Pandemic to keep Asia’s growth at lowest since 1967, warns World Bank

Growth in China was expected to come in at 2% this year, boosted by government spending. (File/AFP)
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Updated 29 September 2020

Pandemic to keep Asia’s growth at lowest since 1967, warns World Bank

  • The bank said the region this year is projected to grow by only 0.9%, the lowest rate since 1967
  • The rest of the East Asia and Pacific region was projected to see a 3.5% contraction

TOKYO: The coronavirus pandemic is expected to lead to the slowest growth in more than 50 years in East Asia and the Pacific as well as China, while up to 38 million people are set to be pushed back into poverty, the World Bank said in an economic update on Monday.
The bank said the region this year is projected to grow by only 0.9%, the lowest rate since 1967.
Growth in China was expected to come in at 2% this year, boosted by government spending, strong exports and a low rate of new coronavirus infections since March, but held back by slow domestic consumption.
The rest of the East Asia and Pacific region was projected to see a 3.5% contraction, the World Bank said.
The pandemic and efforts to contain its spread led to a “significant curtailment” of economic activity, the report said.
“These domestic difficulties were compounded by the pandemic-induced global recession, which hit EAP (East Asia and Pacific) economies that rely on trade and tourism hard,” it said.
Countries in the region may need to pursue fiscal reform to mobilize revenue in response to the economic and financial impact from the pandemic, while social protection programs can help support workers’ integration back into the economy, the Washington, DC-based bank said.
“Countries with well-functioning social protection programs, and good implementation infrastructure, pre-COVID, have been able to scale up more quickly during the pandemic,” it said.
The economic shock of the pandemic was also expected to lead to a jump in poverty, defined as income of $5.50 a day, the bank said, adding that based on past experience and the latest gross domestic product forecasts, poverty could expand by 33 million to 38 million people to see its first rise in 20 years.
The bank said that 33 million people who would have in the absence of the pandemic escaped poverty would remain in it this year.
“The region is confronted with an unprecedented set of challenges,” said Victoria Kwakwa, vice president for East Asia and the Pacific at the World Bank.
“But there are smart policy options available that can soften these tradeoffs — such as investing in testing and tracing capacity and durably expanding social protection to cover the poor and the informal sector.”


Smartphone giant Xiaomi reels as US ramps up China blacklist

Updated 10 min ago

Smartphone giant Xiaomi reels as US ramps up China blacklist

  • US Department of Defense ‘determined to counter China’s military-civil fusion development strategy’

HONG KONG: Shares in Xiaomi collapsed on Friday after the US blacklisted the smartphone giant and a host of other Chinese firms as the Trump administration aims to cement its trade war legacy against Beijing.
Beijing hit back at the latest sanctions, accusing the US of “abusing state power” to crack down on Chinese companies “for no reason.”
The flurry of last-minute blacklistings is the coda to four years of aggressive diplomatic and trade policies toward rival China under Donald Trump.
With just six days to go before the president leaves office, US officials made a series of announcements targeting Chinese firms including state oil giant CNOOC, Xiaomi and embattled social media favorite TikTok.
Xiaomi — which overtook Apple last year to become the world’s third-largest smartphone manufacturer — was one of nine firms classified by the Pentagon as “Communist Chinese military companies.”
The Pentagon’s action means US investors will be unable to purchase Xiaomi securities and will ultimately have to divest down the line unless the order is overturned by the incoming administration of Joe Biden.
Xiaomi is one of the biggest companies to be blacklisted so far and its shares plunged more than 10 percent in Hong Kong by the close of trading Friday after the announcement. US chip giant Qualcomm is a major investor.
The smartphone maker denied having links to China’s military and said in a statement it was “reviewing the potential consequences” of the new order.
But the US Department of Defense said it was “determined to highlight and counter the People’s Republic of China’s military-civil fusion development strategy” that allowed it to access key technology and security data.
Similar actions have been made by the US against other tech firms including Huawei and chip giant SMIC, hobbling their ability to import key technology and compete internationally.
“The Trump administration has broadened the concept of national security, abused state power and repeatedly cracked down on Chinese companies for no reason,” said Chinese Foreign Ministry spokesman Zhao Lijian Friday.
“China is firmly opposed to that.”

FASTFACT

Xiaomi denied having links to China’s military and said in a statement it was ‘reviewing the potential consequences’ of the new order.

Trump issued an executive order in November banning Americans from investing in Chinese companies deemed to be supplying or supporting the country’s military and security apparatus, earning a sharp rebuke from Beijing.
Earlier this month the New York Stock Exchange said it was delisting three state-owned Chinese telecoms giants to comply with the order.
The Commerce Department also released a separate banned entity list on Thursday targeting companies such as CNOOC and deep-water explorer Skyrison, which develops military equipment.
That makes it extremely difficult for US firms to export products or technology to those companies without a hard-to-obtain license.
Commerce Secretary Wilbur Ross said CNOOC had been listed because of “reckless and belligerent actions in the South China Sea and its aggressive push to acquire sensitive intellectual property and technology for its militarization efforts.”
“CNOOC acts a bully for the People’s Liberation Army to intimidate China’s neighbors, and the Chinese military continues to benefit from government civil-military fusion policies for malign purposes,” Ross said.
Territorial disputes in the South China Sea have festered for years, with Beijing building a series of artificial islands to expand its military and commercial reach in the contested region.
“CNOOC has repeatedly harassed and threatened offshore oil and gas exploration and extraction in the South China Sea, with the goal of driving up the political risk for interested foreign partners, including Vietnam,” the Commerce Department said.
CNOOC’s share price was less affected, falling a little more than 1 percent in Hong Kong on Friday.
Meanwhile, the Commerce Department also announced new rules for trading in technology and communications equipment with “foreign adversaries” including China, Russia, Iran, North Korea, Cuba and Venezuela.
The rule will take effect in 60 days. The aim is to protect against data and national security vulnerabilities in software and hardware, and it would outline a six-month review process before any ban is implemented.
A senior administration official confirmed the new rule would apply to TikTok, the video app that Trump banned from operating in the US.