China’s economic shift creates opportunities for other emerging markets
China’s pursuit of high-end manufacturing and relocation of labor-intensive factories will generate opportunities for other emerging markets (EMS) in Asia to bolster economic growth, Fitch said in a report.
The rating agency said Asia’s ‘frontier’ EMS, such as Vietnam, will benefit from industrial transfers, but noted preconditions, including a sound business environment and political stability, Xinhua reported.
“China’s rising wages, higher land costs and real exchange rate appreciation over the past decade have reflected policy efforts to rebalance the economy and raise living standards, but they have also reduced low-end manufacturing competitiveness,” the report said.
Wages of manufacturing workers in the country have surpassed those of other EMS in the region, while ongoing urbanization and an aging work force will continue to drive the rise.
Chinese firms, along with peers from other manufacturing nations, have started to transfer at least part of their production bases to less-developed economies in search of lower labor costs. Domestically, the government is pushing industries to Ireland is set to almost triple the amount available to cut taxes and increase spending in next week’s budget through a series of additional revenue raising measures, the Irish Times reported.
Finance Minister Paschal Donohoe has just €350 million (£314.37 million) in spare resources — far less than the expansionary budgets of the last two years — but the Irish Times said it understood the final package would be between €900 million and €1 billion, Reuters wrote.
A spokeswoman for the finance ministry said she could not comment on the budget ahead of its presentation.
Governments usually give themselves some additional wriggle room on budget day through small hikes in excise duties on tobacco and ministers have said they are move up the value chain, shifting to a new growth pattern based on innovation rather than cheap labor.
Fitch pointed out that China’s global share of exports of clothing, footwear and furniture, although still considerable, is retreating from its peak in 2014. examining revenue raising measures.
However generating up to €650 million would go far further than recent years.
The Irish Times said a substantial increase in stamp duty on commercial property from the current rate of two percent was expected to be included.
When laying out the options for possible policy changes in July, the finance ministry said such a measure warranted consideration and that each one percentage point increase would yield around €100 million.
Boosting the package to €1 billion would likely allow the government to meet its goals of increasing the relatively low threshold at which people hit the higher rate of income tax and trimming the amount they actually pay while also sticking to the agreed.
“A significant drop in China’s low-end manufacturing over the coming decades would leave a large gap for lower-cost countries to exploit,” according to the report.
The rating firm cited Bangladesh and Vietnam as potential and promising EMS to grab China’s baton as they “already have strong footholds”, together accounting for eight percent of global exports in clothing, footwear and furniture in 2015, up from three percent five years ago.
But low wages are not the only thing that matters. Fitch said only those offering a workable business environment and relative macroeconomic and political stability can make the most of opportunities stemming from the shift in China’s development strategy.
Some EMS should first overcome hurdles including security risks, poor infrastructure and immature market systems, said the report. Police in Taiwan are taking measures to help a local bank trace lost funds due to hacker attacks, which might reduce the bank’s losses to less than $500,000.
The Far Eastern International Bank reported its system was hacked earlier this week, with implanted malware affecting some of its personal computers, servers and the Society for Worldwide Interbank Financial Telecommunication’s network, Xinhua reported.
Hackers were found to conduct virtual transactions to move funds to other destinations while no leaks of customer information were reported.
Taiwan’s criminal investigation bureau said it had launched an investigation into the hacking incident and retrieved part of the lost funds thanks to the help of the International Criminal Police Organization.
Banks on the island are asked to tighten security control over telecommunications and transactions and an information security network for the financial sector is expected to be built by the end of this year, according to the island’s top financial regulator.