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.

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CHINA
Trade surplus projected to reach nearly USD 1 trillion by year-end
(12 November 2024) China’s trade surplus is projected to reach nearly USD 1 trillion by year-end, with the goods trade surplus already reaching a record USD 785 billion in the first ten months of 2024, up almost 16% from the previous year. China’s strong export volume, driven by falling export prices and weak domestic demand, has led to significant trade imbalances globally, including a 4.4% increase in the U.S. surplus, a 9.6% increase with the EU, and a 36% increase with ASEAN countries. The yuan-denominated trade surplus represented 5.2% of China’s GDP in the first nine months, the highest since 2015. Countries globally, from South America to Europe, have imposed tariffs on Chinese goods, with the incoming U.S. administration under Trump likely to pursue further tariffs. Foreign companies are reducing investments in China, with foreign direct investment liabilities declining in the first nine months, potentially marking China’s first annual FDI outflow since 1990. In response, China’s State Council announced increased financial support for companies to stabilise trade, employment, and economic growth. Additionally, India’s central bank has expressed readiness to let the rupee weaken should China allow the yuan to fall further, potentially escalating a currency rivalry.

CHINA
China planning on slashing homebuying taxes to spur housing market
(12 November 2024) China is preparing a proposal to reduce deed taxes for homebuyers in major cities, including Beijing and Shanghai, to as low as 1%, down from up to 3%, as part of a fiscal strategy to revitalise its weakened housing market. This measure aligns with plans for more “forceful” fiscal policies in 2024, in addition to a CYN 10 trillion debt swap initiative for local governments. The tax cut proposal also suggests removing the distinction between ordinary and luxury homes, which would lower upgrade costs for buyers. This initiative, if enacted, would reduce purchasing costs and stimulate property sales, especially in top-tier cities. The move has already influenced markets, with the Bloomberg Intelligence gauge of developers’ shares rising slightly before resuming losses. China’s property sector, suffering from years of downturns, has seen billions in lost household wealth, contributing to deflationary pressure. Recent policies have aimed to support the property market, such as reducing borrowing costs, easing purchasing restrictions, and doubling the loan quota for unfinished projects to four trillion yuan. October saw a rise in residential property sales, though mainly in state-backed projects and existing homes.

AUSTRALIA
Employment growth slows in October with net jobs rising by 15,900 
(15 November 2024) Australia’s employment growth slowed in October, with net jobs rising by 15,900 compared to a revised increase of 61,300 in September, which was below market expectations of a 25,000 rise. However, annual job growth remained strong at 2.7%, driven primarily by full-time positions. The unemployment rate held steady at 4.1%, and the participation rate slightly decreased to 67.1%. The data led National Australia Bank to revise its forecast for the Reserve Bank of Australia’s (RBA) first rate cut to May, from February. Despite this, other major banks still anticipate a rate cut in February. The RBA’s current cash rate remains at 4.35%, and analysts suggest that with inflation still above target, a near-term rate cut is unlikely. Inflation was 2.8% in Q3, largely due to government rebates, while underlying inflation remained at 3.5%. The likelihood of a rate cut in December or February is seen as low, with markets indicating only a 10% chance in December and 28% in February. The labour market remains tight, with hours worked increasing and underemployment dropping to 6.2%.

THE PHILIPPINES
Economy grows by 5.2% year-on-year in Q3 2024, marking slowest expansion in five quarters
(07 November 2024) The Philippine economy grew by 5.2% year-on-year in Q3 2024, down from a revised 6.4% growth in Q2, marking the slowest expansion in five quarters. Household consumption rose by 5.1%, supported by central bank rate cuts in August and October, although declining exports and agricultural output moderated overall growth. Exports of goods and services declined by 1.0%, while imports increased by 6.4%, resulting in a “deep contraction” in net exports. The National Economic and Development Authority Secretary attributed export declines to inventory adjustments in the electronics sector, particularly semiconductors. Agriculture contracted by 2.8%, impacted by El Nino and seven typhoons, including Typhoon Yagi. Government expenditures grew by 5%, slower than the prior quarter’s 10.7% due to climate-related disruptions. President Ferdinand Marcos Jr. is targeting upper-middle-income status for the Philippines by the end of his term, requiring at least 6.5% growth in Q4 to meet the government’s 6-7% annual GDP target. HSBC noted easing inflation, central bank rate cuts, and reduced “revenge spending” as factors influencing Q3 consumption.

THE PHILIPPINES
Authorities begin clearing debris in northern regions following Typhoon Yinxing’s landfall
(08 November 2024) On 08 November, Philippine authorities began clearing uprooted trees and debris in northern regions as Typhoon Yinxing moved out to sea after making landfall the previous night with winds reaching 175 km/h. Nearly 30,000 residents had evacuated to government shelters before the storm, which fortunately caused no casualties despite significant damage. The typhoon brought 242.6 mm of rain and uprooted trees, knocked down power lines, and caused soil erosion. Cagayan province’s disaster chief reported minor landslides without fatalities. In Pamplona, strong winds tore roofs from homes, and shelter-seeking residents in Santa Ana faced additional challenges as high winds shattered windows. By 8 AM on 08 November, Typhoon Yinxing was moving across the South China Sea, while clean-up operations were underway, including power restoration and road clearing. This is the third major storm to impact the Philippines in a month, following Storm Trami and Super Typhoon Kong-rey, which collectively resulted in 158 fatalities. Climate research indicates storms in the Asia-Pacific are forming closer to coastlines, strengthening rapidly, and persisting longer on land due to climate change.

MALAYSIA
Sarawak state targets quadrupling renewable energy capacity by 2035
(08 November 2024) The state of Sarawak has set a target to quadruple its renewable energy generation capacity to 15 GW by 2035, up from its current 5.7 GW, with 62% of existing capacity derived from hydropower. Sarawak’s surplus energy is exported through the Borneo Grid to Indonesia and Brunei, and discussions are ongoing to supply up to 1 GW of renewable power to Singapore by 2031, involving a 700-km undersea cable project with Sembcorp Industries. The Baleh Dam, a 1.3 GW hydropower facility, is set to come online in 2027, while a collaboration with Abu Dhabi’s Masdar and Petronas subsidiary Gentari aims to develop a 1 GW floating solar project at the Murum Hydroelectric Plant. The CEO of the Asian Strategy and Leadership Institute views the 15 GW goal as ambitious but achievable, though he notes challenges related to local energy stability, environmental impacts of hydropower, talent development, and investment. Sarawak is also exploring power supply to Johor, driven by industrial and data centre demands. Sarawak Energy, now the first Southeast Asian global patron of the World Energy Council, is focusing on partnerships to support regional energy needs and climate objectives.

MALAYSIA
Malaysia’s central bank maintains overnight policy rate at 3.00% in final policy meeting of 2024
(06 November 2024) Bank Negara Malaysia (BNM) maintained its overnight policy rate at 3.00% in its final policy meeting of 2024, consistent with market expectations and a steady economic outlook. This rate has held since May 2023, with economists forecasting it will remain stable until at least 2026. BNM noted continued economic strength, supported by resilient domestic spending and increased exports. Inflation rates, both headline and core, have averaged 1.8% year-to-date, with 2025 inflation projected to stay manageable due to easing global costs and stable domestic demand. However, BNM highlighted that the inflation outlook may be influenced by government policies, particularly as Malaysia phases out blanket subsidies on items like diesel, electricity, and chicken, with further fuel subsidy cuts expected by mid-2025. In October’s budget, the government raised its 2024 economic growth forecast to 4.8%-5.3%, up from 4%-5%. Preliminary estimates for Q3 show annual growth at 5.3%, down from Q2’s 5.9%.

INDONESIA
Indonesia aims to increase palm oil production to support growing biofuel demand
(07 November 2024) Indonesia aims to increase palm oil production to support its growing biofuel demand and President Prabowo Subianto’s food security objectives. The country launched a mandatory B35 biodiesel program in early 2023, requiring a 35% palm oil blend, and plans to increase this to 40% in 2025 to reduce carbon emissions and oil imports. While Indonesia produces approximately 60% of the world’s palm oil, efforts to boost productivity will focus on expanding a smallholder replanting programme, improving farming practices, and introducing higher-yielding crop varieties. Since 2017, around 360,000 hectares have been replanted under the programme, though this remains below the target of 180,000 hectares annually. It is estimated that 2024 production will remain around 50 million tonnes, with output unlikely to increase substantially in the short term due to replanting delays; newly planted trees require about three years to mature. The USDA forecasts a 3% production increase to 47 million tonnes in 2024-25, partly driven by recovery from 2023’s El Niño conditions, despite longstanding moratoriums on new land clearance to prevent deforestation. 

VIET NAM
Viet Nam sets dong’s reference rate at historic low amidst strengthening US Dollar
(07 November 2024) The State Bank of Vietnam (SBV) set the dong’s reference rate at a historic low of VND 24,283 per dollar on Thursday, amid pressure from a strengthening U.S. dollar. The dong traded at 25,402 per dollar, close to its all-time low, reflecting a more than 4% decline this year, its weakest performance since 2015. Analysts suggest that the SBV may permit a gradual depreciation of the dong but is prepared to intervene to avoid excessive weakening. The SBV sets the daily reference rate based on a basket of eight currencies, allowing a 5% trading band. The depreciation trend follows regional central banks’ adjustments to a strong dollar, with other currencies such as South Korea’s won also reaching multi-year lows. SSI Securities Corp. highlighted that this situation may push the SBV to enhance foreign exchange reserves and increase flexibility in exchange rate policies to support market depth.

VIET NAM, BRUNEI DARUSSALAM
Viet Nam and Brunei Darussalam collaborating to strengthen tourism cooperation
(08 November 2024) The Vietnamese Embassy in Brunei Darussalam held a workshop on 06 November to strengthen tourism cooperation with Brunei and the BIMP-EAGA region post-COVID-19. The Vietnamese Ambassador highlighted rising demand for sustainable and Halal tourism, noting opportunities for Viet Nam and Brunei to tap into the nearly 400 million people within BIMP-EAGA. Vu expects tourism growth in 2025, supported by cultural events in Viet Nam that are expected to attract Muslim tourists from the region. He underscored the eco-tourism potential in Brunei, Borneo, and BIMP-EAGA countries, as well as the impact of Indonesia’s capital relocation to Nusantara on tourism appeal. With existing direct flights between Brunei and Viet Nam, both countries serve as gateways connecting the Mekong region and BIMP-EAGA. The Embassy aims to collaborate with partners to promote tourism across these regions, including new travel routes. Representatives from Brunei and Malaysia expressed interest in closer tourism ties, acknowledging Viet Nam’s recent e-visa introduction, enhanced air links, and expanded Halal services. Brunei’s Tourism Department Acting Director, called Viet Nam a key market, with plans to promote Brunei’s cultural and Islamic tourism through social media influencers. In 2024, Brunei welcomed 4,000 Vietnamese tourists, and its national airline facilitated travel for over 12,000 passengers on six weekly flights between Brunei and Ho Chi Minh City.

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SOUTH KOREA
Korean government revises approach to regulating dominant online platforms
(08 November 2024) South Korea’s government has revised its approach to regulating dominant online platforms, shifting from the proposed Platform Competition Promotion Act (PCPA) to amendments in the existing Monopoly Regulation and Fair Trade Act. The PCPA, criticised by the United States for potentially benefiting Chinese companies, was aimed at platforms with over 60% market share and annual local revenues exceeding KRW 4 trillion (USD 2.9 billion), such as Naver, Kakao, and Baemin. The amendments will still enable scrutiny of dominant platforms but focus on interventions for specific abuses rather than broad preemptive controls. However, the changes have drawn mixed reactions. Industry groups, like the Digital Economy Research Institute, warn of stifled innovation, while advocates such as People’s Solidarity for Participatory Democracy argue that the adjustments lack the power to curb monopolistic practices effectively. The Korea Fair Trade Commission (KFTC) recently fined Kakao T KRW 72.4 billion for abusing market power in the taxi-hailing sector, where it holds a 96% share, a record penalty intended to address anti-competitive behaviour. Meanwhile, Democratic Party legislators have threatened to revive the PCPA if voluntary negotiations between platforms like Coupang and Baemin and small business owners stall, reflecting ongoing tensions.

CHINA
Chinese spending on chipmaking equipment projected to exceed USD 40 billion in 2023
(07 November 2024) China’s spending on chipmaking equipment is projected to exceed USD 40 billion in 2023 but is expected to fall below this level in 2024 due to earlier advance purchases spurred by U.S.-China tensions, according to SEMI. In 2025, the market is anticipated to contract further by 5-10%, driven by declining equipment utilisation rates at Chinese semiconductor plants. ASML Holding, which recorded 50% of its recent quarterly sales in China, forecasts this share to decrease to 20% in 2025, leading the company to lower revenue expectations. SEMI also estimates a 4% annual decline in China’s chipmaking equipment spending from 2023 to 2027, contrasting with projected annual growth of 22% in the Americas, 19% in Europe and the Middle East, and 18% in Japan. Despite this downturn, China will remain the world’s largest chipmaking equipment market, with expected spending of USD 144.4 billion between 2024 and 2027, outpacing South Korea’s USD 108 billion and Taiwan’s USD 103.2 billion. China’s government aims to boost domestic self-sufficiency in semiconductors, with a 2023 self-sufficiency rate of 23%, supporting local suppliers like Naura Technology Group and AMEC, which are increasing technological capabilities. Semiconductor Manufacturing International Corp. (SMIC) and other local chipmakers are expanding procurement of domestic equipment, in part due to state direction.

CHINA
Chinese exports rose by 12.7% year-on-year to USD 309.06 billion, fastest increase since March 2023
(06 November 2024) In October, China’s exports rose by 12.7% year-on-year to USD 309.06 billion, marking the fastest increase since March 2023 and surpassing analysts’ forecast of 5.2%. This significant growth, compared to 2.4% in September, is attributed to delayed shipments due to improved weather, price discounts, and seasonal demand. Imports, however, dropped by 2.3%, missing the forecasted decline of 1.5%. Export gains included an 8.1% rise to the U.S., a 12.7% increase to the EU, and a 15.8% rise to ASEAN nations, while imports from these regions fell over 6%. Exports to Russia surged nearly 27%. Chinese car exports grew 11%, despite tariffs from the U.S. and EU. Economists expect export strength to continue into early next year as businesses anticipate possible trade conflicts with the U.S. Fiscal stimulus measures, including rate cuts and relaxed property purchase rules, have been implemented to counter weak domestic demand, and further stimulus details are expected after China’s parliament meeting concludes. Factory activity also showed slight improvement in October, with the purchasing managers’ index reaching 50.1, a positive shift from September’s 49.8.

SINGAPORE
Singapore’s “deep tech” investments rose 31% in 2023, constituting 25% of total deal values
(29 October 2024) On 1 October, Tianjin in China launched its first driverless public bus network, spanning 20 kilometres and serving 10 stops across key urban areas, using vehicles developed by Singapore’s autonomous vehicle startup Moovita. This marks Moovita as the first foreign AV provider to gain a licence in China. Singapore’s “deep tech” investments rose 31% in 2023, despite a 20% overall market downturn, constituting 25% of total deal values, surpassing the global average. “Deep tech” refers to startups born out of scientific research in areas with potentially large social impacts like AVs, semiconductors, robotics and pharmaceuticals. Singapore’s deep tech startup ecosystem has moved from 18th to 7th globally, reflecting increased investor interest amid supply chain shifts, with key investors from the US, Japan, and Europe. Singapore’s government has committed 1% of its GDP (SGD 25 billion) to research through 2025, boosting initiatives like NTU’s spin-offs, which saw portfolio values grow to SGD 1.27 billion by March. Deep tech firms like Cosmos Innovation and Eureka Robotics highlight the ecosystem’s shift from attracting major corporations toward building homegrown industry leaders in chipmaking, biotechnology, and AI solutions for solar cells, aiming to expand Singapore’s role in global tech innovation.

VIET NAM
Vingroup sets up USD 150 million startup investment fund, with focus on AI, semiconductors, and cloud computing
(29 October 2024) Vingroup, Viet Nam’s largest conglomerate, has launched the VinVentures Technology Investment Fund with USD 150 million to support startups in artificial intelligence, semiconductors, and cloud computing. The fund, primarily comprising USD 100 million in transferred assets from Vingroup’s previous investments, aims to integrate investees with Vingroup subsidiaries, which could serve as potential customers. VinVentures also supports Viet Nam’s goal to attract USD 35 billion in startup investment by 2035. A band of private equity and venture capitalists announced the goal last month when they formed the Vietnam Private Capital Agency (VPCA), an association that includes Golden Gate Ventures and Monk’s Hill Ventures. Amidst a 79% decline in Viet Nam’s fundraising for startups in early 2024, VinVentures seeks expansion in Singapore, Indonesia, and the Philippines, looking beyond Vingroup-linked ventures. Over the next three to five years, VinVentures plans to deploy USD 50 million, although contributions from Vingroup founder Pham Nhat Vuong remain undisclosed. Vingroup has strategic interests in AI through VinAI, which could integrate AI technologies into VinFast electric vehicles, potentially enhancing their functionality.

VIET NAM, UNITED ARAB EMIRATES
Viet Nam and UAE sign Comprehensive Economic Partnership Agreement (CEPA)
(29 October 2024) The United Arab Emirates (UAE) and Viet Nam have signed a Comprehensive Economic Partnership Agreement (CEPA), marking Vietnam’s first free-trade agreement with a Middle Eastern country, according to the Vietnamese trade ministry. Following a year of negotiations, the agreement was signed in Dubai by Vietnamese Prime Minister Pham Minh Chinh. The CEPA will facilitate increased trade and investment in agriculture, energy, technology, and logistics between the two countries. Under the agreement, the UAE will phase out tariffs on 99% of Vietnamese exports, while Viet Nam will remove tariffs on 98.5% of UAE exports. In 2023, trade turnover between Viet Nam and the UAE reached approximately USD 4.7 billion, a 6% increase from the previous year.

MALAYSIA
Malaysia remains logistics hub for solar panel exports amid heightened US tariffs
(28 October 2024) Malaysia remains a logistics hub for solar panel exports amid a recent hike in US tariffs on Southeast Asian solar equipment, according to Malaysia’s Transport Minister. He noted that several major US companies in Malaysia are re-exporting solar equipment, such as microchips and semiconductors, back to the US. Loke emphasised Malaysia’s commitment to fostering inter-ASEAN trade and reducing reliance on a single market. He also highlighted the potential market opportunities arising from Malaysia’s new BRICS partnership, asserting that ministries, including the Ministry of Investment, Trade and Industry, are working to protect Malaysia’s exports from potential impacts. The US previously increased tariffs on solar equipment from Cambodia, Malaysia, Thailand, and Viet Nam, citing unfair government subsidies.

THE PHILIPPINES
The Philippines injects USD 7 billion into financial system through reduction in bank’s reserve requirement ratio
(25 October 2024) The Philippines has injected nearly USD 7 billion into its financial system as a reduction in banks’ reserve requirement ratio (RRR) took effect, aiming to stimulate lending and economic growth. The Bank of the Philippine Islands expects banks to use these funds to increase lending, especially to consumer segments, potentially improving net interest margins by 12.75 basis points. The RRR cut, announced by Bangko Sentral ng Pilipinas (BSP) in September, reduces the reserve ratio to 7% for major banks, with similar reductions for digital and thrift banks. According to Abacus Securities Corp., the RRR cut will initially boost net interest margins but may lower them in the long term as loan rates decrease. Although loan demand is expected to grow slowly, it was noted that excess funds could be reinvested with the BSP if demand does not increase significantly. The BSP’s Governor indicated that further reductions could bring the RRR down to zero by 2029, aiming to streamline the financial system and manage liquidity through term deposit auctions.

THAILAND
Thailand plans to raise retirement age to 65 across private and public sector
(26 October 2024) Thailand plans to raise the retirement age to 65 across both private and government sectors, responding to improved healthcare and longer life expectancy, now averaging 75.3 years according to WHO data. Thailand’s Labour Minister disclosed that the government aims to increase contributions to the social security fund from workers, employers, and the state, while expanding benefits to include two million migrant workers from Myanmar, Lao PDR, and Cambodia. Additionally, the Labour Ministry is evaluating the conversion of annual fluctuating medical costs, estimated at THB 60 billion (approximately USD 1.78 billion), into a fixed expense. Currently, retirement ages vary: it is set at 60 for government workers and ranges from 55 to 60 in the private sector.

THAILAND
Thailand looking for six new airports to establish country as regional transport hub
(29 October 2024) Thailand’s Deputy Transport Minister emphasized the need for six new airports in Thailand—proposed in Mukdahan, Bueng Kan, Satun, Phayao, Kalasin, and Phatthalung—to establish the country as a regional transport hub. Her statement followed discussions at the 59th Asia and Pacific Directors General of Civil Aviation Conference in the Philippines, where a projected doubling of global passenger numbers over the next 20 years underscored the necessity of infrastructure investment in the Asia-Pacific. Thailand’s Department of Airports (DoA) is encouraged to prioritise sustainable and inclusive development, addressing security, universal design, and accessibility for travellers with disabilities. The ministry’s environmental agenda includes expanding carbon reduction initiatives, aiming for carbon neutrality and achieving Level 5 Airport Carbon Accreditation, following the DoA’s receipt of the 2024 Environmental Impact Assessment Monitoring Award.

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AUSTRALIA
Australia looking to extract critical minerals from mining by-products
(29 October 2024) Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) is investigating the potential to extract critical minerals like gallium and germanium from mining by-products to support global semiconductor and advanced technology production. This multiagency effort highlights gallium from alumina refining and germanium from zinc processing, both dominated by China, which controls 90% of global gallium and 60% of germanium supply. Following China’s export controls in 2022, the US has underscored the need for supply chain security, citing Australia’s potential in an August 2023 report by the Center for Strategic and International Studies. Australia previously produced gallium in the 1990s, and the head of CSIRO noted that a single alumina refinery could meet a substantial portion of global demand, estimated at 700 tonnes annually. However, the small global demand for gallium and germanium (140 tonnes per year) could destabilise markets with even modest increases, necessitating strategic management. This initiative, part of Australia’s Critical Minerals Research and Development Hub, aligns with national goals to enhance supply chain resilience and reduce reliance on extraction, aiming for lower-energy, cost-effective methods for mineral processing.

CHINA, UNITED STATES
United States finalizes rules restricting investments into high-tech sectors in China
(29 October 2024) The U.S. Department of the Treasury has issued finalised rules, effective 2 January, restricting U.S. persons from investing in certain high-tech sectors in mainland China, Hong Kong, and Macao, specifically artificial intelligence, semiconductors, and quantum technology. The restrictions, following an executive order from President Joe Biden in August 2023, require U.S. citizens, entities, and permanent residents to either avoid transactions in these sectors or notify the Treasury when they occur. This expanded “U.S. persons” definition could disrupt China’s tech and investment communities, where U.S.-linked individuals, such as “haigui” (overseas returnees), play significant roles. Most U.S. venture capital investors had already reduced involvement in these areas, which are now primarily state-backed in China. The rules exclude publicly traded securities and derivatives, and the Treasury emphasised that the U.S. remains committed to open investment with due consideration for national security. The administration has engaged in discussions with allies, with entities like the European Commission and the U.K. exploring similar restrictions on outbound investments in sensitive sectors.

JAPAN
Labour market shows increased tightening in September, supporting BOJ stance
(29 October 2024) Japan’s labour market showed increased tightening in September, with the job-to-applicant ratio rising to 1.24 from August’s 1.23, surpassing economist forecasts of stability. The unemployment rate fell to 2.4%, its lowest since January, with an increase of 270,000 workers and a decline of 90,000 jobless individuals year-on-year, according to reports from the labour and internal affairs ministries. This employment demand is seen as supportive of the Bank of Japan’s (BOJ) focus on wage-driven inflation as it heads into its policy meeting, although no immediate rate changes are anticipated. BOJ Governor Kazuo Ueda has signalled a patient stance, with most economists predicting a rate hike in December or January, pending further evidence of sustained wage growth. The BOJ’s updated outlook, expected post-meeting, will reflect trends in workforce participation, particularly among women, whose numbers grew by 430,000 year-on-year. Labour shortages remain particularly severe for small and medium-sized firms, with manpower issues cited in 163 bankruptcies out of 4,990 total over the last six months. Prime Minister Shigeru Ishiba has pledged economic support for these firms to manage salary increases and adopt labour-saving technologies. Wage negotiations are set to benefit from these employment trends, with the Rengo labour union targeting a minimum 5% raise, and 6% specifically for smaller businesses, following a 5.1% increase secured this year—the highest in 33 years.

MALAYSIA
Malaysia government introduces record MYR 421 billion budget
(22 October 2024) Malaysia’s Prime Minister Anwar Ibrahim presented a record budget of MYR 421 billion (USD 96.8 billion) for 2025, driven by a USD3.1 billion increase, primarily due to salary bonuses for civil servants and pensioners. Civil service wages and retirement payouts will rise by RM6 billion each, with a MYR 500 (USD 115) bonus for civil servants and MYR 250 (USD 57.5) for pensioners in February. The statutory minimum wage for the private sector will increase to MYR 1,700 (USD 391) from February. Despite the budget rise, development expenditure remains unchanged at MYR 86 billion (USD 19.8 billion), while operating expenditure grows to MYR 335 billion (USD 77.0 billion), including MYR 4 billion (USD 919.8 million) for debt interest. Subsidies will be cut by MYR 9 billion (USD 2.1 million), though MYR 13 billion (USD 3 billion) in cash transfers will support the poorest 60% of adults. Fuel and public service subsidies will be reduced for the wealthiest 15%, but maintained for the rest. The fiscal deficit is projected to fall to 3.8% of GDP by 2025, supported by projected growth of up to 5.5% and an expansion of sales and services tax in May 2025. A new 2% levy on dividend income exceeding MYR 100,000 (USD 22,993) will also be introduced.

MALAYSIA, THAILAND, INDONESIA, VIET NAM
Malaysia, Indonesia, Viet Nam, and Thailand join BRICS as partner countries
(24 October 2024) Malaysia, Indonesia, Viet Nam, and Thailand have joined BRICS as partner countries, aligning with other recent additions including Algeria, Belarus, Bolivia, and Turkey. BRICS, founded in 2006 and comprising Brazil, Russia, India, China, and later South Africa, now represents economies valued at over USD 28.5 trillion and holds an annual summit, currently in Kazan, Russia. Malaysia’s Foreign Affairs Minister Mohamad Hasan cited enhanced trade potential and alignment with the Global South’s agenda, particularly as Malaysia prepares for ASEAN chairmanship in 2025. Minister of Economy Rafizi Ramli aims to strengthen Malaysia’s BRICS ties and resilience amid global economic challenges. Indonesia’s Foreign Minister Sugiono will highlight peace and solidarity for developing nations, while representatives from Thailand and Viet Nam also join the discussions. Political analysts suggest the ASEAN members’ BRICS association may reflect intentions to diversify trade and balance relations, especially with China’s prominent BRICS role. Despite concerns regarding ASEAN’s unity and BRICS’ ability to manage an expanded, diverse membership, these nations are expected to use their partner status to amplify ASEAN’s voice in BRICS discussions. 

THE PHILIPPINES
Tropical Storm Trami causes severe flooding, leads to 40 deaths and displacing of thousands
(25 October 2024) Tropical Storm Trami caused severe flooding in the Philippines, leading to at least 40 deaths and displacing tens of thousands. Over two months’ worth of rainfall fell in some areas within two days, particularly impacting Batangas and the Bicol region. In Batangas, six unidentified bodies were found, and several areas remain inaccessible to rescue teams. Flash floods in Subic Ilaya killed five people. Around 193,000 people have been evacuated, with 30,000 fleeing the Bicol region due to unexpectedly high flooding. Rescuers are struggling to reach people stranded on rooftops due to a shortage of rubber boats. A hospital in Lemery was forced to close due to flooding. Storm surge warnings along the west coast of Luzon remain in effect. Despite the storm moving out to sea, search efforts for a missing fisherman were suspended due to strong currents.

THE PHILIPPINES
The Philippines builds up its capital market to support growth and clean energy projects
(25 October 2024) The Philippines is reintroducing interest rate swaps (IRS) and enhancing the bond repurchase (repo) market to create alternative benchmarks for loan pricing, driven by an anticipated USD 20 billion annual capital requirement through 2050 to support growth and clean energy projects. The Peso IRS overnight reference rate, aligned with Bangko Sentral ng Pilipinas’ daily reverse repurchase rate, will be introduced as a floating benchmark for IRS transactions. Bloomberg LP is expected to provide the trading platform, with 15 banks, including BDO, Metrobank, and Citi, serving as market makers to quote one-, three-, and six-month swaps. Five additional banks will participate regularly. To boost repo market activity, fund managers and trust entities are seeking exemption from the documentary stamp tax (DST), which currently applies to non-bank repo participants. The Bankers Association of the Philippines (BAP) awaits the International Swaps and Derivatives Association’s recognition of the Peso IRS reference rate, which, alongside the proposed DST exemption, could enhance market depth and create a yield curve for pricing debt instruments of varying terms.

THAILAND
Thailand plans to introduce THB 300 travel tax for foreign visitors
(24 October 2024) Thailand plans to introduce a THB 300 (approximately MYR 39) travel tax for foreign visitors, initially targeting air passengers in mid-2025. Tourism and Sports Minister Sarawong Thienthong stated that the proposal will go to Cabinet for approval in January, with a phased implementation over six months. The first phase focuses on air travellers, who make up 70% of foreign arrivals, with a second phase planned for overland visitors. The tax will include a capped insurance premium of THB 60 per person and will use a system similar to South Korea’s Electronic Travel Authorisation, requiring online registration and payment before arrival. Frequent border crossers for trade purposes will be exempt via a border pass. The ministry aims to standardise the THB 300 levy across all entry points to ensure uniformity.

THAILAND
Thailand’s car production in September falls by 25.48% year-on-year
(24 October 2024) Thailand’s car production in September fell by 25.48% year-on-year, following a 20.56% decline in August, according to the Federation of Thai Industries. Domestic car sales also dropped significantly by 37.11% to 117,000 units, as reported by the spokesperson for the federation’s automotive division. Export figures declined by 10.83% from the previous year, attributed to economic challenges faced by trading partners and the ongoing conflict in the Middle East. Thailand remains a key production hub in Southeast Asia for major carmakers, including Toyota and Honda.  

VIET NAM
IMF projects Viet Nam’s economy to grow by 6.1% in 2025
(24 October 2024) The International Monetary Fund (IMF) projects Viet Nam’s economy to grow by 6.1% in 2025, consistent with its 2024 forecast, according to the World Economic Outlook 2025. Vietnam’s consumer price index is expected to increase by 3.5%, down by 0.6% from the previous year. In contrast, Viet Nam’s Ministry of Planning and Investment forecasts a more robust growth range of 6.5% to 7.5% for 2025. Prime Minister Pham Minh Chinh expressed the government’s ambition to target a higher growth rate between 7% and 7.5% in 2025, as stated in his recent address to the National Assembly.

RCEP Monitor

CHINA
China Iron & Steel Association urges steel mills to limit production after price rally
(25 October 2024) The China Iron & Steel Association (CISA) urged steel mills to limit production despite a recent rebound in steel prices triggered by government stimulus measures. CISA emphasised that the price increase does not reflect a long-term improvement in the industry, which continues to face oversupply and weak demand, particularly from the property sector. Steel production has exceeded 1 billion tonnes annually over the past four years, but output has recently declined, and the association aims to maintain this trend to balance supply and demand. CISA forecasts annual steel output to decrease to 800 million tons by 2035. Iron ore prices, a key steelmaking input, rose 1.9% to USD 101.15 per tonne in Singapore, while steel rebar and hot-rolled coil contracts increased by 1.3% and 1.5%, respectively, in Shanghai.

AUSTRALIA
Australian economy on track for soft landing, with inflation cooling
(25 October 2024) Australia’s economy is on track for a soft landing, with inflation cooling without major impacts on domestic growth, according to Treasurer Jim Chalmers at the IMF and World Bank meetings. While inflation is moderating, the IMF has advised reducing fiscal spending if disinflation slows further. The Reserve Bank of Australia (RBA) has maintained its key interest rate at 4.35%, despite slow economic growth, low unemployment, and rising house prices. The RBA has extended its core inflation target timeframe beyond 2026, noting robust hiring trends. Amid ongoing inflation concerns, the Labor government has reported consecutive budget surpluses to showcase fiscal prudence ahead of the upcoming election. In foreign policy, Australia has stabilised relations with China, its top trade partner, leading to lifted trade curbs on key exports like lobsters, wine, and coal, although broader tensions remain, especially with tightened security ties to the US. Third-quarter inflation data is due on 29 October.

NEW ZEALAND
Annual trade deficit narrows to NZD 9.1 billion in 12 months through September
(22 October 2024) New Zealand’s annual trade deficit narrowed to NZD 9.1 billion in the 12 months through September, the smallest shortfall since March 2022 and down from a peak of NZD 17.1 billion in May 2022, according to Statistics New Zealand. The contraction is driven by weak economic conditions that reduced import demand, with imports decreasing 8.4% year-on-year to NZD 78.5 billion, including an 11% fall in plant and machinery imports and a 23% drop in passenger vehicle imports. The Reserve Bank of New Zealand began easing monetary policy in August after sustained high interest rates curbed economic growth and business investment. Exports also declined 1.2% to NZD 69.4 billion, contributing to a narrower current account deficit, which reached NZD 27.6 billion or 6.7% of GDP for the year through June, down from a record 9.4% at the end of 2022.

ASEAN
Southeast Asian interest rates diverging after US Federal Reserve slashes rates
(16 October 2024) Interest rate paths in Southeast Asia are diverging after the U.S. Federal Reserve cut rates last month, with export-driven economies like Thailand and Malaysia expected to hold off on easing until 2025, while domestic demand-driven economies like Indonesia and the Philippines are moving towards further cuts. Indonesia, with a 5% GDP growth rate but weakening household consumption, has already cut its rate to 6% and may lower it again this year. Inflation has slowed to 1.84%, suggesting economic lethargy. Analysts predict the Philippines will also cut its key policy rate to 6% in response to easing inflation. Meanwhile, Malaysia and Thailand, both with current account surpluses and appreciating currencies, are under less pressure to reduce rates soon. Thailand’s central bank, focused on managing household debt, is resisting calls for a rate cut despite public pressure. The Malaysian central bank has held its rate at 3% and is expected to do so through 2025.

SINGAPORE
Singapore’s economy grew 4.1% year-on-year in Q3 2024, fastest pace in two years
(14  OCtober 2024) Singapore’s economy grew 4.1% year-on-year in Q3 2024, the fastest pace in two years, following 2.9% growth in the previous quarter. The manufacturing sector expanded by 7.5%, driven by growth across most clusters except for biomedical manufacturing, while the services and construction sectors grew by 3.3% and 3.1%, respectively. On a quarterly basis, seasonally adjusted GDP rose 2.1%, compared to 0.4% in the prior quarter. Non-oil domestic exports increased 15.7% in July and 10.7% in August. The Monetary Authority of Singapore (MAS) maintained its monetary policy stance, expecting GDP growth to reach the upper end of the 2% to 3% forecast range for 2024. Core inflation rose to 2.7% in August, though MAS expects inflation momentum to remain contained, forecasting core inflation to average between 2.5% and 3% for the year, down from a prior range of 2.5% to 3.5%.

INDONESIA
Sri Mulyani Indrawati asked by president-elect Prabowo to continue as finance minister
(15 October 2024) Sri Mulyani Indrawati has been asked by president-elect Prabowo Subianto to continue as Indonesia’s finance minister following a meeting on Monday night, potentially easing concerns about fiscal discipline under the new government. Indrawati, a respected technocrat, has not confirmed whether she will accept the role. Her previously expected departure had raised investor concerns over Prabowo’s ambitious spending plans, including a free meal program costing IDR 71 trillion in 2025. Following the news, the Jakarta Composite Index rose by 0.5% on Monday and another 0.25% on Tuesday morning. Prabowo, set to announce his cabinet on Sunday after his inauguration, plans to appoint 44 to 46 ministers, significantly more than the outgoing president’s 34. Indrawati confirmed that the Finance Ministry will remain a single entity, despite earlier plans in Prabowo’s manifesto to create an independent State Revenue Agency by combining the Directorate-General of Taxation and the Directorate-General of Customs and Excise. Other key figures likely to join the cabinet include Energy Minister Bahlil Lahadalia, Trade Minister Zulkifli Hasan, and State Enterprise Minister Erick Thohir.

MALAYSIA
Bursa Malaysia’s benchmark index rises by 17% over past year
(15 October 2024) Malaysia’s stock market has seen a steady revival, with the Bursa Malaysia’s benchmark index rising by up to 17% over the past year, driven by strong post-pandemic economic growth and significant foreign investments, particularly from US tech giants such as Nvidia, Google, and Microsoft. Investors opened 289,000 new trading accounts in the first seven months of 2024, nearly double the number in 2023. The country recorded MYR 83.7 billion (USD 19.3 billion) in approved investments in the first quarter, over half from foreign sources, and second-quarter GDP growth reached 5.9%. Malaysia’s stock exchange registered 34 initial public offerings in the first nine months of 2024, including 99 Speed Mart’s listing, which raised MYR 2.36 billion. Foreign investors bought a net total of MYR 1.50 billion in Malaysian stocks in the week ending 30 August. Malaysia’s IPO market led Southeast Asia during the first half of 2024, raising around USD 450 million. The Bursa’s market capitalisation hit MYR 2 trillion (USD 460 million) in May. Analysts see further potential for growth due to continued FDI momentum, Fed rate cuts, and infrastructure projects, though some caution is advised regarding foreign investor activity.

THE PHILIPPINES
Rice production falls 11.9% in third quarter of 2024, with output at 3.35 million metric tons
(17 October 2024) The Philippine Statistics Authority (PSA) reported an 11.9% drop in palay (unhusked rice) production for the third quarter of 2024, with output at 3.35 million metric tons (MT), down from 3.8 million MT in the same period last year. This figure also fell 1.2% below the PSA’s July forecast of 3.39 million MT. The total harvest area for palay decreased by 14.1% to 796,277 hectares, although yield per hectare increased by 2.4% to 4.20 MT. Meanwhile, corn production increased by 2.4% to 2.526 million MT, despite a 2% reduction in harvest area to 806,362 hectares. Challenges in the agricultural sector were exacerbated by the El Niño phenomenon, resulting in reduced rainfall and typhoons. The Department of Agriculture (DA) highlighted 2024 as a “litmus test” for the sector, facing high fuel costs, droughts, and floods. Supertyphoon Julian alone caused PHP 607.38 million in losses to the farm sector. The DA estimates annual palay losses of 500,000 to 600,000 MT due to natural calamities.

HONG KONG, CAMBODIA, LAO PDR, MYANMAR
Hong Kong relaxes visa criteria for Cambodian, Laotian, and Myanmar nationals
(17 October 2024) The Chief Executive of the Hong Kong Special Administrative Region (HKSAR) announced on 16 October that the HKSAR government has relaxed visa criteria for nationals of Cambodia, Lao PDR, and Myanmar, extending the validity of multiple-entry visas from two to three years. This policy has already applied to Vietnamese nationals since last year. The measures aim to strengthen ties with ASEAN countries. Additionally, the government will fast-track visa processing for group visitors from ASEAN countries via local travel agents and provide self-service immigration clearance for business and development participants from ASEAN. Effective immediately, the requirement for arrival or departure cards is canceled to streamline immigration. The government also plans to promote tourism from ASEAN and the Middle East, with initiatives including Arabic information at the airport and a list of halal restaurants.

VIET NAM
Viet Nam estimates cost of new railway to China at USD 7.2 billion
(17 October 2024) Viet Nam has estimated the cost of constructing a 427-kilometre railway connecting it with China’s Yunnan province at VND 179 trillion (USD 7.2 billion). The railway will run from Lao Cai province through Hanoi and Haiphong to Ha Long City. The plan, submitted by the Vietnam Railway Authority to the Transport Ministry, is expected to be reviewed and approved, with construction slated to begin in 2030. The railway is projected to handle 8.3 million passengers and 17.5 million tonnes of cargo annually by 2050. Vietnam is seeking Chinese technology and funding for this project, as part of its broader efforts to upgrade its aging railway infrastructure. Additionally, the National Assembly is expected to approve a USD 67 billion plan for a 1,541-km high-speed railway from Hanoi to Ho Chi Minh City, Vietnam’s largest infrastructure project to date. 

RCEP Monitor

JAPAN
Exports decline by 1.7% year-on-year in September 2024
(17 October 2024) Japan’s exports declined by 1.7% year-on-year in September 2024, marking the first drop in 10 months, according to Ministry of Finance data. This decline was worse than the forecasted 0.5% increase and followed a 5.5% rise in August. Exports to China, Japan’s largest trading partner, fell by 7.3%, while those to the U.S. decreased by 2.4%. Imports grew by 2.1%, below the expected 3.2% increase. As a result, Japan recorded a trade deficit of JPY 294.3 billion (USD 1.97 billion), larger than the forecasted JPY 237.6 billion deficit. The Bank of Japan (BOJ) Governor has pointed to external risks, such as U.S. economic uncertainties, in his cautious stance on timing the next interest rate hike. While the BOJ is expected to hold rates steady at its upcoming meeting, its forecast projects inflation to remain around the 2% target through March 2027. Despite these challenges, a central bank survey indicated that Japan’s business sentiment remains stable, though global economic uncertainties and geopolitical tensions may affect future performance.

AUSTRALIA, CHINA
Australia maintains open trade with China in electric vehicles and renewable energy products
(17 October 20240 Australia has maintained open trade with China, particularly in electric vehicles (EVs) and renewable energy products, despite tariffs imposed by the U.S., Canada, and the EU. Australian Prime Minister Anthony Albanese and Chinese Premier Li Qiang have emphasised the importance of institutional dialogue, including cooperation on climate change and renewable energy. In 2023, Chinese direct investment in Australia fell to USD 613 million, but bilateral ties have since improved, with a notable increase in Chinese investments in Australian renewable energy projects, such as the development of a 500MW solar farm in Queensland. Challenges remain, including lengthy foreign investment review processes and underdeveloped Australian energy infrastructure. Nonetheless, collaboration efforts, including the upcoming Smart Energy Conference and Exhibition starting in 2025, are expected to strengthen ties. Analysts suggest that balancing climate goals with geopolitical concerns will require a mature, independent Australian approach, leveraging China’s dominance in clean technology and Australia’s critical raw materials.

AUSTRALIA
Labour market adds 64,100 jobs in September, exceeding economists’ expectations
(17 October 2024) Australia’s labour market added 64,100 jobs in September 2024, significantly exceeding economists’ expectations of 25,000 jobs. Of these, 51,600 were full-time roles, bringing the total number of jobs created since the Albanese government took office to over 1 million. The unemployment rate was 4.1%, slightly lower than the initial 4.2% reported for August (the ABS has now revised August’s rate down to 4.1%). The labour force participation rate reached a record 67.2%, while hours worked rose to 1.97 billion. Although job ads and vacancies are shrinking, signalling potential employment challenges, the Reserve Bank of Australia (RBA) is expected to maintain its interest rate stance, with rate cuts unlikely until later in 2025. The Australian dollar rose to 67 US cents following the jobs data release, reflecting reduced investor expectations for early rate cuts.

VIET NAM
Viet Nam’s economy grew by 7.4% year-on-year in Q3 2024
(06 October 2024) Vietnam’s economy grew by 7.4% in Q3 2024 compared to the same period last year, surpassing the previous quarter’s 6.93%. The General Statistics Office attributed the growth to a 15.8% rise in exports, despite Typhoon Yagi’s impact, which caused factory activity to contract in September and hit agriculture, which grew by 2.58% versus 3.34% in Q2. The typhoon, which struck on 7 September, caused USD 3 billion in damages. Despite these disruptions, Vietnam’s GDP grew 6.82% in the first nine months of 2024, close to its pre-COVID-19 growth of 7.3%. However, VinaCapital warned that slowing U.S. demand, driven by the Federal Reserve’s recent rate cut, may reduce exports of goods like laptops and mobile phones. Electronics exports, which rose 20.6% in Q3, continue to play a crucial role in the country’s growth. The government is prioritising collaboration with global semiconductor and AI partners to strengthen its high-tech sector.

MALAYSIA
Stronger ringgit and softer oil prices present opportunity for government to remove petrol subsidies
(08 October 2024) Malaysia’s stronger ringgit, which appreciated over 14% against the US dollar in Q3 2024 and 8% year-to-date, along with softer oil prices, presents an opportunity for the government to remove petrol subsidies, particularly for RON95. Analysts suggest that subsidy rationalisation could reduce the government’s annual fuel subsidy burden of MYR 15-20 billion. Socio-Economic Research Centre’s Lee Heng Guie and Sunway University’s Yeah Kim Leng highlight that the current environment would result in a manageable 24% rise in RON95 prices to RM2.55 per litre, or lower if the ringgit strengthens further. Despite public dissatisfaction following targeted diesel subsidy cuts in June, inflationary pressures have remained subdued, and UOB maintains a 2024 inflation forecast of 2%. With Prime Minister Anwar Ibrahim’s upcoming 2025 budget announcement, analysts see this as a politically viable time to implement these reforms.

MALAYSIA
Malaysia and UAE finalize Comprehensive Economic Partnership Agreement
(10 October 2024) Malaysia and the United Arab Emirates (UAE) have finalised a Comprehensive Economic Partnership Agreement (CEPA), aimed at reducing tariffs, removing trade barriers, and fostering private-sector collaboration to boost investments. This marks Malaysia’s first free trade agreement with a Gulf Cooperation Council (GCC) nation. Key benefits include zero import duties for Malaysian exports such as electronics, machinery, jewellery, and palm oil. The agreement positions Malaysia as a gateway for UAE companies to access ASEAN markets, particularly benefiting small and medium enterprises (SMEs) through regional integration. Bilateral non-oil trade between the two nations reached USD 4.9 billion in 2023, and USD 2.5 billion in the first half of 2024, a 7% increase from the previous year. The UAE, Malaysia’s second-largest Arab trade partner, aims to elevate its non-oil foreign trade to USD 1 trillion, with the CEPA playing a key role in strengthening ties with Southeast Asia.

INDONESIA
Bank Indonesia intervenes to support rupiah following slump 
(07 October 2024) Indonesia’s central bank, Bank Indonesia (BI), is intervening in the spot, domestic non-deliverable forwards, and bond markets to support the rupiah, which is on its longest losing streak since 2023. Edi Susianto, executive director for monetary management, attributed the rupiah’s 1.3% decline to external factors, including global market developments, escalating tensions in the Middle East, and stronger-than-expected U.S. economic data. The rupiah reached 15,693 per dollar, following an 8% rally in Q3 based on expectations of further U.S. Federal Reserve rate cuts. BI’s foreign-exchange reserves, which stood at USD 149.9 billion in September, are sufficient to cover 6.4 months of imports and external debt obligations, providing the bank with resources to stabilise the currency. Market expectations now suggest BI may hold its policy rate in its upcoming meeting on 16 October, following a surprise rate cut in September.

INDONESIA, SINGAPORE
Indonesia introduces visa-free entry for Singapore permanent residents
(08 October 2024) Indonesia has introduced visa-free entry for Singapore permanent residents to visit Batam, Bintan, and the Karimun Islands, with the aim of boosting tourism and investment in these regional economic zones. The new policy, announced by Indonesia’s Director General of Immigration, allows visitors to stay up to four days and applies to several ports in the Riau region. This visa-free option is distinct from the broader ASEAN visa-free policy and targets Singapore’s 545,000 permanent residents. The initiative is part of Indonesia’s broader efforts, which include “second home” and golden visas, to attract leisure and business travellers, particularly to key areas like Nongsa Digital Park and Bintan Resort, which are important hubs for tourism and the digital economy.

THAILAND
Finance Ministry presses Bank of Thailand to lower rates to weaken baht
(09 October 2024) Thailand’s finance ministry is pressing the Bank of Thailand (BOT) to lower interest rates to support economic growth and weaken the baht, currently at 33.39 per US dollar. Thailand’s Deputy Finance Minister indicated a possible rate cut of 25 basis points, potentially this or the next meeting, to bring the baht closer to 34.5 per US dollar. Prime Minister Paetongtarn Shinawatra’s administration is prioritising economic growth, targeting a rate cut to address low inflation and weak GDP growth, which has averaged less than 2% annually. High household debt, however, is a factor in BOT’s reluctance to reduce rates, with the bank considering the current 2.5% rate “neutral”. The government is also weighing measures to support economic growth, such as tax incentives and soft loans for households, and adjusting the 2025 inflation target to 1.5%-3.5%. Efforts to influence BOT policy include potentially appointing Kittiratt Na-Ranong as BOT chairman, despite warnings from former BOT Governor Tarisa Watanagase about risks to the economy.

THE PHILIPPINES
Philippines’ sovereign bonds expected to continue gaining from falling rice prices
(10 October 2024) Philippine sovereign bonds are expected to continue gaining as falling rice prices reduce inflation, bolstering the case for more interest rate cuts by Bangko Sentral ng Pilipinas (BSP). Inflation in September reached a four-year low, aided by India’s easing of rice export restrictions, with HSBC identifying the Philippines as the primary beneficiary due to rice comprising 9% of its inflation basket. BSP began its easing cycle in August with a 25-basis-point rate cut, followed by a 250-basis-point reduction in banks’ reserve requirements, effective from 25 October. Further rate cuts are anticipated, with BSP Governor Eli Remolona signalling a 25-basis-point cut at the 16 October meeting, potentially followed by another in December. However, a larger reduction could occur after Finance Secretary Ralph Recto supported a half-point cut. Analysts expect 10-year bond yields to decline to 5.5% within six months, down from the current 5.74%. 

RCEP Monitor

CHINA, AUSTRALIA
Australia to resume rock lobster exports to China by end-2024
(10 October 2024) Australia will resume rock lobster exports to China by the end of 2024, marking the end of a nearly four-year ban that halted a AUD 700 million trade. Australian Prime Minister Anthony Albanese announced the agreement after a meeting with Chinese Premier Li Qiang at the ASEAN summit. Before the 2020 ban, over 90% of Australia’s rock lobsters were exported to China, but trade plummeted following sanctions linked to political tensions. The lifting of the ban is part of broader efforts to stabilise Australia-China relations, which have seen the removal of other trade barriers on products like wine and beef. Andrew Ferguson, managing director of a South Australian seafood company that relied on China for 98% of its lobster exports, expressed relief, noting the severe impact of the ban on his business. He emphasised the need to diversify markets moving forward, as the ban had forced many producers to exit the industry. The reopening of the Chinese market is expected to significantly benefit Australian exporters during the upcoming Lunar New Year season.

CHINA
China’s stock market rally slows after officials hold off on further stimulus measures
(09 October 2024) China’s stock market rally slowed after the National Development and Reform Commission (NDRC) refrained from announcing additional stimulus measures. The CSI 300 index rose 10.8% but closed 5.9% higher. Hong Kong’s Hang Seng index dropped 9.4%, and the Hang Seng Tech index fell 12.8%, as investors shifted funds to mainland markets. Analysts had anticipated more fiscal spending alongside existing monetary stimulus, which had contributed to a 33% rise in the CSI 300 over the past month. The NDRC Chair reaffirmed confidence in China achieving its 5% GDP growth target and noted plans to issue ultra-long-dated sovereign bonds in 2025. Industrial commodities also saw declines, with Brent crude falling 5.4% and copper dropping 1.7%. China recorded 765 million domestic trips during its Golden Week holiday, contributing RMB 700.8 billion in travel spending.

NEW ZEALAND
Reserve Bank of New Zealand cuts official cash rate by 50 basis points
(09 October 2024) The Reserve Bank of New Zealand (RBNZ) cut its official cash rate (OCR) by 50 basis points to 4.75%, marking the second consecutive reduction in its easing cycle. Despite inflation returning to the target range of 1%-3%, the central bank maintained that the current policy stance remains restrictive. The kiwi dollar dropped 0.9% to USD 0.6084 following the decision, while swap rates indicated further expected rate cuts. The RBNZ minutes indicated inflation is converging towards the 2% midpoint, and the economy is experiencing excess capacity, prompting the adjustment in policy. Economists anticipate further easing, with Citi projecting a 75 basis points cut at the November meeting. The central bank also warned of potential risks from the ongoing Middle East conflict and slowing growth in the US and China. ANZ and ASB economists highlighted the continued restrictive stance, despite the recent cuts.