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East Asia & Pacific is facing some great development challenges today: urbanization, protection of the environment, the need to find renewable energy sources and many others. This site wants to create a conversation around those important issues. More »

Growth

In Thailand, finding the way back into growth: Step 1, switch the supply chains back on

Submitted by Frederico Gil Sander on Wed, 2009-11-04 12:35

As part of its regular monitoring of the corporate sector in Southeast Asia, the World Bank economic team I am part of in Thailand has been working on a short case study of supply chains of Japanese multinational companies (MNCs) in the electrical and electronics (E&E) industry. We wanted to hear directly from firms about how the crisis affected them, how they were able to adjust so quickly to the drop in demand, what the rebound looked like, and what were the prospects going forward to upgrade along the value chain. I have learned a great deal from these interviews, and have become convinced that supply chains are central to understanding the current crisis in Thailand and East Asia more generally.

Some facts: the crisis had a disproportionate impact on manufacturing. In Thailand, manufacturing represents about 40 percent of GDP, but contractions in manufacturing value added have accounted for about 75 percent of the contraction of headline GDP. Within manufacturing, the auto and E&E industries account for the bulk of the contraction. Most of the output in those industries is exported, and more than three-fourths of the decline in Thai exports during the crisis was due to falls in shipments from the auto and E&E industries. My conclusion is that the magnitude of the crisis in Thailand has been driven primarily by these two industries.

China: Robust growth in sight provides room for shift in policy focus

Submitted by Louis Kuijs on Tue, 2009-11-03 23:11

The economic data for the third quarter of 2009, released almost two weeks ago, confirmed an impressive recovery in China’s economy, supported by very large fiscal and monetary stimulus. Real GDP growth rose to 8.9 percent year-on-year in the third quarter. This is clearly good news, for China and many other countries whose economies are benefiting at the moment from strong demand from China. As the World Bank economic team for China (which I'm part of) argues in more detail in the new China Quarterly Update, it also means that it is time to consider a less expansionary macroeconomic policy stance and focus more on the structural reforms needed to rebalance the economy and get more growth out of the domestic economy on a sustained basis.

It’s not as if China has not been hit by the global recession. China’s real economy has been hit hard. Exports fell sharply since November last year, and the contribution of net external trade to GDP growth was minus 3.6 percent points in the first three quarters of this year – with the negative contribution particularly large in the third quarter (in year-on-year terms).

A quick look at 60 years of China's development

Submitted by James I Davison on Thu, 2009-10-08 16:18

Last week’s 60th anniversary celebrations marking the founding of the People’s Republic of China seemed to generate a lot of coverage and interest on news and social media websites. Business magazine Fast Company used the occasion to consider 15 different development-related statistics – comparing then to now.

Most of the figures are striking, and the graphic’s triangles illustrate how rapid and staggering the changes have been in China in just six decades. Interesting data (although the magazine doesn't specify its sources) in the infographic include:

  • The average life expectancy has increased from 35 to 73 years old.
  • The rate of illiteracy was 80 percent in 1949 and is 9.1 percent now.
  • The enrollment rate for primary-school children went from 20 percent to 99.3 percent.

Take a closer look at the chart here. (Hat tip to Cool Infographics.)

Are China’s banks having a "good crisis"?

Submitted by James Seward on Wed, 2009-10-07 15:17
The crisis certainly hit China hard, but the spillover to banks has been minimal thus far. Photo courtesy of randylane under a Creative Commons license.

The story of the current financial crisis is well-known now and much has been written.  Indeed, we’re now at the point where many observers are indicating that the crisis is now at an end.  It would seem that the immediate financial sector impacts are leveling off, but in many countries the economic recovery will likely take a long time.  However, a number of emerging markets have come out of the crisis in relatively stable shape.  China is the most prominent example.  In fact, one might say that China is having a “good crisis” in certain ways as it has lifted its prominence – it is the one large country seen as leading the world out of this global crisis.  The same applies for China’s financial system given that many of its banks are now the largest in the world and (at least on the surface) posting strong performance. 

Regional Finance Roundup: Is East Asia leading the world out of the crisis?

Submitted by James Seward on Tue, 2009-09-29 16:30

Given that Asia is now widely seen as leading the world out of the crisis, it is fitting that the role of Asia was more prominently recognized in the global economic system in the recent G20 meeting held in Pittsburgh.  Since we last looked in July, the outlook for the emerging markets of East Asia has continued to brighten.  The latest regional forecasts come from the Asian Development Bank in its Asian Development Outlook (pdf) published last week.  It points to “the rapid turnaround in [Asia’s] largest, less export-dependent economies” and predicts that “the regional economy is now poised to achieve a V-shaped rebound.”  These are very positive words indeed!  As the graph below shows, the ADB has in fact upgraded its growth forecasts for a number of economies for 2009.

Although the signs are pointing upwards, performance is still mixed in a number of key areas.

Inquiring minds: Cambodian students worry about their country's future

Submitted by Stéphane Guimbert on Thu, 2009-06-25 16:00

It's been a very enriching experience to listen to the reactions of these 1200 or so college students.

Over the past couple of weeks, thanks to my colleagues Saroeun and Sophinith, I have traveled to various universities in Cambodia to present the findings of the World Bank’s growth report for the country. It's been a very enriching experience to listen to the reactions of these 1200 or so students. It was also nice to see the dynamism of these universities and these students.

Most interesting was the focus of their questions. Although the report is focused on medium- and long-term trends, many questions were about the impact of the global economic crisis. My answer: Cambodia is very exposed to the crisis given its openness and reliance on foreign investment, and despite the strong resilience of its rural economy.

There were also many questions about extractive industries. The answer is in Chapter 5 of the report: there remain considerable uncertainties about the potential in oil and gas and in mining, with in fact practically no major proven commercially viable reserve so far.

How can China keep on growing while its exports are shrinking?

Submitted by Louis Kuijs on Wed, 2009-06-17 22:05

Getting a clear view on where China’s economy is heading is not easy at the moment, as evidenced by large variations in GDP growth forecasts. One of the confusing developments is that while exports have continued to do badly recently, the domestic economy has exceeded most observers’ expectations by a wide margin.

Working in recent weeks on the World Bank’s new China Quarterly Update, released today, we have been trying to determine how the economy has been doing on balance, what the prospects are, and what this means for economic policy. In this blog, I will summarize our understanding of recent developments and prospects, leaving the upshot for economic policies for a later discussion (keep reading after the jump).

Can China become the engine for world economic growth?

Submitted by David Dollar on Wed, 2009-05-20 12:40

This somewhat provocative question was the title of a conference hosted by Oxford and Standard Charter this week in London.  My answer was: "No, not tomorrow; but yes, eventually – especially if China continues to vigorously pursue economic reform."
 
The reason that China cannot be the engine of global growth tomorrow is straight-forward.  For the last decade an awful lot of the final demand in the world has come from the U.S.  That era is over for the time being as U.S. households now concentrate on rebuilding their savings.  No one country can fill the gap left by the slowdown in U.S. consumption: Japan, Germany, and China together have less consumption than the U.S., so no one of them can replace the U.S. as the major source of demand in the world.  It's not realistic to expect China to play that role.  But we are probably moving into a more multi-polar period in which there is more balanced growth in all of the major economies. 

Looking for signs of Cambodia's recovery: the ox weigh in, and more

Submitted by Stéphane Guimbert on Wed, 2009-05-13 13:29

Royal oxen, cousins to the more common variety in the photo, offered their take on Cambodia's agricultural prospects.
(Photo courtesy of dee under a Creative Commons license)

An important new development for economic forecasters happened yesterday. Like every year, a royal oxen predicted the country’s agriculture fortunes (a bit like Groundhog Day  for American readers, this is essentially based on what the oxen does and does not eat): by refusing to eat any of the grain, it raised concerns of a low rice harvest for this year… This would obviously be a bad omen given the many hopes placed on agriculture for weathering the global economic crisis. Other than that, tourist arrivals continue to slow down (and the low season will now start as the rain comes) and garment exports remain way below last year’s level.

So any good news since my last post on this and the release of the Cambodia Economic Watch? Yes, a few.

 

Remarkable progress, remaining vulnerability among China's poor

Submitted by David Dollar on Tue, 2009-04-07 23:01

China's share of population living below the poverty line declined from 65 percent at the beginning of economic reform in 1981 to 4 percent in 2007.

At the height of the recent boom the U.S. household savings rate dropped to zero: the average American family saved nothing from its annual income of more than $38,000 per person. In China, by contrast, poor rural families earning less than $200 per person save 18 percent of their meager income. This is one of the striking findings of the World Bank poverty assessment released today.

The poverty study uses a wealth of household survey and village-level data to tell a fascinating story of progress and vulnerability. The progress is remarkable: the share of the population living below the World Bank's consumption poverty line for China declined from 65 percent at the beginning of economic reform (1981) to 4 percent in 2007. The pace of poverty reduction varied over these 26 years. One of the periods of most rapid poverty reduction has been the boom time since China joined the World Trade Organization. Poverty declined from 16 percent in 2001 to 4 percent in just six years.