US-China Trade Dispute Hightlights Needs for Bold Reforms

Diep Nguyen

21:54 10/10/2019

BizLIVE -

The report warns that downside risks to the region’s growth prospects have intensified. Prolonged trade tensions between China and the United States would continue to hurt investment growth, given high levels of uncertainty.

US-China Trade Dispute Hightlights Needs for Bold Reforms
World Bank makes clear that increasing trade tensions pose a long-term threat to regional growth.  While some countries have hoped to benefit from a reconfiguration of the global trade landscape, the inflexibility of global value chains limits the upside for countries in the region in the near term. 
“While companies are searching for ways to avoid tariffs, it will be difficult for countries in developing East Asia and the Pacific to replace China’s role in global value chains in the short-term due to inadequate infrastructure and small scales of production,” said Andrew Mason, World Bank Lead Economist for East Asia and the Pacific. 
The report warns that downside risks to the region’s growth prospects have intensified. Prolonged trade tensions between China and the United States would continue to hurt investment growth, given high levels of uncertainty. A faster-than-expected slowdown in China, the Euro Area and the United States, as well as a disorderly Brexit, could further weaken the external demand for the region’s exports. 
High and rising debt levels in some countries are also putting limits on their abilities to use fiscal and monetary policies to ease the impacts of the slowdown. In addition, any abrupt changes in global financial conditions could translate into higher borrowing costs for the region, dampening credit growth and further weighing on private investment and economic growth in the region.
To weather growing risks, the report recommends that countries with sufficient policy space use fiscal and/or monetary measures to help stimulate their economies, while guarding fiscal and debt sustainability. Countries in the region will also benefit from staying the course on trade openness and by deepening regional trade integration. 
The ongoing US-China trade dispute, along with slowing global growth, also increase the need for countries in the region to undertake reforms to improve their productivity and boost growth. This includes regulatory reforms that improve the trade and investment climate to attract investment and facilitate the movement of goods, technology, and know-how.

DIEP NGUYEN

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