Asia Pacific businesses are caught in the crossfire of the US-China trade war. No matter how the conflict ends, trade patterns in the region are likely to change permanently and it will be those businesses with the most strategic foresight that stand to benefit.
In April, the Bangkok Post reported a curious case of Thailand forcibly removing a US national’s “seastead” residence on the grounds that it compromises Thai sovereignty. “Seasteading” is described as the making of a home in a new, previously uninhabited place at sea, and is associated with the concept of autonomy, self-sufficiency and a frontier lifestyle. This is usually achieved by building residential structures just beyond the fringes of a country’s territorial waters in an attempt to remove the structures from any governmental control.
1Q 2019 has gone by and we are fast approaching the mid-year mark. Thus far, the Thai economy has demonstrated mixed results, with modest expectations for the months ahead. The World Bank has cut down Thailand’s growth projection from 3.9% to 3.8% amid an anticipated global slowdown. The Bank of Thailand appears to agree and trimmed its growth outlook from 4.1% to 3.8%. At the same time, the Bank cut down export growth estimates from 7% to 3%. The performance of the country’s largest banks has also left some room for improvement, as they posted declining net earnings in the first quarter of this year.
January 2019 marked the one-year anniversary of the inception of the US - China trade war. What started with the US increasing import tariffs on Chinese solar panels and washing machines, later spiralled into retaliatory and counter-retaliatory tariff measures between the two countries. Throughout much of 2018, the global business community looked on with apprehension as the two largest economies escalated their trade dispute, which, at its peak, tallied 360 billion USD in combined tariffs. At the close of 2018, the world breathed a sigh of relief when the US and China called for a temporary truce and agreed to resume trade negotiations.
January 2019 marked the one-year anniversary of the inception of the US - China trade war. What started with the US increasing import tariffs on Chinese solar panels and washing machines, later spiralled into retaliatory and counter-retaliatory tariff measures between the two countries. Throughout much of 2018, the global business community looked on with apprehension as the two largest economies escalated their trade dispute, which, at its peak, tallied 360 billion USD in combined tariffs. At the close of 2018, the world breathed a sigh of relief when the US and China called for a temporary truce and agreed to resume trade negotiations.
The global economic cycle has peaked and businesses face a more downbeat outlook in 2019. With risks increasing, how can businesses continue to achieve growth and thrive in the year ahead? Among the 5,000 mid-market business leaders Grant Thornton interviewed as part of the IBR’s global economic outlook, global optimism sits at net 39%, a fall of 15 percentage points (pp) from net 54% in Q2 2018. This is the weakest optimism score seen since Q4 2016.
APAC remains the most dynamic region in the world in 2018. Expected to grow by 5.5% this year, the region is set to account for almost two-thirds of global growth, with strong GDP projections of 5.6% continuing into 2019. Grant Thornton’s International Business Report (IBR) also signifies sustained business leader optimism in the region. Net optimism sits at net 55% in Q2 2018, up 27pp from Q2 2017. ASEAN (the Association of Southeast Asian Nations) is a particularly bright spot. At net 64%, business optimism in ASEAN has reached a record high against healthy projected growth of more than 5% each year between now and 2022.
With 2019 now well underway, distinct themes are beginning to emerge that are likely to shape global economic developments for the remainder of the year. Amid likely slowdowns within some of the major world economies, developing regions such as ASEAN will have a golden opportunity to take the initiative. The question is whether key countries such as Thailand will make the necessary adjustments in order to capitalise on their good fortune.
Keeping pace with a fast-moving economy means continually re-investing profits to fund future growth. Although many companies struggle to access the liquidity needed to enable timely investment, a proactive approach to working capital management can free up significant untapped cash within any business, providing a platform for longer term, sustainable growth.
Thailand’s push toward its 4.0 economic model gained a lot of momentum in 2018, as the government made investments and policy changes in countless areas to smooth the way for business. The way forward is clear on most fronts, and the next decade is sure to be an exciting one for Thailand and the advanced manufacturing and digital economy that is well on its way.
South East Asia is a bright spot in the global economy. The outlook for the region is sustained, healthy growth of more than 5% per year between now and 2022.(i) Against this backdrop, business sentiment has hit a new high. We explore what is driving this positivity and find that infrastructure emerges as a source of real opportunity for ASEAN firms in the coming years. At the same time, however, concerns over climate change loom large. Greater cooperation will be key to overcoming these environmental risks.
Given the slowing rate of economic growth, businesses across Asia Pacific (APAC) region have an appetite for automation. In this article we explore where that support is strongest, and why. We find that amid the rich opportunities, risks are present in the automation revolution. Businesses and policymakers should confront these challenges now, to avoid hampering future growth prospects.
For a country with global ambitions, China has many of the key attributes needed to achieve its aspirations. But the essential lesson holds across world affairs just as surely as it applies to business, or to life in general.
In July 2018, the trade war between the United States and China went live. The war of words which saw threats, posturing, and “nudges” to impose tariffs on goods traded between the United States and China became a reality.
The Chinese authorities have released proposed changes to tax law that may significantly impact how international assignees and long-term expats in the People’s Republic of China (PRC) are taxed. From changes to residency, personal taxation, payroll withholding and tax efficient benefits for assignees, the potential changes are far reaching.
In the final part of this article, we continue our examination of how customs rules for free trade agreements (“FTAs”) should be modernised to meet the needs of a digital economy.