Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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There could not be better timing for China to announce such a huge trade deal as the Regional Comprehensive Economic Partnership (RCEP), in the midst of presidential reshuffling in the US.

Furthermore, among the many wild cards that Beijing could use during the period of political vacuum in the US, opting for trade liberalization is a great plus for China’s image and probably more relevant in economic terms than any other more aggressive option that the media have been discussing, from Taiwan to the South China Sea.

Still, it is important to note that the RCEP negotiations had been dragging on for eight years and that the final agreement has been watered down in terms of key liberalization measures. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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Right before what was expected to be chaotic presidential election in the US, the 19th Central Committee of the Communist Party of China calmly, but surely, last week laid out its targets for the 14th Five-Year Plan and beyond at its Fifth Plenum, and, most important, how to achieve them. …


Federico Steinberg, Elcano Royal Institute and Universidad Autónoma de Madrid

Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

Since the launch of the euro, much attention has been focused on the international role it might play. Seen from the outside, a single European currency should have become a rival to the dollar. From the inside, though, the notion of the euro becoming a major reserve currency was not a stated European objective. Market forces would be left to decide its fate.

Two decades on, however, the world feels under pressure to take sides in the growing strategic competition between China and the United States. The European Union is waking up to the reality of a stuttering Transatlantic Alliance and an increasingly assertive China. Among the tools the EU has to protect, and possibly regain some of, its lost economic sovereignty, fostering the euro´s role as an international currency is one of the most obvious. Interestingly, at the current juncture, it is not only the EU that needs the euro to support its strategic autonomy. So does the rest of the world, particularly China and any country that fears US weaponisation of the dollar. This also means that economic fundamentals might not the key factor behind the push for greater international use of the euro. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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The yuan is higher than it has been in more than two years, and foreigners are suddenly showing interest again in holding the Chinese currency.

Earlier in the decade, Beijing brought the yuan into the spotlight through an aggressive effort to take the currency overseas through swap agreements with foreign central banks and offshore bond issuances denominated in the currency.

This time, foreigners are coming to China to get yuan. Chinese assets stand out at a time interest rates in much of the world are at zero or below and many currencies are sagging. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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Those who say there are no letters left in the alphabet to describe the evolution of the world economy after the pandemic are absolutely right. It is abundantly clear now that we cannot expect to see a rapid V-shaped recovery — nor should we expect a complete stagnation or a L-shaped recovery.

The Square Root-Shaped Economy

The newest version of recovery, the K-shape, reflects the increasing disparity between the winning and losing sectors, including the middle class.

So rather than suggest a letter, I would like to call for a different shape recovery in a post-COVID world: the square root. A square root begins with a strong upswing, much like the one we are experiencing now, even as the pandemic still lingers. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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Minds in Beijing are focusing increasingly on the upcoming meeting of the Chinese Communist Party Central Committee next month.

High on the body’s agenda will be sketching out a new official five-year plan for Asia’s largest economy. A freshly coined buzzword looks set to play a leading role in these discussions: “dual circulation.”

The new term has won a featured place in speeches and state media reports since May even though its precise meaning has been left rather ambiguous.

“Circulation” itself here refers to the production and consumption of goods and services. The first “circulation” in the “dual” formulation is about maintaining integration with the rest of the world. The second “circulation,” in the consensus view of economic observers, centers on increased reliance on domestic demand and reducing economic dependence on the rest of the world. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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Anxiety about the EU-China summit, which ended on Monday, had been growing for some time. First, the eruption of Covid-19 was reason to cancel the physical summit -the so-called Leipzig Summit — and opt for a video conference. The reality, though, is that there was not much was there to agree upon anyway. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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As the world struggles to overcome the Covid-19 crisis, Taiwan has so far behaved as a rare oasis in as far as mobility restrictions to counteract the pandemic have remained very limited thought the year except for a couple of weeks in early February. Those early containment measures in February did slow down the Taiwanese economy and even more so the global lockdown in the second quarter, as shown by the recent publication of Taiwan’s second quarter GDP, which has turned out to be negative, but only slightly. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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The dominance of Chinese state-owned enterprises in China’s domestic market is giving them unfair advantages in the European Union single market as well. The EU Commission recently released a series of recommendations for leveling the playing field regarding foreign subsidies. Unfortunately, while useful, these ideas are unlikely to be enough to deal with the issue.

Given the urgency of the matter, any solutions need to go beyond trade instruments toward competition ones, which have not been considered by the EU until now. …


Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

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China has been hit first by the Pandemic, but it has also exited first. Its economy is giving some signs of recovery but it is still too early to assess the speed and shape of such recovery. At the same time, the rest of the world has been hit even harder and is barely starting to exit lockdown against the pandemic. China economy is surely suffering the lack of external demand but there is a hope that domestic demand can cushion it. So far data for domestic consumption and investment do not seem to indicate that this will be the case. In fact, retail sales in April have grown -7.5% compared to an average of 8% last year. Meanwhile, fixed asset investment grew by -10.3% with infrastructure investment alone saw -11.8% negative growth in April 2020. …

About

Alicia Garcia Herrero艾西亞

Senior Fellow at Bruegel

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