Read more about the article China’s Economic Growth on Target Despite Challenges

China’s Economic Growth on Target Despite Challenges

IMF projects China's economic growth at 4.6% and 4.1% for this year and next. China's official target is 5%. Six challenges to China's economic growth include the real estate sector, local government debt, domestic demand, external resistance to China's exports, change in foreign investor sentiment, and demographic decline. Despite challenges, China's economic growth remained steady in Q1 2024, with exports and manufacturing investment compensating for the drag from the property sector.

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Read more about the article The Global War of Subsidies

The Global War of Subsidies

Janet Yellen warns China against flooding the world with cheap exports of clean energy. Excess industrial capacity and government support in China's clean energy sector were discussed by US Treasury officials. The US, EU, South Korea, Japan, and Australia are implementing subsidy programs to protect their domestic industries and compete with China.

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Read more about the article Demographic Dynamics and Immigration Policies in High-Income Countries

Demographic Dynamics and Immigration Policies in High-Income Countries

Most high-income countries will experience declines in their populations over the next few decades. Some negative consequences of aging are on the horizon: greater fiscal imbalances and risks of economic stagnation. Immigration may be a way for those countries to mitigate the tendency. On the source side of immigration flows, brain drain is a risk. The policy paper presents the case of Japan, a nation that has grappled with the consequences of a declining and aging population for several years, as an example for other countries destined to confront similar circumstances in the forthcoming decades.

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Read more about the article AI and the Future of Government: Unexpected Effects and Critical Challenges

AI and the Future of Government: Unexpected Effects and Critical Challenges

Based on observable facts, this policy paper explores some of the less-acknowledged yet critically important ways in which artificial intelligence (AI) may affect the public sector and its role. Our focus is on those areas where AI's influence might be understated currently, but where it has substantial implications for future government policies and actions. We identify four main areas of impact that could redefine the public sector role, require new answers from it, or both. These areas are the emergence of a new language-based digital divide, jobs displacement in the public administration, disruptions in revenue mobilization, and declining government responsiveness. This discussion not only identifies critical areas but also underscores the importance of transcending conventional approaches in tackling them. As we examine these challenges, we shed light on their significance, seeking to inform policymakers and stakeholders about the nuanced ways in which AI may quietly, yet profoundly, alter the public sector landscape.

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Read more about the article Emerging Markets and Developing Economies in the Global Financial Safety Net

Emerging Markets and Developing Economies in the Global Financial Safety Net

When countries face external financial shocks, they must rely on financial buffers to counter such shocks. The global financial safety net is the set of institutions and arrangements that provide lines of defense for economies against such shocks. From any individual country standpoint, there are three lines of defense in their external financial safety nets: international reserves, pooled resources (swap lines and plurilateral financing arrangements), and the International Monetary Fund. We argue here that there is a need to extend and facilitate access to the ultimate global financial safety net layer: the IMF. We illustrate that by pointing out how Morocco and Mexico have boosted their defensive power by having access to IMF precautionary lines of credit.

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Read more about the article Whither China’s Belt and Road Initiative?

Whither China’s Belt and Road Initiative?

China's Belt and Road Initiative (BRI), launched by Xi Jinping, completed its tenth anniversary this year. It has entered a third phase. After the “peak” (2014-17) and “correction” (from 2018 onward) phases, the focus will now be on “smaller, smarter” projects, in coordination with the country’s clean energy industrial policies.

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Read more about the article Resilience and Realignment of Global Trade

Resilience and Realignment of Global Trade

Multiple shocks faced by the global economy over the past three years have apparently shaken the conventional wisdom on gains from economic integration, and have sparked widespread calls for protectionist and nationalist policies. Is there already evidence of some ‘deglobalization’, or do the factors that underlie globalization remain strong enough despite the shocks? So far, there are no signs of an overall reversal in the long-term trend of greater global trade integration. However, a partial realignment seems to be underway, reflecting the more durable side of those recent shocks. This is probably leading to higher costs and prices on the margin, in the case of realignments done to overcome shocks of a geopolitical nature. The answer seems to be that global trade has been resilient, although it is undergoing some realignment.

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Read more about the article Growth Implications of a Fractured Trading System

Growth Implications of a Fractured Trading System

An assessment of the implications for growth—particularly the costs—of moving towards a fractured trading system can use as a benchmark what happened during the period of what is usually called hyper-globalization or globalization 2.0 Substantial growth in GDP per capita in emerging markets and developing economies, as well as reductions in poverty rates and lower per capita GDP inequality among countries were major achievements. The transmission channels of the trade fragmentation will be a reversal of the path by which those gains were attained.

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Read more about the article Rising Use of Local Currencies in Cross-Border Payments

Rising Use of Local Currencies in Cross-Border Payments

Pairs of countries have agreed to settle commercial and financial transactions with each other in their local currencies, usually facilitated through bilateral agreements between their central banks. China has been able to use its currency to settle half of its foreign trade and investment transactions. The growing use of local currencies in external payments will be part of what we have already called a “slow and bounded de-dollarization”. A partial fragmentation of the global payments system is underway.

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Read more about the article GVCs, Resilience, and Efficiency Considerations: Improving Trade and Industrial Policy Design and Coordination

GVCs, Resilience, and Efficiency Considerations: Improving Trade and Industrial Policy Design and Coordination

The COVID-19 pandemic and the war in Ukraine have reignited the debate on efficiency versus resilience in international trade and global value chains (GVCs). This policy brief[ (i) explains the contrasting perspectives of the private sector (primarily seeking efficiency) and the public sector (aiming for resilience); (ii) demonstrates that GVCs are still flourishing, despite some mounting signals of a geo-fragmentation leading to a greater reallocation of the GVCs; and (iii) provides recommendations to help the G20 navigate the balancing act between efficiency and resilience considerations. Domestic policy design in the G20 countries and international coordination among these countries is essential.

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Read more about the article The U.S. Dollar’s “Exorbitant Privilege” Remains

The U.S. Dollar’s “Exorbitant Privilege” Remains

• Notwithstanding the ongoing drive by countries for a higher plurality of main currencies, raising the use of the renminbi, “de-dollarization” looks bound to be partial and limited. • Higher speed and depth of such a transformation would require a metamorphosis of China’s regulatory and policy regime for which the country will not have the desire to implement. • While the euro has remained mostly a regional reserve currency, the U.S. may retain its “exorbitant privilege” through the provision of U.S. dollar safe assets for longer.

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Read more about the article The global economy faces a lost decade

The global economy faces a lost decade

The economic factors that have propelled global prosperity over the past three decades are losing their grip. The aging and slow growth of the global workforce are highlighted as downward factors, explaining half of the expected slowdown in potential GDP growth through 2030. What should countries do in the face of this prospect of a “lost decade”?

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Read more about the article The parrot says that commodity prices will rise

The parrot says that commodity prices will rise

In 2023, both the demand and supply sides point to upward pressure across much of commodity prices. Not all commodity prices will necessarily move up. As far as energy, metals and minerals are concerned, the parrot is likely looking up at this point; definitely in this case the best thing to do is to mimic the parrot.

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