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

David Martínez Turégano, Senior Economist at European Commission

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The discussion on value chains has heated up since the US-China trade war started in 2018 and, even more so, with the scarcity of certain health products following the outbreak of the COVID-19 pandemic this year. Both geopolitics and security considerations as concerns for the the global supply chain have come to the forefront of the debate, pushing the discussion about the need to reshuffle global value chains further. …


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

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After more than seven years of negotiations, the European Union and China appear to have reached a deal for their Comprehensive Agreement on Investment to go forward right before the deadline pressed by President Xi Jinping at the EU-China summit back in September.

The deal is important politically as it shows the EU’s commitment to its own economic sovereignty without constraints from the U.S. and it follows the example set by the 10-members of the Association of Southeast Asian Nations, Australia, Japan and South Korea in signing the Regional Comprehensive Economic Partnership back in November. Suddenly, it looks as if U.S. President-elect Joe Biden has been left alone in his pursuit to contain China even before he is sworn in on Jan. …


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

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Asian economies have been hit by the pandemic but differences among countries are striking. Beyond the extent of lockdowns and the size of the policy response, whether fiscal or monetary, the underlying characteristics of Asian economies also explain differences in growth trends.

Countries with the largest current account deficits have suffered, as risk-off episodes have complicated their necessary external funding, constraining their fiscal support. This is the case of India, Indonesia and the Philippines. In turn, the Chinese mainland, but also other economies such as Vietnam and China’s Taiwan and, to a lesser extent, South Korea and Japan have been less impacted both because of more effective containment policies and, in many cases, larger fiscal and monetary response. In addition, many of these economies’ sectoral specializations have helped increase exports during COVID-19, whether tech, electronic or medical supplies. …


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

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After more than seven years of negotiations, a final agreement between China and the European Union on a Comprehensive Agreement on Investment (CAI) could be reached before the end of 2020. This deadline was agreed at the EU-China Summit in April 2019 and President Xi reminded European of the importance of striking a deal before year-end during the EU-China Virtual Summit in September.

Here, we first examine the minimum conditions that EU negotiators would want met in order to seal a deal. …


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

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Many Asian economies will age more rapidly over the next several decades, including Hong Kong, Japan, mainland China, Singapore, South Korea, Taiwan and Thailand. Asia’s working-age population peaked in 2015 and will gradually decline at an accelerating rate in the coming decades.

By 2050, the elderly population in these countries on average is expected to increase to 27% from 7% in 1995.

Reduced labor supply creates a drag on growth, but this can be mitigated by higher labor participation, investment in capital-intensive sectors, and government policies that address productivity.

That said, it is a gravity-defying act. …


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

COVID-19 has led to the transmission globally of value chain disruptions originating in China and the scarcity of critical medical goods, not helped by an increase in export restrictions imposed by producing countries. These developments have prompted a debate on the resilience of economies in dealing with such challenges. For the European Union, this discussion poses major questions: how has the world’s most industrially-integrated area and largest exporter become so dependent on China for a large number of products, and which sectors are most affected and why?

To answer these questions, we look in this blog post at the EU’s role in global value chains and, more generally, its external competitiveness. The EU is the region with the greatest degree of participation in global value chains, but that participation — in the EU’s regional value chain as well as globally — is shrinking fast, a phenomenon that may have significant relevance for the integration of the EU single market. The EU’s decreasing role in value chains is linked to technological innovation and human capital. On both fronts, we find preliminary evidence that China is catching up very fast. …


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

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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. …

About

Alicia Garcia Herrero艾西亞

Senior Fellow at Bruegel

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