Asia New Vision Forum: Global Economists Blast Trade Protectionism

03 Oct 2024

At the Asia New Vision Forum 2024, an international business leadership conference hosted by Caixin this week, leaders from various fields gathered in Singapore to share their insights on a wide range of topics, from technology and investment to arts and philanthropy.

Below are some of the highlights and key takeaways on finance and the economy drawn from speeches and panel discussions at the forum.

On trade protectionism

The rise of trade protectionism may threaten fledgling manufacturing sectors in members of the Association of Southeast Asian Nations (ASEAN), Hoe Ee Khor, chief economist of the ASEAN+3 Macroeconomic Research Office, said at a panel.

“Most (ASEAN) countries started off at the low end of the supply chain by producing cheap products. Over time, they developed, and their products became more sophisticated for them to move up the value chain. They’ve become middle-income economies but have not fully become high-income,” he said. “At this point, there is backlash against globalization, and it’s threatening their very important driver of growth.”

Philipp Rösler, a former vice chancellor of Germany, gave a scathing criticism against protectionism.

“Look at what (former U.S. President) Trump once said to the people who lost their jobs: The reason why you lost the jobs was global free trade, so let’s stop free trade to save our jobs. This is as stupid as it can be,” he said. “The reason why they lost their jobs is not free trade. Free trade once created these kinds of jobs. The reason why they lost jobs is because of a lack of technology.”

Bai Chongen, dean of the School of Economics and Management at Tsinghua University, proposed a plan to help countries resolve tariff disputes.

Some countries impose high tariffs on products they deem to have received government subsidies during manufacturing, arguing that these levies are needed to counter unfair competition.

Bai’s solution involves calculating the subsidies an industry receives in each country and trying to even the playground by letting the governments work out appropriate tariff levels. He used electric vehicles (EVs) as an example.

If both the Chinese and Singaporean governments subsidized the EV industry, they could calculate two figures — per-car subsidies in China and Singapore — and then one of them could impose a tariff on the difference, making competition fairer, he said.

On CBDC

Central bank digital currencies (CBDCs) can enable more direct financial interaction in global transactions, according to Andrew Sheng, a distinguished fellow at the Asia Global Institute of the University of Hong Kong.

Project mBridge, a multiple-CBDC platform that has been joined by the Chinese mainland, Hong Kong and Thailand, facilitates a “local-to-local currency swap,” leveraging blockchain technology to reduce reliance on a third-party currency, Sheng said.

“The future of global transactions will be very much local-to-local,” he said. “Why do I need to go through a third-party currency if my central bank trusts the other central bank?”

“Digitally, we have made it technically possible with a very different architecture,” Sheng added.

On China’s economic recovery

Improved consumer spending is a core metric for investors to assess how well China’s economy is recovering, according to Fred Hu, chairman of private equity firm Primavera Capital Group.

“What really troubles the economy is consumers do not have strong confidence at this particular time,” said Hu. “Household consumption is the only viable driver for China’s economic growth. It’s not exports; everywhere, we’re facing headwinds, tariff or non-tariff trade barriers. We have to rely on … the emerging middle class’s spending power.”

“If China can manage to revive confidence, making consumers willing to spend again, China will see its economic outlook improve almost instantaneously,” he said.

On Chinese companies’ global expansion

Hope remains for China’s high-quality companies to expand globally despite geopolitical challenges such as the China-U.S. rivalry, according to Hu.

“As China reaches this point of economic development, it’s natural for high-quality Chinese companies to become increasingly global,” said Hu. However, he acknowledged that “the bar is much higher for Chinese companies to succeed in countries like the U.S.” due to the tariff hikes and hostility from its politicians.

He said there are more welcoming destinations for Chinese companies to expand their overseas footprint. “Southeast Asia generally embraces Chinese investment … many parts of Europe are more receptive than the U.S. … In South America, Chinese investment has become their only source of reliable long-term capital,” said Hu.

On growth opportunities for Asian countries

The diversification of global supply chains, which is happening partly due to geopolitics, offers good opportunities for many Asian countries, said Alicia García-Herrero, chief economist for Asia-Pacific at investment bank Natixis SA, at a panel Thursday.

The U.S. Federal Reserve’s easing cycle can also benefit Asian countries, even though the impact may not be as strong as in Europe or the U.S. China’s recently announced stimulus measures, depending on how big they will be, can also be “a game changer,” she said.

Although tech innovation can be expensive, and open access to new advanced technology is no longer the norm, Southeast Asian countries may be compelled to invest more in innovation, according to García-Herrero.