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Begin New Search Topic De-Risking Publication Year within 3 Years

1. What if? The Effects of a Hard Decoupling from China on the German Economy

Author:
Julian Baqaee, Julian Hinz, Benjamin Moll, Moritz Schularick, Feodora A. Teti, Joschka Wanner, and Sihwan Yang
Publication Date:
01-2024
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
How would the German economy cope with a hard economic decoupling from China? The authors study a scenario where the global economy fragments into three distinct blocs: the G7 economies and their allies, China and her allies, as well as neutral countries. German trade with China would have to be entirely rerouted to countries within the "Western" block and neutral countries. The authors quantify the costs of such a worst-case hard decoupling using the (Baqaee and Farhi 2021) multi-sector model of the world economy. The key finding is that a total cut-off of trade relations with China would have severe but not devastating effects on the German economy. The welfare loss for Germany (relative to a no-cut-off baseline) would be around 5 percent of Gross National Expenditure (GNE) over the first few months and around 4 percent over the first year, plus additional short run costs due to business-cycle amplification effects. In the medium and long run, the costs would fall to a permanent loss in the 1–2 percent range. Less extreme decoupling or gradual de-risking scenarios (“small yard, high fence") would incur smaller costs. The single most influential assumption relates to the “trade elasticity,", i.e., the ease and speed with which trade can be reorganized away from China to neutral countries and within the “Western” block. The authors´ findings, in particular the critical dependence of economic costs on the time horizon over which adjustments take place, provide some rationale for embarking on a gradual de-risking trajectory to avoid a costly and politically contentious hard decoupling dictated by geopolitical events.
Topic:
Globalization, International Trade and Finance, Sanctions, Geoeconomics, Decoupling, and De-Risking
Political Geography:
China, Asia, and Germany

2. Foreign investments, de-risking and the EU’s green transition: Mining critical minerals in Finland

Author:
Elina Sinkkonen and Marco Siddi
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
The EU is highly dependent on imports of critical and strategic raw materials, both at the extraction and the processing stages. Many of the key supply chains for these materials are dominated by China. In addition, the EU is also dependent on China for many green technologies, such as battery production. The EU’s Critical Raw Materials Act (2023) sets concrete targets for reducing dependencies in the green transition by 2030. Considering both the level of existing dependencies in critical and strategic raw materials and the fact that the Act does not provide any new funding instruments, the feasibility of reaching the set targets is questionable. The Finnish mining sector presents an interesting case that illustrates the scarcity of domestic financing. Most metal ore mines in Finland are owned by foreign companies, and similar trends apply to the refining and recycling of materials. If the EU wishes to mitigate the risks of becoming dependent on authoritarian countries, foreign investments in sectors relevant to the green transition should be subject to investment screening. For example, the Finnish Act on the Screening of Foreign Corporate Acquisitions does not cover greenfield investments such as investments in building battery factories.
Topic:
European Union, Mining, Supply Chains, Green Transition, Raw Materials, Critical Raw Materials (CRM), and De-Risking
Political Geography:
Europe and Finland

3. 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

4. Europe’s De-risking from China: Dead on Arrival?

Author:
Nicola Casarini
Publication Date:
07-2024
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
De-risking ties from China has become a buzzword in European policy circles, amid growing tensions between the West and the Asian giant. While US policymakers and experts continue to focus on the need to decouple ties from Beijing, the concept of de-risking has been largely fashioned in Brussels to avoid the decoupling debate and find a common transatlantic ground. While EU member states have reduced critical dependencies on China to varying degrees, their efforts are resisted by some large companies, local authorities and civil society actors eager to boost ties with Beijing. Recently, several EU governments have been promoting industrial cooperation with China, opening doors to Chinese investments in their territories to boost production of electric vehicles and green technologies. While this form of cooperation brings benefits to Europe’s industrial capacity and competitiveness, it however risks increasing the level of dependency on Beijing, undermining the de-risking strategy being put in place by the European Commission, as well as deepening the rift with the US on how to deal with the Asian giant. Going forward, there is a need for a thorough and frank debate about the EU’s de-risking strategy and its future prospect, also considering a possible return of Trump to the White House.
Topic:
Foreign Direct Investment, European Union, Trade, Transatlantic Relations, Industry, and De-Risking
Political Geography:
China, Europe, and Asia