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Chinese economy and the IMF: Is risk in eye of the beholder?

The International Monetary Fund’s (lMF) latest assessment on the Chinese economy was released on Feb 6 by the IMF Resident Representative Office in China. It included recent developments, the outlook, risks and policy suggestions. Reflecting the worsened external environment since the last update several months ago, China’s economic growth for 2012 was revised down to 8.25 percent. But still, China remains a bright spot in the midst of intensifying strains in the euro and fragilities elsewhere.

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The International Monetary Fund’s (lMF) latest assessment on the Chinese economy was released on Feb 6 by the IMF Resident Representative Office in China. It included recent developments, the outlook, risks and policy suggestions. Reflecting the worsened external environment since the last update several months ago, China’s economic growth for 2012 was revised down to 8.25 percent. But still, China remains a bright spot in the midst of intensifying strains in the euro and fragilities elsewhere.

Steady progress is being made on many fronts. The external current account surplus fell to about 3.3 percent of GDP; monetary policy has been fine tuned; and owing to prudent policies, inflation is now forecast at about 3.3 percent, barring any food supply shocks; and measures to contain speculation in the property market have been successful.

Having said that, China is not without internal risks. Balance sheet deterioration from the slowing real estate and export sectors, and outstanding loans to local government financing platforms could dampen economic activities.

Moreover, recent rebalancing took place largely through a surge in investment, rising from 42 percent of GDP in 2007 to 48 percent in 2011. This raises sustainability questions. Moreover, China is exposed to Europe and other countries through trade. In fact, China’s global exposure has risen, with its share in global exports in 2011 rising to 10.5 percent, up from 8.8 percent in 2007.

China’s outlook is inevitably tied with the global environment. Most advanced economies will decelerate, and emerging economies will grow at a slower pace. The eurozone economy, on the other hand, is now expected to go into a mild recession weighed down by deleveraging and fiscal consolidation. Global growth is now projected to expand by 3.25 percent in 2012, down by about 0.75 percentage points relative to the September projection.

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Is risk in eye of the beholder?

Thailand enjoys a strategic location and serves as a gateway into the heart of Asia – home to what is today the largest growing economic market.

The country also offers convenient trade with China, India and the countries of the Association of Southeast Asian Nations (ASEAN), and easy access into the Greater Mekong sub-region, where newly emerging markets offer great business potential.

Hub of ASEAN

Thailand was one of the founding members of ASEAN and has been instrumental in the formation and development of the ASEAN Free Trade Area (AFTA).
AFTA entered into force on 1 January 2010 for the six original ASEAN (ASEAN-6) members (Thailand, Singapore, Malaysia, Indonesia, Philippines, and Brunei), thereby reducing import duties to zero; the so-called CLMV countries (Cambodia, Laos, Myanmar and Vietnam) will follow suit in 2015.

Thailand has forged close economic cooperation with other ASEAN member nations, and Thai manufactured products and services have access to their markets, which includes all 10 ASEAN countries. ASEAN is home to more than half a billion people, GDP in excess of US$1.5 trillion and total trade of well more than US$1 trillion per year.

Social and political stability

Thailand is a foreigner friendly and welcoming Buddhist country. The country’s form of government is a constitutional monarchy, with a high reverence for the Thai Monarchy, and devotion to the teachings of Buddhism. And although the vast majority of the people in Thailand are Buddhist, all religions are welcome, and His Majesty the King is the patron of all religions.

The SET installed new Trading System to facilitate future growths in Thailand financial and stock markets

In addition the Exchange will increase foreign listings to not less than 5 percent of total market capitalization. The new structure proposes 2 major groups: (1) The Stock Exchange of Thailand and (2) the Capital Market Development Fund (CMDF). The SET will focus mainly on the capital market functions while the CMDF will deal with long-term capital development through investor education, capital market personnel development and support for SET Research Institute, corporate governance and corporate social responsibility.

 

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