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Navigating Economic Dynamics: East Asia and Pacific Region’s Growth Prospects

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Navigating Economic Dynamics: East Asia and Pacific Region’s Growth Prospects

The World Bank’s recent semi-annual economic outlook sheds light on the trajectory of the East Asia and Pacific region, revealing a landscape marked by resilience amidst global challenges. Despite outpacing global growth rates, the region faces a nuanced scenario, with factors such as recovering trade and financial conditions juxtaposed against rising protectionism and policy uncertainties.

According to the World Bank’s April 2024 Economic Update for East Asia and Pacific, regional growth is projected to moderate to 4.5% in 2024, down from 5.1% in the previous year. Within the region, developing economies are anticipated to witness a slight uptick in growth to 4.6%, while China’s growth is expected to decelerate to 4.5% amid various internal and external challenges. Pacific Island countries, on the other hand, are forecasted to experience a slowdown to 3.6%, reflecting a normalization of growth post-pandemic.

Manuela V. Ferro, Vice-President of the World Bank for East Asia and Pacific, underscores the region’s pivotal role in global economic dynamics despite facing multifaceted challenges, including demographic shifts and climate change impacts. To sustain growth momentum, she emphasizes the importance of fostering private sector investment, addressing financial sector issues, and enhancing productivity.

However, the outlook is not without risks, with potential downsides including a global economic slowdown, prolonged high interest rates in major economies, policy uncertainties, and geopolitical tensions.

A special focus of the report delves into the productivity gap among leading firms in the region, particularly evident in digital-intensive sectors. This lag raises concerns across the business spectrum, with impediments such as competition constraints, skill disparities among workers, and management inefficiencies identified as contributing factors. To address this, the report advocates for greater competition, improved infrastructure, and education reform to enhance human capital.

Aaditya Mattoo, Chief Economist for East Asia and Pacific at the World Bank, emphasizes the need for bold policy actions to unlock the region’s economic potential. While past growth has been driven by investment, Mattoo highlights the imperative of shifting towards productivity-led growth through measures such as competition enhancement, infrastructure development, and educational reforms.

In conclusion, the East Asia and Pacific region stands at a critical juncture, navigating through a complex economic landscape. By addressing structural challenges and embracing policy reforms, the region can harness its inherent strengths to foster sustainable and inclusive growth in the years ahead.

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Unraveling the Illusions: Assessing the U.S.-China Trade War

In the realm of U.S. politics, the narrative of leveraging trade war tactics against China persists, championed both by the current Biden administration and its Republican predecessor, Trump. Yet, amidst the clamor of trade bullying as a campaign strategy, the question lingers: Has the United States truly gained anything from this prolonged trade dispute, and what implications does it hold for China?

Despite fervent efforts to curb Chinese imports and mitigate trade imbalances, the reality paints a starkly different picture. The U.S. goods trade deficit ballooned to unprecedented levels, undermining the efficacy of Trump’s tariff-centric approach. Economists caution against the fallacy of equating trade deficits with economic woes, attributing them instead to deeper structural issues.

Moreover, attempts at decoupling from China have proven futile as supply chains remain intricately entwined. While direct trade may have waned, intermediary countries often serve as conduits for Chinese inputs destined for American shores, complicating supply chains and inflating costs. Trump’s promise of reviving manufacturing and job creation has similarly faltered, with tariffs failing to significantly impact employment figures, and retaliatory measures exacerbating economic strains.

The repercussions extend beyond domestic borders, casting shadows over global trade norms. The U.S.’s unilateral actions, bypassing international arbitration mechanisms, have eroded the foundations of the multilateral trading system. Trump’s utilization of Cold War-era tactics, such as the Section 301 investigation, and Biden’s continuation of protectionist measures only exacerbate tensions, perpetuating uncertainty in the global economy.

Meanwhile, the impact on China’s economy presents a more nuanced narrative. Despite trade frictions, China maintains its position as a global economic powerhouse, bolstered by robust trade networks and strategic partnerships. Embracing multilateralism, China champions free trade agreements and upholds the principles of open markets.

Contrary to the rhetoric of decoupling, the intertwined nature of the U.S. and Chinese economies persists. Stateside, export-dependent regions like California rely heavily on Chinese markets, while Chinese exports continue to meet American consumer demand. Efforts to sever these economic ties are deemed fallacious, underscoring the enduring interdependence of the world’s largest economies.

As the specter of trade war rhetoric looms large in political discourse, the need for a recalibration of strategies becomes increasingly apparent. The pursuit of protectionism and unilateralism yields little benefit, instead perpetuating economic uncertainties and global tensions. In embracing collaboration over confrontation, both the United States and China stand to foster greater economic stability and mutual prosperity in an interconnected world.

china

Pivoting from China? Consider These Points

For years, offshoring to China, for operations, supply chain, or otherwise, was routine, seen by businesses as a means to cut costs and increase profits. 

However, foreign businesses operating in China, or whose supply chains involve China, are experiencing increased costs, whether in the form of regulatory compliance costs, increased dues and tariffs on imports from China, or increased costs of goods in China itself, all of which have eroded profit margins for some businesses. Recent supply chain shortages and delays, even after the COVID-19 pandemic, have undermined normally efficient and timely processes, and further cut into profits. The changing state of diplomatic affairs between the United States and China alone gives rise to uncertainty for businesses. 

Imports from China have been declining steadily since last year and, in 2023, the U.S., once China’s largest export market, became only its third largest, behind the Association of Southeast Asian Nations and the E.U. China’s share of U.S. imports in the furniture, textile, and machine industries is at its lowest level since 2015. This decline in imports is partly attributable to the recent acceleration of supply chain reshoring, or domestication, among U.S. businesses, and rising imports from other countries, including Malaysia, Vietnam, India and Mexico. 

Indeed, businesses big and small, from Adidas, Apple, Nike, and Samsung on down, have been reevaluating their operations and supply chains involving China, and are either pivoting from China completely, via a clean break, or partially, adopting what is called the “China plus” strategy. They have found that adopting a “China plus” strategy, for example by engaging additional manufacturers or suppliers in other countries, prevents reliance on any one source, providing a buffer against supply chain shortages and delays, or unexpected changes in cost or regulation. In any case, businesses that are considering shifting their operations and supply chains, or at least parts of them, elsewhere should do so responsibly. 

As with any relationship, the parties and countries with which businesses are newly associating ought to be appropriately vetted, to ensure that what they have to offer works practically and in accordance with law. Businesses should consider:

  1. Industry

For some industries, if sufficient alternatives in other countries are available, it may make sense to clean break from China; for others, where alternatives are sparser, it may make sense to adopt a “China plus” strategy. For example, some businesses in the electric vehicle, lithium battery, semiconductor, and rare earth industries have found success completely reshoring their operations, manufacturing, and production, because of increased domestic investment in those areas. Businesses in the solar panel industry have found success completely outsourcing to countries like Bangladesh, Cambodia, Malaysia, the Philippines, and Thailand. The furniture and textile industries have found success paring back in China while expanding parallel operations and supply chains in different locales familiar with the processing components from China, such as Mexico and Vietnam.  

2. Resources

The capital at a business’ disposal is always a consideration; a “China plus” strategy, in integrating more players, is likely to add costs in some aspects, but may save costs that would be associated with a clean break. Additionally, a business will need to have adequate human resources at its disposal, not the least of which is personnel competent and experienced in managing complexities across different jurisdictions and involving various parties, and in handling increased responsibilities in inventory and transit.

3. Logistics

Logistics will need to be considered as well. With the “China plus” strategy, adding more sources, as opposed to replacing sources in China in their entirety, may involve more handlers and transit throughout a business’ process. This requires that businesses consider their internal procedures and their obligations to their customers, and whether the time required by adding more sources aligns with the same. Will cultural issues and holidays (formal and informal) present any issue regarding timely manufacture and delivery? 

4. Payment

Additionally, when engaging any foreign parties, businesses should consider the applicable foreign currency controls, and payment logistics. Establishing foreign bank accounts and know-your-customer requirements can be burdensome and time-consuming.  A business should check to see if its bank is able to timely issue payment to, and receive payment from, the foreign party or foreign jurisdiction, and also whether the foreign party is affiliated with a domestic affiliate or subsidiary for payment purposes. 

5. Due Diligence

Whether breaking cleanly from China, or bringing other players into the mix, a business ought to properly vet the parties and the jurisdictions with which it is dealing. Physically visiting and inspecting the parties and their operations, if reasonable, is preferred. One cause for concern, for instance, may be where a party has a physical office location, but no manufacturing presence, creating risks of product origin misclassification for U.S. tariff purposes, which can lead to fines and penalties. A business at the very least should have been referred to the parties by a trusted and reputable source, or know that the parties are dealt with and respected by others in the industry. 

A business should audit the parties and their processes, and ensure alignment with its own and with the processes of any other parties involved. Such should include a review of contractual arrangements between a party and its subcontractors or suppliers, to ensure that any one party is not overly reliant on another’s performance. 

For compliance with U.S. Customs regulations, parties exporting goods to the U.S. should be able to provide businesses with bills of lading demonstrating the movement of the goods for each shipment, invoices and proofs of payment (where appropriate) for any components of such goods, and exporter certifications describing the origin of the goods and any components thereof. 

Depending on the countries and goods involved, it may be helpful to engage a qualified attorney for a review of U.S. Customs regulations and other applicable domestic laws (such as export controls on certain goods, including sensitive industries [advanced computing and semi-conductor, AI, encryption, geo-location, etc.]  and military goods), and the applicable laws of the foreign jurisdiction, to ensure businesses are (or would be) compliant and that they understand any resulting changes in duties or tariffs, processes, responsibilities, and risks involved. Customs, for example, determines the “country of origin” of a particular good based upon the extent to which it is manufactured or transformed in any particular country, and the “country of origin” determination affects the applicable duties (including anti-dumping and countervailing duties) and tariffs. 

The Bureau of Industry and Security of the U.S. Department of Commerce maintains lists of countries, goods, entities, and individuals subject to controls, bans and other sanctions. The lists, including a Consolidated List, can be located under the “Policy Guidance” tab at bis.doc.gov/index.php.  Banks, too, will often flag certain entities and individuals. Before considering engaging additional or new parties, especially in other jurisdictions, a business ought to check against the Bureau’s lists and consult their bank. 

A business that is pivoting from China—or anyone considering business abroad—would do well to assess carefully the alternatives and associate with proven parties, with strong track records, and in reliable locations.  One should do so only after assessing and accommodating for the landed costs of goods (including duties and tariffs), risks and responsibilities involved, with the consultation of the appropriate professionals. 

Author Bio

Charles Baldwin is a partner and Mousa Alshanteer is an associate with the North Carolina law firm Brooks, Pierce, McLendon, Humphrey & Leonard, LLP (“Brooks Pierce”). Both have significant experience in helping companies pursue business overseas. This article expresses the views of the authors, is for educational purposes only, does not constitute legal, tax, or other professional advice or express the views of Brooks Pierce. You are advised to seek independent legal advice regarding any international transaction. 

sprayers

China’s Increasing Export of Food Products Results in Growth of the Agricultural Sprayers Market Accounting for 94% Growth in Revenue

The global agricultural sprayers market size is predicted to reach US$ 3,106.1 million in 2023 and further register a growth rate of 5.9% CAGR between 2023 and 2033. Total agricultural sprayer sales are poised to generate revenues worth US$ 5,499.5 million by the end of 2033.

Growing focus on farm mechanization to cope with rising food demand along with rising popularity of self-propelled and aerial sprayers is a prominent factor driving agricultural sprayer demand worldwide.

Agricultural sprayers are machines or equipment used for applying liquid substances such as fertilizers, pesticides, and herbicides to crops or plants. Addition of these liquid substances by using agricultural sprayers allows farmers to maintain crop health during the crop growth cycle.

Agricultural sprayers come in various types, sizes, and designs. Right from simple handheld sprayers to self-propelled and aerial ones, agricultural sprayers have become essential pest control tools across the thriving agricultural sector.

 

Incorporation of agricultural sprayers helps farmers significantly improve productivity and save labor costs. They also save farmers from pesticide exposure. Thanks, to these features, demand for agricultural sprayers is set to rise at a healthy pace during the projection period.

Rapid shift from manual farming to modern mechanized farming, especially across nations such as China, India, and the United States is expected to bolster agricultural sprayer sales over the next ten years.

The progression of modern farm techniques has a direct impact on the growth of the agricultural sprayers industry. Development and adoption of precision farming techniques provide benefits to production corporations, agricultural cooperatives, agricultural operators, and local governments.

Another crucial factor expected to positively influence expansion of the global agricultural sprayers is the growing concerns regarding food insecurity triggered by population explosion and reduction in arable land.

As per the Food and Agriculture Organization (FAO) of the United Nations, severe food insecurity increased from 10.9% in 2020 to 11.7% in 2021. This is prompting farmers throughout the world to adopt innovative agricultural products and technologies to enhance their crop production.

Agricultural sprayers are important for increasing farm efficacy and crop production. Farmers and agricultural enterprises use their time, money, and other resources to accomplish farming goals in order to produce crops.

The interval between crop planting and harvesting is one of the most important phases of crop production. To prevent the young crop from weed growth, bug, and pest infestation, farmers used various chemicals. For applying them, agricultural sprayers have become ideal tools.

Spraying in agriculture is one of the frequent and important activities for the application of fungicides, herbicides, and insecticides. The farmers are shifting from conventional spraying techniques to new-age spraying techniques as well as novel agrochemicals. Thus, increasing farming activities and the production of liquid-based agrochemicals are expected to drive demand for agricultural sprayers.

Further, growing popularity of unmanned aerial vehicle (UAV) sprayers, portable power sprayers, and air-assisted sprayers worldwide will create lucrative growth opportunities for agricultural sprayer manufacturers over the next ten years.

Key Insights

As per FMI, the agricultural sprayers’ demand is predicted to reach 1.2 million units in 2023. Rapid transition towards modern mechanized farming and increasing focus on enhancing crop production to tackle food insecurity are key factors spurring growth in the global agricultural sprayers industry.

Subsequently, awareness associated with the benefits of using advanced agricultural equipment, especially across India, Japan, Korea, and other developing nations is surging. These benefits such as reduced cost, improved efficiency, and reduced manual labor will boost agricultural sprayer sales through 2033.

Agricultural sprayers have become essential equipment for applying liquid agrochemicals to plants or crops. They help farmers to protect crops from pests, improve productivity, and save money. Hence, growing usage of sprayers across thriving agricultural sector is anticipated to aid in the expansion of the global market.

Leading companies in the market are committed towards developing advanced agricultural sprayers to cater to the rising demand from end users. They are continuously introducing innovative spraying equipment to increase sales. This will bode well for the market

trade

DMCC Reports on the Future of Trade as Global Trade Defies Expectations in 2021

DMCC’s latest feature, Defying Predictions and Driving Post Pandemic Economic Recovery, unravels global trade predictions for 2021 in a positive manner. The article explains the surprising resilience through the 2020 year despite challenged by the global pandemic.

The report highlighted two key global and regional takeaways, first, global trade will underpin strong global economic growth in 2021 with the US and Chinese economies leading the way. This growth has defied expectations of double-digit annual declines, which had been estimated between 13-32% by the World Trade Organization. Second, Dubai, a major trade hub, saw its foreign trade growth rebound significantly in 2020, despite the economic challenges posed by the COVID-19 pandemic. The second half of 2020 seeing a particularly strong jump in volumes of 6% year-on-year. Dubai’s overall export values jumped 8% in 2020, on an annual basis.

Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer of DMCC, said, “In 2020, the outlook for global trade was bleak as the world sought to grapple with the impact of the pandemic. Today, the picture is much more positive, as evidenced by the findings of our latest Special Edition Future of Trade – 2021 report. But while global trade has shown its resilience, it is simultaneously in the midst of profound change. Technology, changing consumer behaviors, the drive to combat climate change, and geopolitics will all be key contributors to its reshaping in the years ahead. In this context, our research puts forward several tangible recommendations to governments and businesses seeking to navigate this new landscape and accelerate the recovery from the pandemic.”

According to the research, the most transformative element of the global trade outlook is technology. Blockchain, decentralized finance, DeFi, and other new and disruptive technologies will further accelerate growth. For example, DeFi protocols have seen a considerable amount of funds invested. Since the start of 2021 alone, the total value locked into DeFi has tripled from approximately USD 20bn to USD 60bn. As digital infrastructures grow, they will continue to accelerate a ground-breaking shift in trade from the national to the global.

Commenting on the release of the Special Edition report, Feryal Ahmadi, Chief Operating Officer, DMCC, said, “Following a challenging and uncertain period, the evidence presented in our Future of Trade report suggests an optimistic outlook. Global trade has defied all expectations and will underpin global economic growth. While geopolitics will continue to present challenges and impact the global trading system, the adoption of technology will continue to shape the future of trade. An important development over the last twelve months has also been the pivot of governments, companies, and investors towards sustainable practices in international trade – now high on the agenda. What the report ultimately reiterates, in line with our previous findings, is that international coordination and collaboration, and technology remain the key enablers and drivers of the recovery.”