sector. Chinese enterprises have been champions in using new tools and platforms such as the internet of things and e-commerce to raise the productivity of a wide range of services and amplify this effect across the whole economy,” said Dr Khor. “China and other economies in the region should continue to enhance economic diversification, including building a vibrant services sector, to augment the growth strategy.”
The ASEAN+3 Macroeconomic Research Office (AMRO) was established to contribute to securing the economic and financial stability of the ASEAN+3 region, which includes 10 members of the Association of Southeast Asian Nations and China, Hong Kong, China, Japan, and Korea. As an international organization, AMRO fulfils its mandate by conducting macroeconomic surveillance, supporting the implementation of the regional financial arrangements, the Chiang Mai Initiative Multilateralisation (CMIM), and providing technical assistance to the members.
Assistant Head of Communications, AMRO