trade

The Olympics closing ceremony. Photo courtesy of rich115 under a Creative Commons license.

The closing ceremony for the Beijing Olympics was as impressive as the opening.  In between, China put on an amazingly well-organized set of games.  China also won the greatest number of gold medals and came in second behind the USA in total medal count.  This splashy performance definitely caught the attention of people in the West and set off a lot of speculation in the press about what it all means.  Robert Samuelson discusses in a recent column the Beijing Olympics as a metaphor for China overtaking the U.S. as the world's biggest economy.

What struck me most during the last week of events and at the closing ceremony is that we really are living in a new, multi-polar era without one single dominant country.  I was fortunate to see Guo Jingjing win her springboard diving gold; Russia-USA men’s volleyball semifinal; Argentina-Nigeria soccer gold medal game; Jamaican runners dominate the sprints; Ethiopian and Kenyan runners dominate the long distances; and American runners sweep a couple of middle distance events. And while the Americans and Chinese can be justifiably proud of their medal totals, don’t forget that the member states of the EU won vastly more medals and gold medals than either of those countries.  (My informal count as of mid-day Friday was that EU states had won 234 medals including 74 gold.)

China’s growth has held up well so far in 2008 (take a look at the Bank's Quarterly Update  for more details).  Growth rate for the first half was slightly over 10%.  Recently there has been concern about the slowdown in the growth of exports: from 28% year-on-year increase in May to 18% in June.  But monthly figures are erratic, and I am more impressed that the growth of exports for the first half was at a 22% rate, about the same as in the last part of 2007.  So, for the moment the slowdown in China – from nearly 12% growth in 2007 – is a healthy easing to a more sustainable rate of growth.

Still, there are some things to be concerned about on the growth front.  Normally I would not expect the Olympics to have much direct effect in a large economy.  But, anecdotally, I am hearing a lot of stories from the business community about difficulties in getting visas, extra security and hence delays at ports, and transportation bottlenecks in some locations.  Since most of the manufacturing production is in the South of the country, far away from the main Olympic locations, there may not be much aggregate effect from these temporary dislocations. But it is also possible that the dislocations will have a modest, negative effect on production and exports. 

After seven years of fitful trade negotiations, the WTO’s Doha Round has collapsed, and the post mortems have already hit the newsstands.  Writing in the International Herald Tribune, Keith Bradsher points to a new alliance between China and India, both pushing for so-called “safeguard” rules for agriculture, translating into uncapped tariffs on food imports from rich countries, ostensibly to support farmers in developing countries. 

The World Bank released the China Quarterly Update —of which I’m the lead author, full disclosure here-- today at a press launch in our Beijing office. The economic journalists noticed that the Bank’s projection for GDP growth in 2008 is now 9.8 percent, more than 2 percentage points lower than the outcome in 2007. Several journalists asked whether it is not time to stimulate growth by loosening macro economic policies and/or what would be the most appropriate policies to relax.

Somebody living in Dallas or Dusseldorf may find it difficult to understand why a government would want to stimulate the economy when growth falls to 9.8 percent.

The difference in perspective is related to a question that has been raised many times since the sub-prime problems broke out in the US: What will happen to growth in developing countries and emerging markets when the US economy, and the European one as well, slows down considerably? Many developing countries and emerging markets had been growing rapidly in the years preceding the sub-prime problems—much more rapidly than high income countries. But exports to high income countries are important for most of them. So the question was: can developing countries and emerging markets “decouple” from the high income countries?

The World Bank released a couple of days ago a new interactive database on trade, the World Trade Indicators. It allows benchmarking and comparison among 210 countries and customs territories, and it includes multiple trade-related indicators. The data comes from the International Trade Centre (ITC), the World Trade Organization (WTO), the United Nations Conference on Trade and Development (UNCTAD), and the World Bank itself. Take a look at the intro page to find your way around all the options, or go straight to the sections dedicated to country rankings, country snapshots, country or overtime comparisons, or maps generated with your selected indicators.

BusinessWeek reports that an annual study by one of Europe's top business schools indicates that Asian economies are overtaking the U.S. and Northern Europe to become the most competitive in the world. Singapore, in position #2, trails the U.S., but the author of the report expects it to take the top spot next year.

The 20th World Competitiveness Yearbook, released May 15 by IMD business school in Lausanne, Switzerland, also points to the fact that Asia has proven relatively immune to the U.S. financial crisis. Also, among the top 20 economies out of the 55 ranked, those in Asia-Pacific posted the greatest gains compared with last year. A few examples: Malaysia climbed four spots to #19, Thailand rose six spots, and the Philippines went up five (see all rankings here).

I see there has been some blog chatter about the World Bank's position on Thailand's rice exports. Let me take the chance here to set the record straight: Thailand is a great international trading partner, it's commited to maintaining its rice exports, and we support this action. This is very important at this time of food price hikes and it's the responsible thing to do.

(The chatter --see some examples here and here-- started with a Bloomberg story  published yesterday).

Last week China reported its first quarter GDP data.  Consumer inflation for the quarter was 8%, which is too high, but we already knew that.  The main news was that GDP growth came in at 10.6% year-on-year.  This is down from last year’s 11.7% rate, but higher than most forecasts for 2008 (including the Bank’s revised 9.4% forecast).  There was a healthy decline in the trade surplus for the quarter of about $5 billion or 10%.  The trade adjustment took a good form in that exports grew at a respectable 21% rate while imports surged 29%.  Most of this increase in exports was to the European Union, while growth of exports to the U.S. moderated to a 5% rate.  All of this looks to be in the direction of the rebalancing that China is trying to achieve.