Yearender: Asia-Pacific's dynamic economy looking to move ahead amid headwinds

HONG KONG, Dec. 29 (Xinhua) -- The Asia-Pacific economy has been hampered by multiple headwinds this year, notably slowing global growth, the Russia-Ukraine conflict and aggressive U.S. interest rate hikes.

Looking into the new year, however, the region is set to move on along the path of recovery as robust domestic demand is expected to offset the global economic downturn, along with benefits from regional free trade agreements.

OASIS OF GLOBAL GROWTH

Citing a worsened global outlook, the Asian Development Bank (ADB) has lowered its economic growth forecasts for developing Asia and the Pacific.

The ADB expected the region's economy to grow by 4.2 percent this year and 4.6 percent next year, lower than its previous forecast in September of 4.3 percent and 4.9 percent, respectively.

Even with the downgraded forecasts, developing Asia will still perform better than other regions globally in terms of growth, it said.

The Asia-Pacific economy has been chugging along over the past three years, as the region has been struggling to combat the COVID-19 pandemic.

Gradually rebounding since phased-in easing of COVID-19 control measures, the region's economy, however, has stood the test of multiple challenges in 2022, including higher inflation, capital outflows and currency devaluation, among others.

"Regional inflation having risen further in the second half of 2022 may have already peaked in many economies," the ADB said, pointing to the data that headline inflation in developing Asia reached 5.6 percent in September, up from 3.0 percent at the start of the year, then declined to 5.2 percent in October.

In response, central banks have continued raising policy rates to tame inflation, thus tightening financial conditions, which have been greatly influenced by aggressive rate hikes in the United States.

For major advanced economies in 2023, it will be a major challenge to avoid a sharp deceleration in the pace of growth, with tightening monetary and financial conditions weighing on economic activity in the United States and the euro area.

The possible slowdown will have a negative impact on the Asia-Pacific region, but on the plus side, mobility arising from easing pandemic conditions and containment measures will underpin domestic demand in most of developing Asia.

At the beginning of this year, the mega free trade Regional Comprehensive Economic Partnership (RCEP) agreement, comprising 15 Asia-Pacific countries, entered into force to spur regional economic recovery.

Fruits from free trade agreements will be another driving force of regional and global economic recovery, said Lawrence Loh, director of the Center for Governance and Sustainability at the National University of Singapore, in an interview with Xinhua.

"Asia and the Pacific will continue to recover, but worsening global conditions mean that the region's momentum is losing some steam as we head into the new year," ADB Chief Economist Albert Park said.

CALL FOR TRUE MULTILATERALISM

Statistics showed that from January to August this year, trade between China and the other 14 RCEP members reached 1.19 trillion U.S. dollars, or 30.5 percent of China's total foreign trade.

In addition, the China-proposed Belt and Road Initiative (BRI), a well-received international public good and an important platform for building a community with a shared future for mankind, has progressed this year. As of the end of August this year, China's accumulative volume of trade in goods with countries along the Belt and Road reached about 12 trillion dollars.

Observers say that China-proposed initiatives, including the BRI, the Global Development Initiative and the Global Security Initiative, are supportive of true multilateralism, which is characterized by upholding the international system with the United Nations at its core and seeking win-win solutions to issues of common concern.

"China remains a steadfast supporter of the world economy, and a key contributor to promoting global peace, security, stability, common development and prosperity," Thong Mengdavid, a research fellow at the Phnom Penh-based Asian Vision Institute, told Xinhua.

China is a reliable partner in terms of regional and global trade through stronger partnerships, open and inclusive development, and its win-win cooperation stance with other countries, he said.

Loh said that multilateralism is a key to better global governance, "Key decisions that affect the world should be inclusively determined by all countries whether big or small."

Earlier this month, world criticism of U.S. trade policies hit news headlines, with World Trade Organization (WTO) members lashing out at the United States at the 15th Trade Policy Review of the country.

The European Union (EU), Canada, Turkey and many other WTO members strongly urged the United States to fulfill its obligations as a WTO member and avoid unilateralism and protectionism.

Expressing concerns about the U.S. Inflation Reduction Act (IRA), signed in August to provide a record 369 billion dollars for climate and energy provisions, some WTO members complained that many of the generous subsidies in the act tilt the playing field in favor of U.S. producers in crucial technology sectors, including the automotive sector.

"Korean EV makers, such as Hyundai and Kia, saw their U.S. sales plunge by 30 percent after the IRA went into effect. A bigger problem is that the U.S. move came right after Korean chipmakers, including Samsung and SK, promised multibillion-dollar investment plans in America," the Korea Times said in an editorial.

Jeon Byeong-seo, head of the South Korean Institute of Chinese Economic and Financial Research, told Xinhua that the U.S. move runs counter to WTO rules and fair competition.

As for the spillover effects of U.S. aggressive rate hikes on South Korea, he said that it shocked South Korea's financial market and its real economy at the same time.

CONFIDENCE IN CHINESE ECONOMY

China has intensified its macro-control this year to cope with the impact of "factors beyond expectations" and maintained overall economic and social stability, according to the tone-setting annual Central Economic Work Conference held recently.

Acknowledging the presence of domestic pressure and external volatility, policymakers at the meeting said they anticipate an overall improvement in the country's economic performance next year, citing strong resilience, potential and dynamism in the economy and the support of pro-growth policies.

In the first 11 months of this year, fixed-asset investment in the high-tech sector climbed 19.9 percent year on year, while the added value of high-tech manufacturing rose 8 percent, 4.2 percentage points higher than the total for industrial enterprises above the designated size.

In the first 10 months of this year, foreign direct investment (FDI) in the Chinese mainland in actual use went up 14.4 percent year on year to 1.09 trillion yuan. The high-tech manufacturing sector reported much stronger growth, with FDI inflows surging 57.2 percent year on year in the period.

China's foreign trade of goods also logged steady expansion. In the January-November period, the country's foreign trade of goods grew 8.6 percent year on year to 38.34 trillion yuan.

Speaking to Xinhua in an interview, ADB experts said that in the face of external risks, "We see that China has adopted strong fiscal and monetary policy measures to revive growth and economic activity, including through additional infrastructure spending, adjustments in bank lending rates, and measures to address downturn in property markets. These are all steps in the right direction and must be continued going forward."

"We also see that there is significant room for a recovery in household demand in China. Given the size of the Chinese economy, neighboring economies would benefit from such pickup in demand and from a broader economic recovery supported by China's robust fiscal and monetary policy measures," they said.

They went on to say that in case international travel resumes next year, regional tourism could become an even bigger driver of growth when Chinese tourists start traveling again.