“ Again , China has an important role to play here . China is the largest economy in the region so there ’ s no question that as things get resolved in China , in terms of COVID outbreaks and so on , you will see supply chains becoming more normal . But this does not mean that other countries don ’ t have a role to play going forward . We have seen countries like Vietnam and Bangladesh become part of supply chains , and that trend will continue after the crises are behind us ,” he added .
The pandemic resulted in stalled production in China and has significantly increased shipping lead times and costs , leading to global supply chain disruptions . However , near sourcing activities and manufacturing relocations to neighbouring countries in Southeast Asia have accelerated greatly since .
“ The steel industry , a major raw material supplier for the automotive , construction , shipbuilding , and white goods industries , was severely affected due to the slowdown in these sectors during the peak of the COVID-19 pandemic in 2020 . Steelmakers across the region reported that the demand for steel products during the COVID-19 pandemic had decreased by 90 % compared to pre-COVID times . This crisis caused structural shifts with significant implications for the market ” commented analyst , Meticulous Research .
“ In Southeast Asia , halted construction projects severely impacted the steel market , with the demand for steel recording a decline of 11.9 % in 2020 . The production and supply of galvanized steel were also severely impacted . The steel markets in Malaysia and the Philippines were the most severely impacted , while Vietnam and Indonesia saw only a modest decline in demand . The pandemic severely disrupted the cash flow of steelmakers in the country as major clients closed businesses . Some of the steelmakers in the country also faced business continuity challenges ,” it added .
Given the strong trade linkages within Asia , a larger than expected slowdown in China due to prolonged or more widespread lockdowns , or a longer than expected slump in the property market , constitutes a significant risk for the region .
“ To achieve high-quality growth , China needs to work on one thing which is very , very important ; declining productivity . We ’ ve seen productivity declining quite sharply in China , and that needs to be addressed . This takes on more importance in the context of decoupling pressures in terms of technology and China ’ s shrinking workforce ,” commented Krishna Srinivasan , Deputy Director of the Asia and Pacific Department , IMF , in April this year .
“ So , how do you address productivity ? I think that goes beyond addressing just unifying the domestic market . You need to work in terms of opening the domestic market for competition . You want to ensure greater market neutrality between private firms and state ones and the prices allowing market base policy mechanisms to work ,” he explained .
Kristalina Georgieva is the managing director of the International Monetary Fund .
Vehicle production in China . Image : Shutterstock . com .
The push to net zero
IMF managing director , Kristalina Georgieva , highlighted the push to net zero in Asia-Pacific in June this year , at the IMF Policy Dialogue on climaterelated financial risks and green finance in Asia and the Pacific .
As the largest economy in the region and the biggest carbon emitter , China clearly has a major role to play in safeguarding the transition to green energy .
“ The science is clear : only decisive action to contain climate change will prevent disastrous outcomes for people and economies . We must cut global emissions by 25-50 per cent by 2030 to limit average global warming between 1.5 and two degrees Celsius . The Asia-Pacific region understands the urgency . Here , temperatures are rising twice as fast as the global average , risking more frequent and severe weather-related disasters . The region produces about half of the global emissions and is home to five of the world ’ s largest greenhousegas emitters ,” she said .
“ We must redirect resources to low-carbon and energy-efficient activities . It requires a comprehensive policy package , including adequate carbon pricing , proper disclosure of climate risks , offsetting measures to protect vulnerable populations and green investment ,” she explained .
Investing in adaptation is equally important , she said . The IMF estimates public adaptation costs of around one-quarter per cent of global GDP per year in the next few decades . But for some climatevulnerable countries , the figure could be much higher . n
76 | ismr . net | ISMR October 2022