ASEAN
Experts advocate for ASEAN regional strategy to achieve greater food security
(12 February 2025) Asean’s agricultural imports reached USD 129.13 billion in 2023, with Viet Nam accounting for 20.9% (USD 27.05 billion), followed by Indonesia (USD 26.06 billion) and Malaysia (USD 20.34 billion). Key imports included wheat (USD 9.46 billion), soybeans (USD 5.21 billion), and corn (USD 5.21 billion), with the United States (USD 13.9 billion), Brazil (USD 13.8 billion), China (USD 13.3 billion), and Australia (USD 12.3 billion) as top suppliers. Experts advocate for a regional strategy to enhance intra-ASEAN food trade, reduce reliance on external markets, and eliminate non-tariff barriers. The Malaysia-based Khazanah Research Institute emphasised integrated supply chains, while other experts highlighted the need to secure fertilisers, seeds, and animal feed. Indonesia’s President Prabowo Subianto aims for food self-sufficiency within four years. PNB Research Institute suggested focusing on climate-suited crops like rice and tropical fruits, alongside collective bargaining for essential imports.

SINGAPORE, TAIWAN
Taiwanese investments into Singapore surpass that of China for first time since 1991  
(11 February 2025) In 2024, Taiwanese investments in Singapore reached USD 5.81 billion, surpassing the USD 3.65 billion invested in China—the first occurrence since 1991. A significant 87% of these investments targeted electronic parts and components manufacturing, including chip fabrication, while 10% were directed towards the financial and insurance sectors. United Microelectronics Corporation (UMC) is set to commence commercial production at its new USD 5 billion Singapore fabrication plant in 2026, which will also house UMC’s largest research and development centre outside Taiwan. Additionally, Vanguard International Semiconductor Corp and NXP Semiconductors initiated construction of a USD 7.8 billion 12-inch wafer fabrication plant in Tampines in December 2024, with production expected to begin in 2027. Cathay United Bank plans to double its Singapore branch workforce to approximately 200 employees in 2025, reflecting increased investments and client demand. Analysts attribute this shift to geopolitical tensions and a realignment of global supply chains favouring Southeast Asia. Singapore’s politically neutral stance, efficient infrastructure, and strong rule of law enhance its appeal as an investment destination for Taiwanese firms. This trend is anticipated to continue amid ongoing geopolitical uncertainties.

INDONESIA
Indonesia diversifying trade partnerships amidst rising global protectionism
(13 February 2025) Indonesia is adjusting its trade strategy in response to rising global protectionism, with Indonesia’s Deputy Trade Minister stating that the government is safeguarding domestic manufacturers while expanding export markets. The US’s potential tariffs on Chinese goods could present opportunities for Indonesia, but officials are proceeding cautiously before implementing import regulations. Indonesia, a BRICS member, has not been directly targeted by US trade actions but remains watchful. Meetings with the US ambassador are scheduled next week. The government is diversifying trade partnerships, negotiating Comprehensive Economic Partnership Agreements with Peru and Canada, and reopening talks with the EU despite challenges related to climate policies, particularly the EU’s deforestation law. Strengthening trade relations with India is also a priority, following President Prabowo Subianto’s recent visit to Prime Minister Narendra Modi.

INDONESIA
Indonesia to launch USD 900 billion sovereign wealth fund on 24 February
(13 February 2025) Indonesia will launch the Danantara sovereign wealth fund on 24 February, with assets under management exceeding USD 900 billion (MYR 4 trillion), following parliamentary approval last week. President Prabowo Subianto stated the fund will invest in high-impact projects across renewable energy, advanced manufacturing, downstream industries, and food production to support the government’s goal of 8% annual economic growth by 2029, up from 5% in 2024. Modelled after Singapore’s Temasek, Danantara will take over state-owned company holdings, including Bank Mandiri, Bank Rakyat Indonesia, and Bank Negara Indonesia, from the Ministry of State-Owned Enterprises. Prabowo also announced that the government has saved over USD 20 billion—approximately 10% of annual spending—through efficiency measures, with funds allocated to more than 20 large-scale projects focused on nickel, bauxite, copper, and other critical minerals.

THAILAND
Thailand to appoint selection panel to identify successor to central bank governor
(10 February 2025) Thailand will appoint a selection panel in March to identify a successor to central bank governor Sethaput Suthiwartnarueput, whose term ends in September. The panel must submit a shortlist to the finance minister at least 90 days before Sethaput’s departure. Probable candidates include BOT Deputy Governor Roong Mallikamas and former IMF economist Sutapa Amornvivat. The Finance Ministry has nominated former permanent secretary Somchai Sujjapongse as BOT chairman, a role that does not influence monetary policy but can contribute to economic discussions. Investors are monitoring whether the new governor will align with government calls for rate cuts and a weaker currency. The selection process follows the government’s unsuccessful attempt to appoint a former minister as BOT chair. The BOT last adjusted its policy rate in October 2023, cutting it to 2.25%, and will review the rate on 26 February.

VIET NAM, CHINA
Viet Nam seeks Chinese loans to partially fund USD 8.3 billion railway project 
(13 February 2025) Viet Nam plans to secure Chinese government loans to partially fund a USD 8.3 billion railway project linking Lao Cai, Hanoi, and Haiphong, Viet Nam’s Transport Minister Nguyen told parliament. The 391km railway will have a 1,435mm gauge and support train speeds of up to 160kph for both passenger and cargo transport. Construction is set to begin in 2024 and be completed by 2030. Parliament will vote on the project next week. In November 2023, lawmakers approved a separate USD 67 billion, 1,541km high-speed rail project connecting Hanoi and Ho Chi Minh City, with operations targeted for 2035.

THE PHILIPPINES
Central bank pauses on easing cycle amidst global economic uncertainties
(13 February 2025) The Bangko Sentral ng Pilipinas (BSP) held its benchmark interest rate at 5.75% on Thursday, pausing its easing cycle due to global economic uncertainties. The BSP’s Governor stated that the central bank remains in an easing stance and confirmed a planned 50 basis points rate cut in 2025, with a reduction possible at the April 3 meeting. The BSP will also lower banks’ reserve requirement ratio by 200 basis points to 5% in the first half of the year, potentially before mid-year. Inflation remained at 2.9% in January, within BSP’s 2%-4% target, with risks to the outlook now “broadly balanced.” The decision to hold rates surprised markets, as only one of 29 economists surveyed anticipated the move. Following the announcement, the peso strengthened by 0.2% against the dollar, and the main stock index rose 1.1%. The BSP’s Governor cited increased uncertainty in global policy as a key challenge, stating that BSP is recalibrating its economic models to address these risks.

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SOUTH KOREA, JAPAN
South Korea and Japan to respond to Trump’s 25% tariffs on steel imports
(12 February 2025) The U.S. will impose 25% tariffs on steel imports from 12 March, prompting responses from Japan and South Korea, key exporters. Japanese Prime Minister Shigeru Ishiba stated his government will assess the impact and seek exemption, with Japan’s Chief Cabinet Secretary confirming a formal request has been made. Japan’s Nippon Export and Investment Insurance will cover losses from U.S. order cancellations due to tariff costs. Japan’s Economy Minister warned of significant risks to the WTO-based trade system. In South Korea, acting President Choi Sang-mok convened a trade meeting to discuss countermeasures, with policymakers concerned about economic effects. South Korea was the fourth-largest steel exporter to the U.S. in 2023, shipping 2.8 million net tons. The Korea Development Institute forecasted 1.6% GDP growth in 2025, down from 2.0% in 2024, citing worsening trade conditions under Trump. POSCO Holdings, the country’s largest steelmaker, is consulting with the government on its response. Tariffs could expand to automobiles and semiconductors, raising further concerns. Trump indicated that security allies may negotiate exemptions.

CHINA
DeepSeek breakthrough spurs bull market in Chinese tech stocks 
(12 February 2025) The Hang Seng Tech Index has surged 25% since January 13, 2025, entering a bull market, driven by investor enthusiasm following DeepSeek’s AI model breakthrough. This performance surpasses the Nasdaq 100’s 4.4% gain and contrasts with a 0.5% decline in major U.S. tech stocks during the same period. DeepSeek’s AI model, developed with significantly less computing power than its U.S. counterparts, has prompted a global reassessment of Chinese tech companies. Notably, Alibaba’s shares rose over 6% after reports of collaboration with Apple to implement AI features in China. Other companies benefiting from this trend include Xiaomi, Baidu, and BYD, with share increases of 34%, 13%, and 40% respectively. Additionally, e-commerce platforms JD.com and Meituan have seen gains of 24% and 11%, respectively, supported by strong consumption data from the Lunar New Year holiday and expectations of significant fiscal stimulus from Beijing. The broader Hang Seng Index has also risen by 15% in the same timeframe. Data from the Stock Connect programme indicates increased activity among mainland Chinese investors, with average daily turnover in February up two-thirds from January and three times higher than February 2024. Analysts attribute this surge to advancements in large language models by Chinese internet companies and anticipate rapid adoption of AI technologies in consumer-facing applications.

NEW ZEALAND
New Zealand to ease golden visa requirements to attract wealthy investors
(10 February 2025) New Zealand is easing investment visa requirements (also known as ‘golden visas’) to attract wealthy investors, reducing residency obligations and removing the English-language requirement. Investors must commit at least NZD 5 million (USD 2.8 million) to local businesses and spend 21 days in the country over three years, down from 117 days over four years. A second option allows for NZD 10 million investment over five years with a 105-day residency requirement. Prime Minister Christopher Luxon framed the changes as part of a broader economic strategy, citing the need to encourage investment. New Zealand’s Immigration Minister noted that previous residency rules deterred investors. The Ardern government’s 2022 “Active Investor Visa” policy directed funds into businesses rather than stocks and bonds but attracted only 20 applicants, compared to previous schemes that saw 200 applicants and NZD 2.2 billion invested in two years. New Zealand’s Finance Minister stated that the Ardern-era scheme resulted in just NZD 70 million in investments since 2022. The policy shift follows Luxon’s rollback of other Labour policies, including a smoking ban and restrictions on oil and gas exploration. New Zealand’s GDP shrank 1% in Q3 2023, reinforcing the government’s focus on economic recovery.

SINGAPORE
Trump’s election victory fuels surge in cryptocurrency investments in Singapore 
(04 February 2025) Trump’s return to the White House has fuelled a surge in cryptocurrency investment among high-net-worth individuals in Singapore, with firms such as Sygnum and Independent Reserve reporting increased client interest. Sygnum  noted a sharp rise in client onboarding following Trump’s election victory, while a September survey of 400 family offices and asset managers found 57% of Singaporean respondents planned to increase crypto allocations, above the 47% global average. Tracxn data showed Southeast Asian crypto firms secured USD 325 million in funding in 2024, up 20% from 2023, despite total fintech funding in the region dropping 23% to USD 1.6 billion. Bitcoin surpassed USD 100,000 in December, driving further investment. CoinGecko reported global spot trading on centralised exchanges hit USD 17.4 trillion in 2024, more than doubling from USD 7.2 trillion in 2023. Singapore’s single-family offices rose to over 2,000 by end-2024, attracting crypto-focused wealth managers. DBS reported a 20% post-election rise in wealth client demand for crypto products. Aspen Digital found 76% of surveyed Asian family offices had invested in digital assets by late 2024, up from 58% in 2022, with allocations rising beyond 10%. The Monetary Authority of Singapore restricts crypto marketing to retail investors, but professional investors remain a key target.

SINGAPORE
Singapore secures SGD 21.9 billion in investment commitments in 2024 
(06 February 2025) Singapore secured SGD 21.9 billion (USD 16.2 billion) in investment commitments in 2024, slightly exceeding 2023 levels, according to the Economic Development Board (EDB). Fixed asset investment (FAI) commitments increased by SGD 0.8 billion to SGD 13.5 billion, while total business expenditure (TBE) per annum commitments declined by SGD 0.5 billion to SGD 8.4 billion. The manufacturing sector attracted SGD 11.1 billion in FAI, with semiconductors and biomedical manufacturing leading investments. TBE was primarily driven by spending in headquarters and professional services. The EDB warned of geopolitical and macroeconomic risks in 2025, citing protectionist policies and trade frictions as factors affecting investment decisions. The 2024 commitments are expected to generate 18,700 jobs over the next five years.

MALAYSIA
Malaysia initiates anti-dumping investigations into steel products from China, South Korea, and Viet Nam
(6 February 2025) Malaysia has initiated an anti-dumping investigation into imports of flat-rolled steel products from China, South Korea, and Viet Nam following a petition by Malaysian steel producer CSC Steel Sdn Bhd, a subsidiary of CSC Steel Holdings Bhd. The company alleges that imported galvanised iron and steel coils or sheets are being sold below market value, causing financial harm to domestic manufacturers. The Ministry of Investment, Trade, and Industry confirmed sufficient evidence to proceed under Section 20 of the Countervailing and Anti-Dumping Duties Act 1993, as published in a federal gazette on 06 February. Miti has attributed the alleged dumping to increased import volumes, declining profitability, and reduced market share for local producers. The ministry has invited responses from the governments of China, South Korea, and Viet Nam, as well as other stakeholders, who have 15 days to request participation and 30 days to submit evidence.

MALAYSIA
Emerging AI tech such as DeepSeek could reduce Malaysia’s reliance on single product
(06 February 2025) Malaysia’s Investment, Trade and Industry Minister stated that emerging AI technologies such as DeepSeek could reduce Malaysia’s reliance on a single product and position the country as a neutral hub for AI companies from both the West and China. Responding to a parliamentary question, the minister said increased AI efficiency does not diminish demand for data centres but may instead drive broader adoption, sustaining investment in data infrastructure. He noted that Malaysia’s semiconductor supply chain would be diversified, with Johor, Penang, and Kedah remaining key strategic locations for AI infrastructure. To enhance Malaysia’s data centre competitiveness, the government aims to introduce additional green investment incentives. Plans also include developing AI and digital workforce capabilities and strengthening Malaysia’s position as an AI processing hub. The minister emphasised maintaining diplomatic relations with both the US and China to secure Malaysia’s status as a neutral technology investment destination.

THE PHILIPPINES
The Philippines’ declares food security emergency over rice inflation
(3 February 2024) The Philippines has declared a “food security emergency,” allowing the release of buffer rice stocks to stabilise prices amid rice inflation concerns. Despite a decline in overall inflation to 3.2% in 2024 from 6% in 2023, rice prices remain high, with retail prices in Metro Manila ranging from 42 to 57 pesos per kilogram. The government attributes this to profiteering by importers and wholesalers, despite record rice imports of 4.68 million tonnes in 2024. The Agricultural Tariffication Act permits the emergency declaration in cases of supply shortages or extraordinary price increases. Critics argue that the measure is temporary and will not address structural agricultural productivity issues. The government holds 300,000 tonnes of unhusked rice in reserves, covering five days of national consumption. Some experts question the necessity of the emergency, citing ample supply and upcoming harvests.

THAILAND
Headline consumer price index rose 1.32% year-on-year in January 2025 
(06 February 2025) Thailand’s headline consumer price index (CPI) rose 1.32% year-on-year in January 2025, up from 1.23% in December, and remained within the Bank of Thailand’s (BOT) 1%-3% target range. Core CPI increased 0.83% year-on-year, aligning with forecasts. The Ministry of Commerce expects February inflation to be around 1.1%-1.2% and maintains its 2025 inflation forecast at 0.3%-1.3%, following 0.40% in 2024. The BOT Governor reaffirmed the 2025 inflation projection at 1.1% and stated the current 2.25% policy interest rate is appropriate but subject to adjustment if necessary. The BOT last changed rates with a 0.25-point cut in October before holding steady in December. The next policy review is scheduled for 26 February. The Deputy Finance Minister has expressed support for a rate cut and intends to discuss potential monetary policy easing with the BOT.

VIET NAM
Viet Nam’s trade surplus with the US reaches USD 123.5 billion in 2024
(06 February 2025) Viet Nam’s trade surplus with the US reached USD 123.5 billion in 2024, an 18% increase from the previous year, making it the third-largest US trade deficit after China and Mexico. US Census Bureau data highlights Viet Nam’s growing role as an export-driven economy, with exports accounting for 90% of GDP. The surplus expansion raises concerns about potential tariffs from Donald Trump, who has historically targeted large trade imbalances. This week, Trump imposed 10% tariffs on China, prompting retaliatory measures, and has also threatened tariffs on Mexico and Canada. Viet Nam’s Prime Minister warned that US trade protection policies pose a risk to Viet Nam’s exports. To mitigate trade tensions, Viet Nam has committed to increasing purchases of American products, including aircraft and liquefied natural gas. At the World Economic Forum in Davos, the Prime Minister reiterated Viet Nam’s commitment to addressing the trade imbalance and referenced ongoing efforts to maintain balanced relations between China and the US.

RCEP Monitor

JAPAN
BOJ policymaker state that rates should reach at least 1% by second half of fiscal 2025
(06 February 2025) Bank of Japan (BOJ) board member Naoki Tamura stated that interest rates should reach at least 1% by the second half of fiscal 2025, reinforcing market expectations of a near-term rate hike. He cited rising inflationary pressures from higher raw material and labour costs and warned that keeping short-term rates below the neutral level could further push up inflation. Tamura estimated Japan’s neutral rate at no less than 1% and suggested rate hikes should be gradual and data-driven. His comments led the yen to strengthen, briefly pushing the dollar to a two-month low of 151.81 yen. The two-year Japanese government bond yield rose to 0.765%, its highest since October 2008, with markets pricing in a 50% chance of a rate hike in July. While the BOJ Governor has avoided specifying a neutral rate, recent wage data suggests broad-based pay increases, supporting expectations of continued monetary tightening. The BOJ raised rates last month to 0.5%, the highest since the 2008 financial crisis. Tamura criticised past massive stimulus under former Governor Haruhiko Kuroda, stating its overall benefits were overstated and warning of potential side effects, including excessive yen depreciation.

NEW ZEALAND
Unemployment rate rises to 5.1% in Q4 2024, highest since Q3 2020
(06 February 2025) New Zealand’s unemployment rate rose to 5.1% in Q4 2024, the highest since Q3 2020, as employment declined 0.1% from the previous quarter and 1.1% year-on-year, the steepest annual drop since 2009. The participation rate eased to 71% from 71.1%. Wage inflation slowed for the seventh consecutive quarter, with ordinary time wages for non-government workers rising 2.9% year-on-year, down from 3.4% in the previous quarter. Average ordinary time hourly earnings increased 1.3% quarter-on-quarter and 4% year-on-year, compared to an 8.6% peak in Q3 2022. The economy contracted 2.1% in the six months through September, weakening business confidence. The Reserve Bank of New Zealand (RBNZ) has cut the official cash rate (OCR) by 125 basis points since August and is expected to implement a third consecutive 50-basis-point cut on 19 February, bringing the OCR to 3.75%. The central bank had forecast a 5.1% unemployment rate in November. Inflation remained at 2.2% in Q4, near the midpoint of the RBNZ’s 1%-3% target range.

AUSTRALIA
Australia faces indirect risks from US tariff regime
(06 February 2025) Australia faces indirect risks from the US tariff regime, despite not being directly targeted. China imposed retaliatory export curbs on critical minerals, including tellurium and molybdenum, raising interest in Australian mining firms as alternative suppliers. A broader trade war could weaken demand for Australian iron ore if China’s economy slows. US tariffs on steel, aluminium, and copper could also disrupt Australian exports and invite cheap foreign imports, impacting local manufacturers. Energy markets may see gains as China’s tariffs hit US coal, oil, and gas, but consumer price effects remain uncertain. In agriculture, potential disruptions to US cattle imports from Canada and Mexico could raise Australian beef prices, while increased Canadian canola exports could heighten competition for Australian oilseed farmers. The Australian dollar initially dropped to pandemic-era lows but rebounded after Canada and Mexico received a 30-day tariff reprieve. ANZ expects the divergence between US and Australian monetary policy to weigh on the currency, affecting exporters, importers, and tourism. The currency remains volatile, with rapid movements driven by tariff announcements.

ASEAN
Startup funding in Southeast Asia in 2024 drops to USD 4.56 billion, a 42% year-on-year decline
(22 January 2025) Southeast Asia’s startup funding in 2024 dropped to USD 4.56 billion, a 42% decline from 2023 and just 20% of its 2021 peak of USD 23.4 billion, according to DealStreetAsia. The number of deals decreased by 10% to 633, with late-stage funding rounds experiencing a 72% drop in value to USD 1.23 billion across 21 deals, marking the first time in six years late-stage funding was eclipsed by early-stage investments. Singapore accounted for 68% of regional funding, followed by Indonesia (9.6%) and the Philippines (9.4%). Financial services, including fintech and digital banking, dominated large fundraisers, with Atome securing USD 300 million in debt financing, the largest deal of 2024. The only unicorn minted was Tyme Group, which raised USD 250 million, led by Nubank, at a USD 1.5 billion valuation. Investors cited macroeconomic pressures, higher U.S. interest rates, a strong dollar, and geopolitical uncertainties under Donald Trump’s presidency as key factors for reduced activity. Early-stage deals are expected to dominate while local investors await improved exit conditions.

THAILAND
Thailand signs trade agreement with European Free Trade Association
(23 January 2025) Thailand will sign its first trade agreement with European countries on Thursday in Davos, partnering with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland. In 2023, EFTA imported USD 1.8 billion worth of goods and services from Thailand and exported USD 1.4 billion. Negotiations for the agreement began in 2005, stalled due to political instability in Thailand, and concluded in November 2024. The pact will reduce or eliminate customs duties on industrial and seafood products, streamline trade procedures, and enhance transparency. The Thai government aims to use the agreement to expand export markets and attract foreign investment amid trade uncertainties linked to U.S. tariffs under the Trump administration. Key Thai exports to EFTA include electronics-making machinery, mechanical appliances, vehicle components, and clock parts. Thailand’s Commerce Minister emphasised the need for structural reforms to boost high-tech exports and attract investment. Thailand is negotiating additional trade agreements with the EU, South Korea, Bhutan, the UAE, and Canada. However, the EU deal remains stalled due to differences over standards in government procurement, intellectual property, and labour protections.

SINGAPORE
Monetary Authority of Singapore eases monetary policy for first time since 2020
(24 January 2025) Singapore’s central bank, the Monetary Authority of Singapore (MAS), has eased monetary policy for the first time since 2020, citing heightened global trade policy uncertainties and moderating inflation. The MAS announced it would reduce the rate of the Singapore dollar’s appreciation against a basket of trading partner currencies, effectively lowering borrowing costs in Singapore’s trade-dependent economy. This decision follows December core inflation data showing a 1.8% year-on-year increase, the second consecutive month below 2%. The MAS also revised its 2025 inflation forecast to 1–2%, down from the previous 1.5–2.5% range. Singapore’s GDP growth is projected to decline from 4% in 2024 to 1–3% in 2025, reflecting external economic uncertainties. The MAS, which manages monetary policy through exchange rate adjustments rather than domestic interest rates, noted that imports account for 40% of Singapore’s consumer spending and gross trade exceeds 300% of GDP. The Singapore dollar initially weakened following the announcement but later traded at SGD 1.3526 per US dollar.

SINGAPORE, MALAYSIA
Malaysia and Singapore announce Johor-Singapore Special Economic Zone to enhance economic collaboration
(21 January 2025) Malaysia and Singapore have announced the Johor-Singapore Special Economic Zone (JSSEZ) to enhance economic collaboration amid rising US-China tensions and global trade fragmentation. Modelled after China’s Shenzhen economic zone, the JSSEZ aims to add USD 26 billion annually to Malaysia’s GDP by 2030, creating 20,000 skilled jobs and attracting 50 new projects. Malaysia is offering a 5% corporate tax rate for 15 years to attract investments in artificial intelligence, quantum computing, and high-end manufacturing. Johor, which has already attracted over USD 25 billion in data centre investments from companies like Nvidia, Microsoft, and ByteDance, will provide land, water, energy, and labour, while Singapore will leverage its global financial and logistics networks. The initiative reflects Malaysia’s strategy to integrate more closely with Singapore and diversify economic risks from geopolitical uncertainties. Bilateral plans include collaboration on green energy, infrastructure, cross-border electricity trading, and transport links. Malaysia’s Economy Minister emphasised the zone’s potential to function as an economic unit, combining Johor’s resources with Singapore’s global connectivity.

SINGAPORE
Private residential property prices rise by 2.3% in Q4 2024 
(24 January 2025) Singapore’s private residential property prices rose by 2.3% in Q4 2024, matching earlier estimates, with a full-year increase of 3.9%, according to the Urban Redevelopment Authority (URA). Developers sold 6,469 new units in 2024, slightly up from 6,421 in 2023, driven by new project launches and lower mortgage rates, as the three-month Singapore overnight rate averaged 2.92%, the lowest since November 2022. Rents for private homes remained flat in Q4, contributing to a 1.9% annual decline, the first drop since 2020. Prices for second-hand public housing apartments increased for the 19th consecutive quarter, with a 9.7% annual rise, the highest since 2022. Strong demand at private residential launches in early 2025 has prompted analysts, including those from Citigroup and Barclays, to predict potential new cooling measures, possibly announced during the annual budget on 18 February. Approximately 27,300 private units are expected to be completed between 2025 and 2027, but supply constraints continue to sustain elevated prices. Singapore’s National Development Minister indicated the government is open to new curbs but emphasised patience to allow existing measures to take effect.

INDONESIA
Indonesia considering reducing nickel ore production quotas to stabilize prices
(21 January 2025) Indonesia is considering reducing nickel ore production quotas to stabilise prices amidst a global surplus, according to its Ministry of Energy and Mineral Resources. Nickel prices have declined by approximately 40% over the past two years to around USD 16,000 per tonne, pressuring domestic producers and causing mine closures outside Indonesia. While specific figures were not disclosed, media reports suggest the 2024 quota could be set at 150-200 million tonnes, down from an estimated 270 million tonnes in 2023. Indonesia, which accounts for 57% of global refined nickel production, produced 2.02 million tonnes last year, with output expected to rise to 2.38 million tonnes in 2024, according to Benchmark Mineral Intelligence (BMI). Analysts warn that significant quota cuts could lead to domestic ore shortages, increased smelter costs, and greater reliance on imports, particularly from the Philippines. Macquarie estimates last year’s global nickel market surplus at 200,000 tonnes, predicting a smaller 60,000-tonne surplus in 2024, partly due to anticipated quota reductions and recovering EV battery demand. A sharp quota cut to 150 million tonnes would remove 35% of global supply, but such a drastic move is considered unlikely due to its potential impact on government revenue and the economy.

VIET NAM
Viet Nam’s economy projected to grow by 6.5% in 2025 
(23 January 2025) Viet Nam’s economy is projected to grow by 6.5% in 2025, according to the Asean+3 Macroeconomic Research Office (AMRO), aligning with Viet Nam’s target range of 6.5% to 8% but below the 7.09% growth recorded in 2024. Inflation is forecast to reach 3.5%, within the target range of 3% to 4.5%. Vietnam’s growth is attributed to strong export performance, with 2024 exports rising 14.3% to USD 405.53 billion and imports increasing 16.7% to USD 380.76 billion, resulting in a trade surplus of nearly USD 25 billion for the ninth consecutive year. Key growth drivers include diversified trade relationships, competitive labour markets, and investments in high-tech manufacturing and digitalisation. Vietnam’s growth outpaces regional peers such as the Philippines (6.3%), Indonesia (5.1%), and Thailand (3.1%), with Asean+3 regional growth forecast at 4.2% for 2025. However, the Plus-3 economies (China, Japan, South Korea) face slower growth of 4.0% due to rising trade barriers, including higher US tariffs on Chinese goods, which could reduce Asean’s growth by 0.1 percentage points. AMRO highlighted the risks of escalating trade tensions and their impact on external demand in the region.

RCEP Monitor

SOUTH KOREA
Financial Services Commission announces stricter delisting rules to improve stock market quality
(21 January 2025) South Korea’s Financial Services Commission (FSC) announced stricter delisting rules to improve stock market quality. The market capitalisation requirement for Kospi-listed companies will rise from KRW 5 billion to KRW 20 billion in 2026 and KRW 50 billion in 2028, while the improvement period following a delisting warning will be halved. Firms with a market cap under KRW 100 billion will face increased revenue thresholds, reaching at least KRW 30 billion by 2029. IPO regulations will also tighten, requiring 40% of shares to be allocated to institutional investors with lock-up periods by 2026. Additional restrictions on institutional investor participation in book-building will take effect in April and July 2025. Currently, 62 Kospi and 137 Kosdaq firms, representing 7%-8% of each market, fail to meet the new standards. Over the past decade, no firms were delisted under the existing thresholds, which the FSC criticised for inefficiencies in capital allocation and eroding market trust. Despite increased listings, South Korea’s MSCI index gains remain low at 3.8% compared to over 65% growth in the U.S., Japan, and Taiwan, highlighting the need for these structural reforms.

AUSTRALIA
IPOs start slowly in 2025 due to concerns over US protectionist policies
(22 January 2025) Australian initial public offerings (IPOs) have started slowly in 2025, with only four companies planning to list on the ASX in the first quarter, according to HLB Mann Judd. This follows USD 2.4 billion raised in IPOs in 2024, exceeding the combined totals of 2022 and 2023 but below the USD 5.9 billion annual average recorded before 2020. A corporate advisory partner at HLB attributed the sluggish start to concerns over US protectionist policies under the Trump administration, particularly tariffs and their impact on electric vehicle demand and commodity prices. These policies are expected to have a greater influence on market activity than Australia’s federal election in May. The Chinese economy’s vulnerability to US tariffs is also cited as a factor potentially affecting Australian IPO activity. Prospective issuers are reportedly cautious, with some deals in 2024 scrapped for not meeting listing requirements. HLB anticipates limited improvement in IPO activity until later in the year. 

JAPAN
Bank of Japan raises interest rates by 0.25 percentage points to 0.5% 
(23 January 2025) The Bank of Japan raised interest rates by 0.25 percentage points to 0.5% on 24 January, marking its highest level since 2008 and the third increase within a year, as inflation remains above the 2% target for 33 consecutive months. Core consumer prices rose 3% in December, while base pay has reached post-1990s highs, with 2023’s spring labour negotiations producing the largest wage increases since 1991. The central bank’s monetary tightening aims to embed inflation, address inefficiencies, and stimulate productive economic growth, though inflation has outpaced wage growth, straining household budgets. Japan’s gross domestic product, adjusted for inflation, has grown only 25% since 1994, with the IMF projecting 1.1% growth in 2025 following a 0.2% contraction in 2024. While private consumption has recovered in recent quarters, spending remains weak after prolonged stagnation.

ASEAN, CHINA
ASEAN economies struggle with influx of cheap Chinese imports
(14 January 2025) China’s exports grew 7.1% year-on-year in 2024 to a record CNY 25.45 trillion (USD 3.47 trillion), driven by rising shipments to Southeast Asia, which accounted for 16% of total exports, according to Chinese customs data. Exports to ASEAN surged 18.9% year-on-year in December, with the bloc becoming China’s largest export market in 2023 at USD 523.7 billion. The influx of Chinese goods, including a CNY 1 trillion export value of electric vehicles, lithium batteries, and solar panels, has pressured Southeast Asian industries, causing factory closures and job losses, such as 50,000 layoffs in Indonesia’s textile sector and 2,000 Thai factory closures between mid-2023 and mid-2024. In response, ASEAN nations have enacted measures like anti-dumping tariffs and taxes on low-cost imports; for example, Vietnam extended duties on Chinese aluminium products, while Thailand proposed a 30.9% tariff on Chinese steel. Analysts highlight challenges to ASEAN coordination due to differing economic conditions, while noting potential benefits from deeper economic ties with China, including technology transfers and infrastructure development, contingent on careful management and policy alignment.

MALAYSIA, UK
Malaysia and UK leveraging membership of CPTPP to strengthen trade and investment ties  
(16 January 2025) Malaysia and the United Kingdom are leveraging their membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to strengthen trade and investment ties. Malaysian Prime Minister Datuk Seri Anwar Ibrahim highlighted the significance of the UK’s entry into the CPTPP and Malaysia’s ratification in October 2024, which eliminates tariffs on member countries’ products. Speaking at the launch of YTL Group’s GBP 4 billion Brabazon New Town development in Bristol, Anwar commended YTL, Malaysia’s largest investor in the UK, for its contributions. The Brabazon project will include 6,500 sustainable homes, three schools, a large urban park, and essential services within a 15-minute radius. YTL, which entered the UK market in 2002 with the acquisition of Wessex Water, plans to invest an additional GBP 4 billion in the UK over five years. Anwar emphasised the importance of international frameworks like the CPTPP in expanding Malaysia’s global trade footprint.

THAILAND
Thailand’s SEC evaluating approval of Bitcoin ETF’s for listing on local exchanges
(15 January 2025) Thailand’s Securities and Exchange Commission (SEC) is evaluating the approval of Bitcoin exchange-traded funds (ETFs) for listing on local exchanges, allowing individual and institutional investors direct access to the cryptocurrency. Currently, Thai investors can only access overseas Bitcoin ETFs through funds such as One Asset Management’s offering launched in June 2024. The SEC Secretary-General highlighted the need to adapt to global cryptocurrency adoption trends, proposing enhanced investor protections. Binance and other digital-asset firms have identified Thailand as a key growth market amid eased restrictions. Thaksin Shinawatra, associated with the ruling Pheu Thai Party, has advocated issuing stablecoins backed by government bonds and developing a Bitcoin transaction sandbox in Phuket for tourism-related services. The SEC is also considering allowing highly-rated local firms to issue stablecoins backed by corporate bonds to enhance access to debt markets. As of November 2024, Thailand had approximately 270,000 active crypto trading accounts, with Bitcoin reaching a record high of USD 108,315 in December, though activity remains below pandemic-era peaks.

THAILAND
Thaksin Shinawatra proposes regulatory reforms to restore confidence in stock market
(13 January 2025) Thaksin Shinawatra, the de facto leader of Thailand’s ruling party, proposed regulatory reforms and incentives to restore confidence in Thailand’s USD 490 billion stock market, which has seen USD 9.6 billion in foreign outflows over two years due to scandals, sluggish economic performance, and political uncertainties. He urged stricter enforcement of regulations by the SEC and Stock Exchange of Thailand to combat fraud and criticised slow responses to corporate scandals involving firms like Stark Corp. and More Return Pcl. Thaksin recommended introducing tax incentives for long-term equity investors, reviewing high-frequency trading, and creating stablecoins backed by government bonds. Proposals included opening a carbon credit trading venue, reducing electricity tariffs to THB 3.70 baht per unit, and offering 99-year leases for a sea reclamation project to protect Bangkok. Thaksin projected GDP growth rates of over 3% in 2025, 4% in 2026, and 5% in 2027, citing plans for infrastructure development to attract foreign investment. Additional initiatives include setting a flat 20-baht commuter fare for Bangkok’s electric trains by October and evaluating tax reforms to enhance competitiveness.

INDONESIA, MALAYSIA, SINGAPORE
Johor-Singapore Special Economic Zone to potentially outcompete Indonesian SEZs 
(14 January 2025) Malaysia and Singapore’s agreement to develop the Johor-Singapore Special Economic Zone (JS-SEZ) is raising concerns in Indonesia over its potential to outcompete Indonesian SEZs for high-value investments. While corporate tax rates in Malaysia currently range from 15% to 24%, the JS-SEZ is expected to offer special tax rates of 5% for 15 years for companies in advanced sectors like AI, aerospace manufacturing, and medical devices. Indonesia’s corporate tax rate stands at 20%, but its SEZs provide up to 20 years of tax holidays and other allowances. Analysts warn that Indonesia faces challenges, including high costs, complex bureaucracy, limited green energy, insufficient infrastructure, and a lack of skilled labour, which have hindered its SEZs’ competitiveness. Indonesia’s SEZs, which have generated USD 15.7 billion in investment since 2012, face logistical barriers and limited realisation in several zones. Comparatively, Malaysia’s streamlined processes and favourable tax policies are seen as more attractive. Indonesia’s special economic adviser noted that global tech giants, including Apple, Alphabet, and Microsoft, have prioritised investments in Malaysia and Vietnam, while Indonesia has struggled to attract similar interest. Suggestions to enhance Indonesia’s SEZs include simplifying permit processes, improving port capacity, increasing green energy supply, and expanding vocational training to enhance workforce skills.

THE PHILIPPINES
Philippines’ bond bourse approves framework for trading forward contracts
(13 January 2025) The Philippine Securities and Exchange Commission approved PDS Group’s framework for trading government bond forward contracts, marking a key step in capital market development. Operated by Philippine Dealing & Exchange Corp. (PDEx), the non-deliverable contracts will allow participants to hedge interest-rate risks, with settlement via a bilateral netting system rather than central clearing. Trading will begin next month in PHP 50-million (USD 853,000) lots, offering the first peso interest-rate hedge akin to bond futures. This initiative complements the recently launched peso interest rate swap facility by the Bankers Association of the Philippines and aims to address growing hedging needs in one of Asia’s fastest-growing economies. Bangko Sentral ng Pilipinas (BSP) had earlier expanded permissible derivatives to include forward contracts. The PDS President emphasised the comprehensive framework now in place to support the market’s development.

VIET NAM
Viet Nam orders banks to withhold taxes for global tech platforms
(17 January 2025) Viet Nam has directed banks to withhold taxes for Agoda, Airbnb, Booking.com, and PayPal, as outlined in a General Tax Department letter dated 31 December. The order applies to 100 domestic and foreign banks, requiring them to deduct and declare tax obligations when processing payments through these platforms. The targeted companies, incorporated in low-tax jurisdictions such as Singapore, the Netherlands, and Ireland, have operated in Viet Nam for over a decade, generating revenues of up to tens of millions of dollars without registering for tax purposes. This measure is part of Vietnam’s broader efforts to tax global digital service providers and e-commerce platforms, complementing its participation in the OECD’s global minimum tax initiative. Authorities are also considering expanding taxation to include low-cost imports purchased via platforms like Shein. The four companies did not respond to requests for comment.

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CHINA

China’s population decreases by 1.39 million in 2024, third consecutive year of decline 
(17 January 2025) China’s population decreased by 1.39 million in 2024, reaching 1.408 billion, marking the third consecutive year of decline, according to the National Statistics Bureau. Births rose slightly to 9.54 million, 520,000 more than in 2023, attributed to delayed childbearing during the COVID-19 pandemic and the Year of the Dragon’s perceived auspiciousness. Despite this increase, it remains the second-lowest birth figure since 1949. Demographer He Yafu predicts a further decline in 2025. Bloomberg Intelligence projects the population may shrink to 1.36 billion by 2035, though efforts to encourage higher birth rates could delay this. In October, authorities pledged support for families with multiple children, including measures for housing, healthcare, and employment. Meanwhile, an ageing population and reduced workforce pose risks to economic growth and strain the pension system. In response, China announced plans to gradually raise the retirement age, the first adjustment since 1978, despite public opposition. 

CHINA
Shanghai and Guangdong reduce 2025 economic growth targets in response to Trump
(15 January 2025) China’s key exporting regions, Shanghai and Guangdong, have reduced their 2025 economic growth targets to approximately 5%, reflecting external challenges, including potential trade policies under US President-elect Donald Trump. Shanghai, which reported a 2024 GDP exceeding CNY 5 trillion and total trade of CNY 4.27 trillion, highlighted pressures on its export-reliant economy, with foreign direct investment falling from USD 24.1 billion in 2023 to USD 17.5 billion in 2024. The city aims to stabilise foreign trade and boost emerging industries like artificial intelligence and biomedicine, with R&D spending accounting for 4.4% of GDP. Guangdong, China’s largest provincial economy with a 2024 GDP exceeding CNY 14 trillion, plans to expand exports of electronics, smart appliances, and electric vehicles while diversifying markets beyond Europe and the US. Despite a 9.8% increase in trade volume to over CNY 9 trillion, Guangdong’s GDP growth lagged at 3.4% in the first three quarters of 2024, impacted by the property market slump. Both regions prioritise local consumption, technological investment, and foreign investment to mitigate external risks.

CHINA
China’s central bank outlines shift in country’s economic growth model
(13 January 2025) China’s central bank governor outlined a shift in the country’s economic growth model, moving away from a focus on investment towards prioritising consumption. This change comes amid concerns over insufficient domestic demand, particularly in consumption, and deflationary pressures. The governor highlighted that macroeconomic policy should now support both consumption and investment, with a stronger emphasis on the former. Measures to increase residents’ income, enhance subsidies, and improve social security will be introduced to stimulate consumption. While China met its 2024 growth target of around 5%, the outlook remains uncertain, especially with the looming threat of higher US tariffs. At a recent policy meeting, officials pledged to prioritise consumption, though the measures introduced so far, such as consumer trade-in programmes and increased subsidies, suggest incremental changes rather than a complete overhaul of the investment-heavy policy. Household spending accounts for just 45% of GDP, far below the OECD average. In his speech at the Asian Financial Forum, the governor also sought to reassure investors, noting improvements in housing sales and reduced risks from local government debt. The People’s Bank of China continues to support the yuan, using various tools, including interest rates and capital controls, to stabilise the currency.

ASEAN, INDIA
Indian outbound tourism to Southeast Asia rises to 3.75 million in 2023
(7 January 2025) Indian outbound tourism to Southeast Asia has surged, with visitor numbers rising from 31,100 in 2021 to 3.75 million in 2023, according to the World Travel and Tourism Council (WTTC). While Indian travel to Sri Lanka and France grew five- and twelve-fold, respectively, during the same period, Southeast Asia saw significantly higher visitor numbers, supported by affordable luxury, convenient visa policies, and expanded flight connections. Spending by Indian travellers abroad reached USD 33 billion in 2023, placing India 10th globally in outbound tourism expenditure. Destinations like Thailand, Indonesia, and Viet Nam attract Indian tourists with competitive pricing compared to Western countries, with direct flights from India increasing 20% in 2024. Southeast Asia also appeals for weddings, with costs often undercutting domestic Indian destinations. Initiatives such as visa-free entry in Thailand and Malaysia and joint ASEAN-India tourism activities further boost travel. Oyo and airlines including Singapore Airlines and VietJet have expanded operations to cater to this market, reflecting growing demand.

THAILAND
Thai government’s plan to reduce electricity prices welcomed by industry leaders
(10 January 2025) The Thai government’s plan to reduce electricity prices from THB 4.15 to THB 3.70 per unit has been welcomed by industry leaders and households as a measure to lower living costs and enhance economic competitiveness. Prime Minister Paetongtarn Shinawatra announced discussions to eliminate unnecessary costs to achieve the price target, initially proposed by former Prime Minister Thaksin Shinawatra. Federation of Thai Industries (FTI) Chairman Kriengkrai Thiennukul highlighted that the reduction would alleviate high production costs compared to regional competitors like Viet Nam and Indonesia, strengthening Thailand’s export and investment appeal. Thai Chamber of Commerce (TCC) Chairman Sanan Angubolkul estimated annual savings of THB 100 billion for households, boosting consumer spending and business profitability. The Electricity Generating Authority of Thailand (EGAT) may require subsidies to support this adjustment, adding to its existing liabilities of over THB 100 billion. At THB 4.15, Thailand’s electricity cost ranks fifth highest in ASEAN, below Singapore (THB 12.30) but above nations like Vietnam (THB 2.69) and Indonesia (THB 2.59).

THAILAND
Inflation rate rises to 1.23% in December 2024, marking return to BOT target range
(6 January 2025) Thailand’s inflation rate rose to 1.23% in December 2024, marking its return to the Bank of Thailand’s (BOT) 1%-3% target range for the first time since May. Core inflation stood at 0.79%, with consumer prices falling 0.18% month-on-month. Full-year inflation averaged 0.4%. The Trade Policy and Strategy Office projects inflation exceeding 1% in Q1 2025 due to higher diesel and food prices, with minimal impact from the recent minimum wage hike. Despite government calls for further rate cuts to boost the economy, BOT maintained its policy rate at 2.25% in December, citing the need for policy space amid global uncertainties. BOT forecasts inflation to average 1.1% in 2025 and economic growth to rise to 2.9% from 2.7% in 2024. Assistant Governor Sakkapop Panyanukul emphasised a robust monetary policy stance to address challenges. The rate panel will next meet on 26 February 2025.

MALAYSIA, SINGAPORE
Johor-Singapore Special Economic Zone (JS-SEZ) signed into law
(8 January 2025) The Johor-Singapore Special Economic Zone (JS-SEZ) agreement, signed during the 11th Malaysia-Singapore Leaders’ Retreat on 7 January, aims to create 20,000 skilled jobs and facilitate the expansion of 50 projects within five years and 100 projects in a decade. The initiative spans the Iskandar Development Region and Pengerang, focusing on 11 sectors, including manufacturing, logistics, and renewable energy. Malaysia will offer tax incentives, a special corporate tax rate, and establish the Invest Malaysia Facilitation Centre – Johor as a one-stop investment hub. Early measures include passport-free QR code clearance at checkpoints and enhanced movement of goods and labour. In 2023, Singapore accounted for 23.2% of Malaysia’s FDI, totalling MYR 43.7 billion, with Johor receiving MYR 31 billion. Singaporean businesses expressed interest, highlighting benefits for logistics, transportation, and manufacturing sectors. Industry leaders called for detailed infrastructure timelines and policy rollouts to maximise benefits. The JS-SEZ is expected to strengthen regional economic integration and attract global investments by leveraging Johor and Singapore’s complementary strengths.

INDONESIA
Indonesia formally joins BRICS as full member, expanding group to 11 nations
(7 January 2025) Indonesia has formally joined BRICS as a full member, expanding the group to include 11 nations. Brazil, which holds the BRICS presidency in 2025, confirmed Indonesia’s entry following unanimous approval by member states, as part of an expansion strategy endorsed at the 2023 Johannesburg summit. Indonesia’s accession was delayed until after its presidential election in 2024, with President Prabowo Subianto assuming office in October. Brazil highlighted Indonesia’s alignment with BRICS goals, including support for global governance reforms and fostering cooperation within the Global South. The group now comprises Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, the United Arab Emirates, and Indonesia.

INDONESIA
Indonesian e-commerce firm Bukalapak announces end of selling physical goods on its marketplace
(8 January 2025) Bukalapak, an Indonesian e-commerce firm, announced it will cease selling physical goods on its marketplace and focus exclusively on virtual products, such as mobile phone credits and streaming vouchers. Customers have until 9 February to place final orders for physical items. The decision follows intense competition from market leaders Shopee, owned by Sea, and Tokopedia, now 75.01% owned by ByteDance’s TikTok. Bukalapak, which raised USD 1.5 billion in its 2021 IPO, has seen its shares decline significantly from an initial IDR 1,060 to IDR 117, a 4.1% drop as of Wednesday. The company reported a loss of IDR 593.23 billion (USD 36.62 million) for the first nine months of 2024. Bukalapak stated its commitment to supporting sellers during the transition to a virtual product-focused platform.

MYANMAR
Military junta implements rolling blackouts in Yangon and Naypyidaw 
(6 January 2025) Myanmar’s military government has implemented rolling blackouts in Yangon and Naypyidaw to manage electricity demand and avoid grid collapse, providing only eight hours of power daily on a rotating schedule starting 5 January. Yangon’s over 40 townships are divided into three groups, each receiving electricity in two four-hour intervals, though actual supply often falls short. The Ministry of Electricity reported a significant gap between the 4,400 MW daily demand and the 1,701 MW produced on 5 January, citing damaged power lines, natural disasters, and low gas quotas. Nationwide electricity production has declined by at least one-third since the 2021 coup, with Yangon alone consuming slightly over half of the national supply. Naypyidaw, previously exempt from power outages, is also experiencing blackouts. The junta leader pledged in January 2023 to achieve sufficient electricity supply by 2025, but challenges persist, including rising costs of solar power equipment, which limits its viability as an alternative energy source.

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CHINA
China’s CPI rises 0.1% year-on-year in December 2024, marking fourth consecutive month of deceleration
(9 January 2025) China’s consumer price index (CPI) rose 0.1% year-on-year in December 2024, marking the fourth consecutive month of deceleration and a full-year increase of 0.2%, significantly below the earlier forecast of 1.1%. Core CPI, excluding food and fuel, rose 0.4%, the highest since July, while producer prices declined by 2.3%, continuing 27 months of factory deflation. The National Bureau of Statistics attributed the decline to commodity price fluctuations and seasonal industry slowdowns. The GDP deflator — a broader measure of economy-wide prices — is expected to decline for the seventh consecutive quarter, extending into 2025, marking the longest streak since the 1960s. Government measures to counteract deflation include expanding subsidies for consumer products and industrial equipment upgrades. President Xi Jinping’s administration has prioritised boosting consumption and domestic demand through public spending and monetary easing in 2025. Economists expect prolonged challenges, with the People’s Bank of China likely to pursue further monetary easing, including interest rate cuts and reducing banks’ reserve requirements, to support economic growth while managing yuan depreciation pressures.

HONG KONG
Hang Seng Index declines 0.4%, marking 3.1% weekly drop
(10 January 2025) The Hang Seng Index declined 0.4% to 19,155.66, marking a 3.1% weekly drop, the largest since 15 November, with Hong Kong’s stock market losing USD 118 billion in capitalisation. Key declines included Li Ning (-4.6%), Lenovo Group (-4.1%), and China Life Insurance (-3.9%), while Tencent rose 0.3%. US-China tensions, including blacklisting Chinese firms like Tencent and Contemporary Amperex, contributed to sell-offs. China’s persistent deflation and the central bank’s decision to refrain from further government bond purchases to manage yuan depreciation added to market concerns. Four IPOs launched, with Suzhou Sepax Technologies (+377%) and Juneway Electronic (+268%) performing strongly, while Bloks Group rose 50% and Numans Health Foods dropped 19%. Regional markets also faced declines, with Japan’s Nikkei 225 down 0.9% and Australia’s S&P/ASX 200 falling 0.5%.

AUSTRALIA
Retail sales increases by 0.8% in November 2024, below forecast
(9 January 2025) Australian retail sales increased by 0.8% in November 2024, below the forecasted 1% rise, following a revised 0.5% gain in October, according to the Australian Bureau of Statistics. Sales grew 3% year-on-year, with department stores leading monthly gains at 1.8%, followed by clothing and food at 1.6%, and cafes, restaurants, and takeaways at 1.5%. The data, coupled with weak underlying inflation, has increased market expectations of a Reserve Bank of Australia (RBA) interest rate cut in February, with money markets pricing a 70% likelihood. The RBA’s December minutes indicated cautious optimism on inflation nearing target levels, but uncertainty persists about household spending. Consumer sentiment remains a concern for Prime Minister Anthony Albanese’s government ahead of the May 2025 election, amid high borrowing costs and cost-of-living pressures. The ABS plans to replace retail sales data with a broader household consumption report from mid-2025, with the first release scheduled for Friday.

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JAPAN
Average size of homes in Japan decline to 30-year low due to rising construction costs 
(03 January 2025) The average size of homes in Japan has declined to a 30-year low, with the total floor area now averaging 92 square metres, a 3 square metre reduction since 2003. Rising construction costs are a primary driver of this trend, as builders opt for smaller homes to maintain affordable sticker prices, resulting in a “stealth price hike.” The shrinkage is evident in both single-family homes and multi-dwelling units, with the latter averaging around 50 square metres, below the 55 square metres considered necessary for comfortable living. Since 2024, house sizes have continued to decrease, exacerbated by rising construction costs (currently 30% higher than 2015 levels) and increasing land prices in popular areas. Demand for larger homes is waning, partly due to the rise in one-person households, which now make up 38% of the total. However, many of these individuals still report issues with inadequate space. The trend has made it more difficult for younger people to enter the housing market, with high property prices and limited options for spacious units in convenient locations. Analysts warn that the downsizing of homes could contribute to a further decline in the birth rate, as small living spaces may discourage couples from having larger families.

JAPAN
78% of major Japanese firms expect moderate growth in Japan’s economy in 2025 
(03 January 2025) A recent Kyodo News survey of 114 major Japanese firms, conducted from late November to mid-December, reveals that 78% expect moderate growth in Japan’s economy in 2025, up from 73% a year earlier. The primary reasons cited for this optimism include a recovery in consumer spending (88%) and rising wages (81%). However, 16% anticipate the economy will remain flat, and 2% foresee a moderate contraction, with concerns over rising prices. Wage growth, particularly outpacing inflation, is deemed crucial for sustaining economic growth, and 46% of companies are planning or considering pay hikes in 2025. In terms of global risks, 13% of firms expressed concerns over the potential negative impact of a second Trump presidency, primarily citing concerns over tariffs (65%), energy and environmental policies (50%), and economic security policies related to China (46%).

CHINA
People’s Bank of China plans to reduce interest rates in 2025, with focus on interest rate adjustments
(03 January 2025) The People’s Bank of China (PBoC) plans to reduce interest rates in 2025, shifting towards a more conventional monetary policy aligned with the US Federal Reserve and the European Central Bank. The current rate of 1.5% is expected to be cut at an appropriate time next year, with a focus on interest rate adjustments rather than quantitative targets for loan growth, which have been phased out. The central bank aims to improve market-oriented interest rate formation and transmission, moving away from guidance that previously steered credit towards high-growth sectors. This reform is seen as crucial due to collapsing credit demand, particularly following the property market slowdown and concerns over excessive lending. However, the PBoC faces challenges in implementing this shift, as the government still prefers using credit expansion to support key sectors. In 2024, the central bank made significant cuts to key rates, including the seven-day reverse repo and five-year rates, as part of a broader stimulus package. The PBoC is also moving towards risk-based pricing of loans, but the transition may cause confusion in the market. Despite these efforts, the PBoC lacks some components of a fully developed interest rate-based system, such as regular public policy meetings.

RCEP Monitor

JAPAN
Job postings targeting Japanese talent decline in seven major Asian economie
(4 December 2024) Job postings targeting Japanese white-collar workers in seven major Asian economies declined by 16% year-on-year in Q3 2023, falling to 69% of the peak seen in Q1 2023, according to JAC Recruitment. Vietnam experienced the largest drop at 36%, followed by Thailand (22%) and Singapore (40%), where the COMPASS framework has tightened visa requirements. South Korea recorded a 59% decline, attributed to high local youth unemployment and increased availability of Korean talent fluent in Japanese. Conversely, job postings for Japanese workers rose by 30% in Indonesia, driven by energy and construction, and by 29% in India, where Japanese companies are expanding across multiple sectors. Thailand, home to 72,000 Japanese residents as of October 2023, saw decreased hiring due to economic slowdowns in key industries. Staffing agencies report medium- to long-term growth potential for Japanese talent in Asia as companies cultivate local teams and adjust hiring strategies post-COVID-19. Rising wages in Asia and stable Japanese demand for overseas experience continue to influence the market, with exchange rates having minimal impact on long-term employment trends.

JAPAN
Bank of Japan reduces holdings of 10-year government bonds to enhance market liquidity
(04 December 2024) The Bank of Japan (BOJ) reduced its holdings of 10-year government bonds maturing in March 2032 to JPY 8.03 trillion as of 29 November 2023, from JPY 8.23 trillion on 20 November, aiming to enhance market liquidity. These bonds, crucial as the cheapest-to-deliver securities for March 10-year bond futures, are heavily used in hedging and arbitrage trading. The BOJ, which holds over 80% of four tranches of futures-linked notes maturing in 2031 and 2032, also conducted repurchase agreement operations where participants requested reductions in their repurchase amounts for the first time since April 2023. Market participants, including Resona Asset Management Co., noted that this move alleviated concerns about bond scarcity and could improve market functioning. The BOJ plans to reduce monthly bond purchases by JPY 400 billion each quarter through March 2026, as part of its roadmap amid inflation above the 2% target.

AUSTRALIA
Annual growth rate in Q3 2023 slowest since late 2020  
(04 December 2024) Australia’s GDP grew by 0.3% in Q3 2023, below the forecasted 0.4%, marking an annual growth rate of 0.8%, the slowest since late 2020. Public sector spending, driven by record public investment, added 0.6 percentage points to growth, while household spending contributed nothing, despite a 1.5% rise in disposable income. The savings rate increased to 3.2%, reflecting cautious consumer behaviour despite tax cuts and slowing inflation. GDP per capita declined by 0.3%, the seventh consecutive quarterly drop. The Australian dollar fell 0.7% to USD 0.6442, with markets pricing in a 96% likelihood of a rate cut in April 2024. Inflation indicators showed the GDP chain price index down to 2.4%, and real unit labour cost growth slowed to 1.6%. Productivity fell 0.5%, raising concerns for the Reserve Bank of Australia’s forecast for inflation to return to its 2%-3% target by 2026.

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AUSTRALIA
Australia enacts one of the world’s strictest tax disclosure laws for multinational companies
(28 November 2024) Australia has enacted a tax disclosure law requiring multinationals with annual revenues exceeding AUD 1 billion, including at least AUD 10 million in Australian revenue, to report profits and revenues in 41 jurisdictions associated with tax incentives or secrecy. The law aims to curb profit shifting by publishing financial details, affecting nearly 900 US companies, 180 Japanese, 161 Chinese, and 111 French firms. Exemptions apply only for national security, legal, or commercially sensitive concerns. The legislation excludes some low-tax territories like Cyprus, Ireland, and Luxembourg due to international agreements but is considered more comprehensive than the EU’s regime. The law aligns with the Global Reporting Initiative standard, mandating disclosure of third-party sales and intragroup transactions without adopting a five-year publication delay permitted by EU rules. Additionally, Australia’s parliament approved Reserve Bank of Australia reforms, establishing a monetary policy board to oversee interest rates. This legislation follows a Labour-Greens agreement to overcome initial opposition. The EU Tax Observatory and other groups view the law as a critical step toward global tax transparency despite gaps.

SOUTH KOREA
Bank of Korea lowers benchmark interest rate by 0.25 percentage points to 3%  
(28 November 2024) The Bank of Korea (BoK) lowered its benchmark interest rate by 0.25 percentage points to 3%, marking a second consecutive cut, citing increased economic risks linked to Donald Trump’s re-election and Republican control of Congress. The BoK revised its 2024 GDP growth forecast to 2.2% from 2.4% and projected 2025 growth at 1.9%, down from 2.1%. The BOK’s Governor highlighted concerns over Trump’s proposed tariffs, including a 25% tariff on Canadian and Mexican goods and 10% on Chinese products, which threaten South Korea’s export-driven economy. South Korea’s trade surplus with the US reached USD 28.7 billion in the first half of 2024, potentially exceeding last year’s USD 44.4 billion record. The Federation of Korean Industries reported profit declines in 12 of 17 sectors for Q3, amid increased competition from Chinese exports. Economists anticipate prolonged export weakness, compounded by potential US inflationary pressures and Federal Reserve rate hikes, which could further strengthen the dollar against the South Korean won. A weaker won is expected to raise import costs, particularly for oil, adding inflationary pressure while limiting the BoK’s flexibility to ease monetary policy further.

NEW ZEALAND
Reserve Bank of New Zealand cuts benchmark interest rate by 50 basis points 
(26 November 2024) The Reserve Bank of New Zealand (RBNZ) cut its benchmark interest rate by 50 basis points to 4.25%, marking its third consecutive reduction in an effort to support the country’s struggling economy. This follows 50-basis-point cuts in October and a 25-basis-point cut in August. New Zealand’s GDP contracted by 0.2% in the June 2024 quarter compared to the previous quarter and was down 0.2% year-on-year, marking four consecutive quarters of contraction. Inflation has moderated, standing at 2.2% in the September 2024 quarter, within the RBNZ’s target range of 1%-3%, down from a peak of 7.3% in 2022. The bank indicated that additional rate cuts could occur in early 2025, potentially in smaller 25-basis-point increments, to further stimulate investment and spending. Economic growth is projected to recover in 2025, although employment growth is expected to remain weak until mid-2025.

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JAPAN
Japan Inc reports record profits for first half for fourth consecutive year
(21 November 2024) For the April-September half, Japan’s publicly traded companies reported record profits for the fourth consecutive year, with a combined net profit of approximately JPY 27.2 trillion (USD 175 billion), marking a 15% year-on-year increase. Nonmanufacturing sectors, accounting for 60% of total profits, drove this growth, particularly in finance and transportation. The finance sector saw a 36% profit increase among Japan’s three megabanks, which reached a combined JPY 2.55 trillion, aided by higher domestic interest rates and gains from securities sales. Brokerage profits surged 95%, while insurers saw a 160% rise. In contrast, manufacturers faced a downturn, with the automotive sector suffering the largest profit drop of JPY 1.2 trillion due to competition from affordable electric vehicles and a price war in the U.S. With the yen currently at 155 to the dollar and ongoing global uncertainties, including the potential impact of a new U.S. administration, Japan’s companies are relying on substantial cash reserves – JPY 114 trillion yen – to manage future challenges, acquisitions, and restructuring efforts. 

AUSTRALIA
Sovereign wealth fund Future Fund to allocate more investments towards domestic assets
(20 November 2024) Australia’s government has issued a new mandate requiring its AUD 230 billion (USD 150 billion) sovereign wealth fund Future Fund to allocate more investments towards domestic housing, energy transition, and infrastructure projects. Withdrawals from the fund will be deferred until at least 2032-33, by which time its value is projected to reach AUD 380 billion. The fund’s primary objective to maximise returns remains unchanged, with a benchmark target of 4-5% above inflation. The Future Fund returned 11.9% in the year to 30 September, with 40% of its portfolio in equities and 10% in infrastructure and timberland. Private investments represent over 40% of its assets. Australian officials emphasised the alignment of the directive with structural economic shifts and opportunities, such as the global net-zero transition. The Future Fund Chair noted that the government’s priorities are consistent with the fund’s strategy, which seeks increased local currency exposure and inflation resilience.

NEW ZEALAND
Treasury indicates it will revise its economic and fiscal forecasts downwards
(21 November 2024) New Zealand’s Treasury indicated it would likely revise its economic and fiscal forecasts downwards due to a prolonged slowdown in productivity. The Treasury Chief Economic Adviser stated that economic growth, previously expected to resume in the second half of 2024, is now anticipated to begin later, as recent data shows weaker-than-expected growth. This slower growth results in a smaller economy and reduced tax revenue, complicating efforts to balance the budget. The government had already reported a larger-than-expected budget deficit for 2023-24, exacerbated by lower growth, but remains committed to curbing public spending to achieve a surplus. Productivity has fallen back to pre-pandemic levels, with manufacturing and service sectors showing contractionary activity. The Treasury’s updated economic and fiscal outlook is due on 17 December. The Reserve Bank of New Zealand, which cut interest rates in August and again in October, is expected to reduce rates further in the coming week.