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1. India-China rapprochement: what are the long-term prospects?

Author:
Nayanima Basu and Alicia Garcia-Herrero
Publication Date:
05-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China-India relations, which have long been fraught, were further complicated by the 2020 military standoff on the Himalayan border. The political disruption had a significant impact on Chinese companies’ presence in India. And yet, India’s dependence on Chinese imports has increased since. The Indian economy is decelerating at a challenging time for Prime Minister Modi, who governs in a coalition. China could offer a partial solution to India’s economic woes by providing manufacturing FDI and creating jobs. The Modi-Xi ‘rapprochement’ after their encounter at the October 2024 BRICS summit signals that relations could improve. India may be willing to accept targeted investment from China, but relations are unlikely to fully normalise, particularly since the 2025 India-Pakistan military stand-off. There are three main reasons for this. First, the Indian army remains cautious about the situation at the border and security risks relating to China. Second, the United States under President Trump will exert pressure on Modi not to depend further on China. This is even more relevant in the context of Trump’s threat to impose tariffs on India. Third, Indian public opinion on China and the Belt and Road Initiative remains negative. India is predicted to experience greater growth than China in the coming decades, meaning China could lose its upper hand in economic relations between the two countries. This, however, will depend on how dependent India might have become on China for imports or for jobs through FDI and other channels. The militarised border, India’s asymmetric economic dependence on China and China’s leadership in the Global South will still shape the relationship even if the Indian economy grows to a similar size to China’s. India-China ‘rapprochement’ is possible but will remain fragile and unlikely to be maintained in the long run.
Topic:
Bilateral Relations, Governance, Economy, Economic Growth, Investment, and Trade
Political Geography:
China, India, and Asia

2. Will China’s economy follow the same path as Japan’s?

Author:
Alicia Garcia-Herrero and Jianwei Xu
Publication Date:
02-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Since the bursting of China’s real-estate bubble in mid-2021, there has been a growing concern that the Chinese economy could end up like that of Japan in the early 1990s. Some structural patterns are strikingly similar: low private consumption over a long period, especially when compared to the rest of the world, and an excessively high savings ratio, though China’s imbalances now are even larger that Japan’s were then. Initial policy responses to the bursting of their respective bubbles have also been similar. Both China now and Japan then were initially hesitant to ease monetary and fiscal policies, and opted to expand manufacturing, with an eye on external demand, supported by more research and development expenditure. In both cases, the outcomes were stubborn trade surpluses and a mercantilist attitude to their growth problems, leading to the United States taking protectionist measures. China also seems to be following Japan’s offshoring of production to mitigate the impact of protectionism. The main difference, though, is that China now is a poorer country than Japan was then, with still more convergence opportunities ahead. China is also a much bigger military and geopolitical contender than Japan ever was. China’s geopolitical weight is behind the US technological containment of China, but also gives China more room for manoeuvre globally, especially in the Global South. It remains unclear – though globally significant – whether China will be able to deviate from the path followed by Japan in the 1980s and 1990s.
Topic:
Industrial Policy, Geopolitics, Economy, Economic Growth, Innovation, and Real Estate
Political Geography:
Japan, China, and Asia

3. Lessons from China's fiscal policy during the COVID-19 pandemic

Author:
Tianlei Huang
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Expansionary fiscal policy helped China's economy grow in 2020, a year in which most economies contracted because of the COVID-19 pandemic. Amid a broader pivot to policy and regulatory tightening, fiscal support was withdrawn in 2021. In 2022, government budget turned expansionary to ensure economic stability ahead of the Communist Party Congress, but the execution fell short and fiscal policy ended up being weaker than planned. A recurrent problem during the pandemic, however, was that local governments did not fully spend their budgets. Aside from the sharp drop in local governments' land sale revenue in 2022, which dragged down their spending, it was also caused by local governments' failure to fully utilize their special bond quotas approved by the central government for capital investment. China's fiscal policy during the COVID-19 pandemic highlights four issues with implications for fiscal policy making. First, the government needs to avoid projecting unrealistically high land sale revenue in its budgets. Second, it needs to reconsider its problematic use of local-government special bond as a major fiscal stimulus instrument. Third, it needs to make sure its deficit, growth, and inflation targets are consistent. Last, Beijing needs to be more tolerant of higher fiscal deficits, at a minimum ensuring that overall fiscal spending grows at least as rapidly as nominal output.
Topic:
Budget, Economic Growth, Fiscal Policy, COVID-19, and Fiscal Deficit
Political Geography:
China and Asia

4. Geoeconomic fragmentation and net-zero targets

Author:
Shirin Hakim and Amin Mohseni-Cheraghlou
Publication Date:
04-2024
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
The second half of the twentieth century experienced significant economic integration. International trade, cross-border migration, capital flows, and technological diffusion increased per capita incomes across countries and reduced global poverty. However, events such as the global financial crisis of 2007 to 2009, Brexit, and the COVID-19 pandemic—all against the backdrop of escalating great power rivalry and tensions between the United States and China—have demonstrated the rise of geoeconomic fragmentation (GEF). Since the 2022 Russian invasion of Ukraine, a growing numberof world leaders have addressed the impacts of GEF on global energy and agricultural markets. For one, higher and increasingly volatile food and energy prices have made it increasingly difficult for developing nations to prioritize environmental concerns and implement sustainable development initiatives.
Topic:
Climate Change, Environment, International Trade and Finance, Economy, Economic Growth, Inclusion, Energy, Geoeconomics, and Net Zero
Political Geography:
China, Asia, and United States of America

5. Asia’s Climate Finance Needs & Opportunities: Advancing a Shared Vision

Author:
Meera Gopal and Kate Logan
Publication Date:
06-2024
Content Type:
Special Report
Institution:
Asia Society
Abstract:
Asia is home to over half of the world’s population and faces immense challenges from climate change impacts. Despite receiving more climate finance than other regions, Asia's needs far outpace current flows, highlighting the urgency for enhanced transparency and accelerated reforms. “Asia’s Climate Finance Needs & Opportunities: Advancing a Shared Vision” provides a comprehensive analysis of climate finance flows to developing countries in Asia, emphasizing the need for reforms to the global financial architecture. This report, launched by the Asia Society Policy Institute, takes stock of current financial flows, assesses how global financial reforms could enhance these flows, and offers recommendations for moving forward from an Asian perspective. The study highlights Asia's diverse climate finance needs, the role of China’s development finance in the region, and the challenges posed by varying needs across subregions. It underscores the importance of harmonizing data and standards to improve transparency and support equitable distribution of funds. Key recommendations include adopting a “whole-of-economy” approach, repurposing fossil fuel subsidies, and increasing finance for adaptation efforts by tapping into the private sector. These strategies aim to address the unique climate and development needs of Asia and support its transition towards sustainable growth.
Topic:
Reform, Climate Finance, Economic Growth, and Transparency
Political Geography:
Asia

6. Xi Jinping’s Quantitative Easing Unlikely to Save Economy

Author:
Willy Wo-Lap Lam
Publication Date:
10-2024
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
In an apparent U-turn, the People’s Republic of China (PRC) has initiated stimulus policies that have boosted the stock market and are attempting to jump-start key sectors and meet the annual GDP growth target of 5 percent. In the last week of September, the central bank announced a package worth at least 2 trillion Renminbi (RMB; $280 billion), cut the banks’ reserve requirement ratio by 50 basis points, and hinted at further measures. The domestic and international response has been underwhelming, in part because the package leaves the economy even more overleveraged than before. President Xi Jinping’s attempts to enhance the PRC’s global stature, including through a recent ICBM test and by deepening support for Russia’s war in Ukraine and for other countries willing to denounce the United States and the West, will not help the domestic economic woes as they discourage foreign investment.
Topic:
Monetary Policy, Economy, Economic Growth, Investment, and Quantitative Easing
Political Geography:
China and Asia

7. Quantitative Analysis of Optimal Investment Scale and Timing for Flood Control Measures by Multi-Regional Economic Growth Model: Case Studies in Viet Nam

Author:
Hiroaki Ishiwata, Masashi Sakamoto, Makoto Ikeda, and Venkatachalam Anbumozhi
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study aims to develop and utilise a multi-regional economic growth model that can take into account flood damage and investment in disaster risk reduction, and, through case studies in Viet Nam, quantitatively analyse the long-term effects of investment in disaster risk reduction on the national and local economy, as well as the optimal scale and timing of investments in flood protection, to gain a better overview of these factors. The results indicate that additional investment in disaster risk reduction could stimulate economic growth, and that the optimal range of the disaster risk reduction budget rate was around 0.3% to 0.5% of GDP, assuming a constant budget rate throughout the total 25-year calculation period. In the case of a variable disaster risk reduction budget rate, we observed that a variable budget rate that gradually reduces the disaster risk reduction budget rate from a higher level than the current rate could further promote economic growth than if the budget rate were fixed. In both cases, we verified that with excessive investment in disaster risk reduction, the high tax burden had the risk of reducing investment in production capital and lead to stagnating economic growth. By region, the long-term effects of investment in disaster risk reduction were most seen in the Central region, where the rate of flood damage is the highest.
Topic:
Economic Growth, Investment, Flood, and De-Risking
Political Geography:
Asia, Vietnam, and Southeast Asia

8. How China’s Human Capital Impacts Its National Competitiveness

Author:
Briana Boland, Kevin Dong, Jude Blanchette, Ryan Hass, and Erica Ye
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
How will the strengths and weaknesses of China’s human capital impact national competitiveness? China’s efforts to maintain economic growth, strengthen supply chains, develop strategic science, technology, engineering, and mathematics (STEM) sectors, and secure a modern military edge hinges on the ability to cultivate and utilize human capital. As the United States and other countries increasingly engage in multidomain competition with China, it is critical to start from a clear-eyed understanding of China’s human capital and Beijing’s strategy for nurturing national talent. Investments in higher education, strategic STEM sectors, and military talent demonstrate key areas in which Beijing is focusing on cultivating human capital. However, China must overcome significant obstacles to innovate as it faces substantial demographic pressures, socio-economic inequalities, and challenges to attracting and retaining top talent both domestically and internationally.
Topic:
Economic Growth, Human Capital, Supply Chains, and Competition
Political Geography:
China, Asia, and United States of America

9. The Post-2025 ASEAN Agrifood Landscape: What Next?

Author:
Paul Teng
Publication Date:
10-2024
Content Type:
Commentary and Analysis
Institution:
Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:
The ASEAN agrifood landscape – food produced from agriculture – has changed much since two key guiding documents were conceived – The ASEAN Vision and Strategic Plan of Action for Food, Agriculture and Forestry, 2016-2025, and the ASEAN Economic Community Blueprint, 2025. New players and new influencing factors are now at the forefront, and more than ever, ASEAN has to balance economic growth-related food security and safeguarding the environment while considering sustainable food systems that provide livelihoods for smallholder farmers and affordable, safe food for consumers.
Topic:
Agriculture, Food, Food Security, Economic Growth, and ASEAN
Political Geography:
Asia

10. Developing an International Macroeconomic Forecasting Model Based on Big Data

Author:
Sang-Ha Yoon
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In the era of big data, economists are exploring new data sources and methodologies to improve economic forecasting. This study examines the potential of big data and machine learning in enhancing the predictive power of international macroeconomic forecasting models. The research utilizes both structured and unstructured data to forecast Korea's GDP growth rate. For structured data, around 200 macroeconomic and financial indicators from Korea and the U.S. were used with machine learning techniques (Random Forest, XGBoost, LSTM) and ensemble models. Results show that machine learning generally outperforms traditional econometric models, particularly for one-quarter-ahead forecasts, although performance varies by country and period. For unstructured data, the study uses Naver search data as a proxy for public sentiment. Using Dynamic Model Averaging and Selection (DMA and DMS) techniques, it incorporates eight Naver search indices alongside traditional macroeconomic variables. The findings suggest that online search data improves predictive power, especially in capturing economic turning points. The study also compares these big data-driven models with a Dynamic Stochastic General Equilibrium (DSGE) model. While DSGE offers policy analysis capabilities, its in-sample forecasts make direct comparison difficult. However, DMA and DMS models using search indices seem to better capture the GDP plunge in 2020. Based on the research findings, the author offers several suggestions to maximize the potential of big data. He stresses the importance of discovering and constructing diverse data sources, while also developing new analytical techniques such as machine learning. Furthermore, he suggests that big data models can be used as auxiliary indicators to complement existing forecasting models, and proposes that combining structural models with big data methodologies could create synergistic effects. Lastly, by using text mining on various online sources to build comprehensive databases, we can secure richer and more real-time economic data. These suggestions demonstrate the significant potential of big data in improving the accuracy of international macroeconomic forecasting, particularly emphasizing its effectiveness in situations where the economy is undergoing rapid changes.
Topic:
GDP, Economic Growth, and Macroeconomics
Political Geography:
Asia, South Korea, and United States of America