The Regional Comprehensive Economic Partnership (RCEP) will expedite the ongoing economic integration of the Asia-Pacific region, an International Monetary Fund (IMF) official has said.
"Production, especially on the manufacturing side, has been increasingly integrated across countries in the region ... you would expect this to continue," Helge Berger, IMF's China mission chief and assistant director in the Asia and Pacific Department, told Xinhua in a recent interview.
"I think a factor that will accelerate this development going forward is the recently agreed regional trade agreement, the RCEP," Berger said.
Berger noted the RCEP will make it easier for production to be organized across the region, and will make it easier for firms and households to purchase goods across the border.
The RCEP, signed in November 2020, embraces the 10 members of the Association of Southeast Asian Nations (ASEAN) as well as China, Japan, South Korea, Australia and New Zealand.
The IMF official said China, as one of the world's largest economies, plays a large role in Asia's recovery and global recovery, not only due to its share in global growth, but also its growth spillovers.
"So if you just ask what has been China's share in growth in the last 10 years or so, it was almost a third of the growth that the world has seen that was coming out of China," Berger said, adding that this number has come down a little bit in recent years, as other economies are also growing faster.
"The fact that China is growing fast means that it's importing more. And so you will see commodity exporters in particular, for example, oil exporters benefiting from Chinese demand," he said.
"But there's also demand of intermediate goods and consumption goods," he added.
Berger said that growth in a large economy like China will benefit other economies.
"It's the local Asian countries that benefit the most from growth in China," he said.
Asia's economy is expected to grow by 7.6 percent this year, according to IMF's latest projection, which highlighted downside risks such as setbacks in vaccine rollouts, questions about the potency of the vaccine against new variants, a resurgence of the virus, and changing external environments.
Looking back, Berger said Chinese policymakers acted decisively early on to contain COVID-19, rolled out many measures to mitigate the impact of the crisis on the economy, and then shifted to macro economic support for the recovery last year.
Its three steps from containing to mitigating to supporting growth are something that has proven to be a successful recipe, he said. "That's an important lesson."
The IMF official, however, noted that the crisis is not over yet, and vaccination remains an important task, for China and also for other countries across the globe.
"We are seeing the pace of vaccination accelerating in China," he said. "But it can accelerate more and probably needs to accelerate more to make a difference and help with the recovery, especially on the consumption side."
According to the IMF's estimation, faster vaccine rollout will increase global output by 9 trillion U.S. dollars between now and 2025.
Berger noted that China, like other large economies, which have the capacity to produce vaccines in large quantities, share the responsibility to help speed up the global vaccination progress.
"We can only support Chinese efforts in this direction and, welcome them as we support and welcome initiatives with other countries, in support of the global vaccination campaign," he said.
For China, growth has been marked up to 8.4 percent this year due to improved outlook on exports, reflecting stronger demand for pandemic-related goods and stronger recovery in advanced economies, including the United States, Berger said.
The IMF official, meanwhile, noted that there are factors moving in the other direction: private consumption is still relatively weak, and fiscal policy has also been slightly less strong than previously expected.
"I think that the key challenge for this year for China is to make sure that the recovery continues in a balanced fashion," Berger said.
Under the IMF's baseline assumption, private consumption in China is catching up slowly in the course of the year. "But we'll need to make sure that this indeed happens so that as both a short term policy implication and one that's slightly longer term," he said.
Berger urged Chinese policymakers to change the composition of fiscal support from the investment-focused one to one that is more focused on helping households.
"You can do this, for example, by investing in the social safety net, make it more comprehensive, make it stronger, giving people the certainty that they don't have to privately save for bad day," he said, adding that this should help not just in the short term, but also in the longer term.
"So it's very important going forward to make sure that economic policy in China continues to support the recovery," he said, warning of "premature exit" from macroeconomic support.
Noting that China aims to become moderately developed by 2035, the IMF official said he thinks an important part of this is making sure that growth comes from much more domestic sources of growth than external sources.
