Macro Dashboard - Emerging Markets Monitor

CEIC Gallery/World Economy/Emerging Markets - January 25, 2016 (Data from CEIC Gallery which is a collection of macroecomonic templates to cover the world economy, emerging economies, thematic analysis and hot topics) The high economic growth in both ASEAN and China has drawn many investors' attention in the past decade. In this section, users can monitor ASEAN’s investment environment through Investment in ASEAN, China’s economy through Li Keqiang Index and Deflation Risk in China, and how the policies are implemented in China through CNH Tracker, One Belt One Road, R&D in China and Urbanization Rate. Investment in ASEAN - Emerging Economies The expansion of foreign direct investment (FDI) inflows is one of the main drivers of an acceleration of economic growth and development in ASEAN. Since the 1980s, ASEAN has long pursued outward-oriented FDI policies, and has successfully been integrated with East Asia’s production networks and supply chains (in advanced ASEAN countries, namely; Singapore, Malaysia, Thailand and the Philippines). China significantly complements ASEAN as a destination for FDI, and also has become an important player in FDI inflows to ASEAN. However, as China labour and operational costs continue to increase, some FDI to China starts to shift to ASEAN. Japanese companies are recently shifting their investments from China and increasingly focusing on the ASEAN. Li Keqiang Index - Emerging Economies Li Keqiang Index (Keqiang Index) was initiated by the magazine The Economist in 2010, which was inspired by the speech of then-China Premier Li Keqiang. He preferred to employ electricity consumption, cargo traffic and loans disbursed by banks to gauge economic activity to GDP measure. CEIC calculate year-on-year percentage growth of the mentioned indicators from CEIC data series and build Li Keqiang Index based on the designated weight (see table below). With the readings of these indicators released in advance, the Keqiang Index can be regarded as a leading indicator of China GDP growth. Deflation Risk in China - Emerging Economies / Hot Topics CPI rebounded from the bottom since Feb 2015. The rise was mainly driven by higher food prices, especially rising pork price which accounts for around 10% of CPI. Higher tobacco tax, which increased 6% to 11% in May 2015, is also one of the factors. PPI, however, kept falling and hit a new record low since 2010. It was affected by metal and energy price slumps and cooled demand. Although CPI rebounded in 2015, China is still facing deflation risk. Rising pork price is unlikely to be a long-term factors as the supply is relatively flexible. On the other hand, weaker China growth indicates lower demand for goods and services, which would lead to factory overcapacity and downwards price pressure. Decline in some commodity prices such as oil, copper, lead, iron and steel are also unlikely to turn around in short term. CHN Tracker - Markets With the liberalization of China's capital accounts underway, the Chinese government introduced several programmes to facilitate the capital flow across the boundaries, namely Qualified Domestic Institutional Investors (QDII), Qualified Foreign Institutional Investors (QFII) and (RMB Qualified Foreign Institutional Investors (RQFII). The CNH tracker aims to monitor the capital flow under this programme and offshore RMB accumulation. One Belt One Road - Emerging Economies / Hot Topics "One Belt One Road" was announced in late 2013 for solving the overcapacity issue in China. With no doubt, this would be a good opportunity for Chinese companies to seek new opportunities outside China. The chart below shows that the outward direct investment to the "one belt one road" countries has increased rapidly since 2013. R&D in China - Emerging Economies As the world’s second largest economy, the scale of China’s manufacturing industries has outperformed US’s since 2010. However, China still falls behind in manufacturing technology and innovation compared to developed countries, which makes cost the only advantage in most of China’s products and hinders China from having further growth on external demand. To cope with this issue, the Chinese government has announced the strategy of “Made in China 2025” in May 2015. The main idea of this strategy is to improve the quality, innovation and hence competitiveness of China-made products to a certain level by the end of the year 2025. The government has listed out 10 priority industries. These industries are expected to obtain more research and development (R&D) resources from the central governments. Urbanization Rate in China - Emerging Economies China mentioned in its suggested 13th 5-year plan the target of doubling the country’s GDP in 2020 compared to 2010. Urbanization is one of the economic engines to maintain the country’s high to medium economic growth. In fact, China has already started a new-style urbanization plan in 2014. The term “new-style” refers to the urbanization plan that would not degrade residents’ living quality, the region’s agricultural development and ecological environment. Under the plan, urban development in both city and township areas have the same importance. According to the National New-Style Urbanization Integrated Pilot Program announced by the National Development and Reform Commission (NDRC)’s Development Planning Department, Jiangsu Province, Anhui Province and 62 counties/townships of other provinces have been selected as the pilot regions of this urbanization plan. The program has been starting from late 2014. It is expected to be reviewed in 2017 and expand to other regions during 2018-2020. The urbanization plan includes the reform of household register system, establishing a mechanism for sharing the cost of assisting migrant workers among the government, enterprises and individuals, setting up a diversified and sustainable financing and investment mechanism for urbanization projects such as encouraging public-private partnership (PPP) investment and so on. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
9th February 2016 Macro Dashboard - Emerging Markets Monitor