Economics
Trumping financial risks in Asia
Twenty years after the Asian financial crisis of 1997–98 and the global financial crisis of 2007–08, storm clouds are gathering once again
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In July 2018, the Bank for International Settlements (BIS) asked whether the world was heading towards a perfect financial storm.
With the US stock market heading for record highs even as emerging markets like Argentina and Turkey were running into foreign exchange problems.
Twenty years after the Asian financial crisis of 1997–98 and the global financial crisis of 2007–08, storm clouds are gathering once again.
Conventional economic models failed to predict the last two crises because the technical definition of financial risk is measured volatility.
The global financial crises proved that current models of financial risk, largely used by banks and financial regulators, are totally blind to Black Swan or Grey Rhino events of unmeasurable uncertainty.
This time round, the consensus is that the Grey Rhino (an event with high probability and high impact, but where the trigger is uncertain) is the looming rise in US interest rates in response to a domestic economy that is running at nearly full capacity, with low unemployment levels and signs of creeping inflation.
As the BIS has warned, non-financial borrowers outside the United States owe US$11.5 trillion dollars, of which US$3.7 trillion is owed by emerging markets.
Global financial fragility comes from two structural imbalances
First, the United States is the leading deficit country in terms of trade and debt, owing the world a net US$7.7 trillion, or 39.8 per cent of GDP.
This amount is growing because of rising fiscal debt and the low level of national savings.
Second, below-par global growth since 2008 has been underwritten almost completely by central bank unconventional monetary policies, which have brought interest rates to an unsustainably low level.
Market fears that the large central banks will withdraw quantitative easing — QExit — threaten to jeopardise the current frail recovery, which is why US President Donald Trump is also against the Federal Reserve raising interest rates.
If geopolitical risks trump financial risks, what could go wrong in the coming months?
Western analysts think that the trigger will be a Chinese debt meltdown. But Chinese debt is internal debt, as China has foreign exchange reserves equivalent to 188 per cent of its foreign debt and still runs a current account surplus.
China’s debt problem is an internal debt issue, very much like that of Japan. While Japanese debt is owed largely to Japanese households, Chinese debt is largely owed by state-owned enterprises and local governments to state-owned banks. In such a situation, China is well positioned to rewrite its national balance sheet, a privilege not possible for more privately dominated markets.
Financial risks are rising not just in China, but globally
Dun and Bradstreet’s Global Risk Matrix, published in May 2018, suggested that US interest rate rises could trigger a fresh debt crisis, sending the global economy into contraction.
Echoing this sentiment, the International Monetary Fund’s July 2018 World Economic Outlook argued that rising trade tensions are threatening growth recovery in Europe, Japan and Britain more than predicted.
Any overheating in the United States would trigger currency crises for some emerging markets.
In short, we cannot separate financial risks from geopolitical risks. Any unforeseen event arising from a geopolitical miscalculation, climate change disaster, war or cyber-induced disruption could trigger another round of financial crises.
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Business
EU’s Solar Initiatives in Southeast Asia Impacted by US-China Trade Tensions
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中国拥有的太阳能公司在东南亚,尤其是泰国、越南、马来西亚和柬埔寨,正面临潜在的挑战和机遇。
Challenges for Chinese Solar Companies in Southeast Asia
Chinese-owned solar companies in Southeast Asia, especially in Thailand, Vietnam, Malaysia, and Cambodia, are encountering significant challenges. These nations are becoming crucial markets for solar energy; however, increased competition and regulatory hurdles are complicating their operations.
Regulatory Hurdles
Many Southeast Asian governments are implementing stricter regulations for foreign investments in renewable energy sectors. This development may hinder Chinese companies’ ability to navigate local laws and establish a strong foothold in these growing markets.
Market Competition
Beyond regulatory challenges, the competition among local and international solar companies is intensifying. To succeed, Chinese firms must innovate and adapt their strategies to meet regional demands while maintaining cost-effectiveness and securing partnerships with local entities.
Source : EU’s solar plans in SE Asia caught in US-China trade war
Business
Malaysia Launches ‘Luxury’ Durian Exports to China as Indonesia Eyes Market Opportunities
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Malaysia has begun exporting fresh durian to China, targeting high-end consumers with 40 tonnes shipped in phases. China, the largest durian buyer, may eventually import from Indonesia pending compliance with standards.
Malaysia’s Fresh Durian Shipment to China
Malaysia has successfully sent its first shipment of fresh durians to China, aiming to capture the interest of a market largely supplied by Thailand and Vietnam. This shipment includes 40 tonnes released in three phases, as announced by Deputy Agriculture and Food Security Minister Datuk Arthur Joseph Kurup. China represents the world’s largest durian importer, having purchased 1.4 million tonnes last year, with a significant portion sourced from Thailand.
Emphasis on Quality
Malaysian exporters, having met China’s phytosanitary requirements, are focusing on the quality of their products rather than sheer volume. Lim Chin Khee from the Durian Academy states that Malaysian durians are considered luxury items, targeting high-end consumers. The first shipment of 20 tonnes has already reached the Zhengzhou Xinzheng International Airport, fetching prices that can reach 200 yuan (approximately $28) per fruit.
Indonesia’s Durian Prospects
Indonesia is also exploring opportunities in the Chinese durian market, with discussions surrounding compliance to China’s phytosanitary standards ongoing. As reported, Indonesian officials are eager to establish a protocol that could facilitate durian exports, considering the strong demand in China. Lynn Song from ING emphasizes that should these negotiations succeed, Indonesian durians could effectively carve a niche in the burgeoning market.
Source : Malaysia starts ‘luxury’ durian exports to China as Indonesia sniffs the market
Business
Vietnam’s Exports of Fruits and Vegetables to Thailand Surge by 70%
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Thailand has become Vietnam’s fourth largest fruit and vegetable market, with exports rising significantly, particularly in durians, as Thailand faces supply shortages due to droughts.
Growth in Bilateral Trade
Thailand has risen to become Vietnam’s fourth-largest market for fruits and vegetables, according to recent customs data from the Vietnam Fruit and Vegetable Association. This shift from sixth place last year is largely attributed to increased demand, particularly for frozen durian. China continues to dominate as the top buyer, importing nearly $2.5 billion worth, a 25% increase.
Rising Imports and Export Dynamics
The United States and South Korea have also contributed to this growth, with imports from Vietnam surging by 31% and 51%, totaling $189 million and $188 million, respectively. Overall, Vietnam’s exports reached an estimated $4.6 billion, a 29% increase, as the country capitalizes on year-round durian cultivation.
Changing Trade Relationships
The trade landscape between Vietnam and Thailand has transformed significantly over the past decade. Thailand, once the leading supplier of fruits and vegetables to Vietnam, saw its imports drop to just $46.5 million in 2023. However, imports have surged 35% this year, reaching $32 million, with popular items including dates and mangosteens.
Source : Vietnam fruit, vegetable exports to Thailand rise by 70% – VnExpress International