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The Economic Outlook for Southeast Asia, China and India is a regular publication on regional economic growth and development in Emerging Asia. It focuses on the economic conditions of the Association of Southeast Asian Nations (ASEAN) member countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam. It also addresses relevant economic issues in China and India to fully reflect developments in the region. This Update presents the region’s economic outlook, depicting rapidly changing trends and macroeconomic challenges amidst external headwinds.

The impressive emergence of China’s economy is set to lose some momentum as the country catches up with more advanced economies and its rapid ageing also weighs on it. However, China can still reap the 'reform dividend', especially with measures to keep up the sustained growth of productivity. Reforms that enhance competition in product markets are among those that can potentially bring about significant productivity gains. China has been lowering the burden on start-ups and simplifying administrative procedures for a while already, achieving significant progress, though more procedures could go online and a one-stop shop is still to be implemented across the country. State ownership remains dominant in most network industries and there are many SOEs even in commercially-oriented industries such as retail or catering. SOEs enjoy implicit government guarantees and are the main beneficiaries of administrative monopolies, i.e. exclusive rights granted by regulations. In addition, they also benefit from various subsidies, sometimes leading to low-level, repetitious investment, excess capacity and waste of public money. A more level playing field would bring about efficiency-enhancing competition by private and foreign firms. Some network industries such as electricity and gas have recently accelerated their opening up and competition is developing in some segments. Digitalisation is a promising candidate to lift China’s long-term growth potential. Competition, in particular competitive pressure from foreign counterparts when there are few domestic players could be an important source of efficiency gains in digital services. China has been a frontrunner in business digitalisation for a while already, but the outbreak accelerated also the provision of e-government services. While strengthening of IPR protection and promoting innovative ways of financing are welcome steps to nurture innovative industries, generous tax exemptions – which by OECD standards do not constitute good tax policy - reduce the availability of public funds for other priority areas.

Overseas direct investment by Chinese firms increased eight fold over the past decade, making the country as an important investor in stock terms as Japan. Investing in leasing and business services appears to make up nearly half of China’s ODI stock according to official sources, though it is over-estimated owing to the fact that all investment through third parties and vehicles appears under this sector, not under the one where the investment is actually made. Correcting for this caveat by using firm-level M&A and greenfield investment data indicates that in fact China’s ODI mostly goes to resource-based manufacturing. Also, China is just as an important manufacturing investor as is Japan. Estimation results show that overseas direct investment affects domestic employment negatively in the majority of sectors, indicating substitution instead of a complementary relationship. Furthermore, ODI reduces the speed of labour market adjustment to its long-run equilibrium and increases the domestic price elasticity of demand for labour. There is considerable heterogeneity across sectors, but the impact of ODI on domestic fixed asset investment tends to be negative in most sectors.

Many Emerging Asian countries have been refining macroprudential policies, particularly since the Global Financial Crisis. For instance, they have developed policies targeting housing markets and broadly transposed the Basel III requirements into their national legislation. In the wake of the COVID-19 pandemic, policy makers now need to identify emerging vulnerabilities and their associated financial stability risks and respond with the appropriate macroprudential tools. This publication provides a detailed overview of the current macroprudential policy situation in Emerging Asian countries and explores how the macroprudential policy toolkit has evolved. The report discusses some of the most pressing challenges to financial stability, including the interaction of macroprudential policy with other policies. It also devotes special attention to macroprudential policies for emerging priorities, such as achieving green goals and updating regulatory frameworks to reflect ongoing Fintech developments. Climate change will indeed create new challenges in financial markets, while Fintech developments bring about many economic opportunities and deepen financial systems, but present a variety of novel risks requiring rapid policy responses.

Ce rapport est une édition spéciale du Tableau de bord de l’OCDE sur le financement des PME et des entrepreneurs, publication phare de l’OCDE. Il examine en détail les conséquences du COVID-19 sur l’accès des PME au financement, ainsi que les mesures prises en conséquence par les pouvoirs publics. Il apparaît qu’avant la crise, les conditions de financement étaient globalement favorables pour les PME et les entrepreneurs, qui bénéficiaient de faibles taux d’intérêt, de critères accommodants d’octroi des crédits et d’une offre de plus en plus diversifiée d’instruments de financement. Mais la crise du COVID‑19 a profondément bouleversé l’accès des PME au financement. Plus particulièrement, l’effondrement brutal du chiffre d’affaires des entreprises a provoqué de graves pénuries de liquidités qui ont mis en danger la survie de bon nombre d’entreprises viables. Ce rapport fait état d’une augmentation de la demande de prêts bancaires au cours du premier semestre de 2020, et d’une stabilité de l’offre de crédit grâce à l’action des pouvoirs publics. Parallèlement, on a observé un recul d’autres sources de financement, en particulier l’apport de fonds propres au stade du démarrage. Le rapport réunit des données sur le périmètre et l’ampleur des mesures prises par les gouvernements dans le monde, et en précise les principales caractéristiques. Il décrit les principaux enjeux stratégiques du financement des PME qui se poseront au cours des prochaines phases de la pandémie ; il s’agira en effet d’éviter le surendettement des PME, de promouvoir une gamme diversifiée d’instruments de financement, de stimuler la création d’entreprises et de renforcer la résilience des PME par des mesures structurelles.

The design of intergovernmental fiscal relations can help to ensure that tax and spending powers are assigned in a way to promote sustainable and inclusive economic growth. Decentralisation can enable sub-central governments to provide better public services for households and firms, while it can also make intergovernmental frameworks more complex, harming equity. The challenges of fiscal federalism are multi-faceted and involve difficult trade-offs. This synthesis paper consolidates much of the OECD’s work on fiscal federalism over the past 15 years, with a particular focus on OECD Economic Surveys. The paper identifies a range of good practices on the design of country policies and institutions related strengthening fiscal capacity delineating responsibilities across evels of government and improving intergovernmental co-ordination.

The Economic Outlook for Southeast Asia, China and India is a bi-annual publication on regional economic growth, development and regional integration in Emerging Asia. It focuses on the economic conditions of Association of Southeast Asian Nations (ASEAN) member countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam. It also addresses relevant economic issues in China and India to fully reflect economic developments in the region.The update of the Outlook comprises three main parts, each highlighting a particular dimension of recent economic developments in the region. The first part presents the regional economic monitor, depicting the economic outlook and macroeconomic challenges in the region. The second and third parts consist of special thematic chapters addressing a major issue facing the region. This update focuses on smart cities, discussing in particular smart city strategies and urban environmental risks.

The Economic Outlook for Southeast Asia, China and India is a bi-annual publication on regional economic growth, development and regional integration in Emerging Asia. It focuses on the economic conditions of Association of Southeast Asian Nations (ASEAN) member countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam. It also addresses relevant economic issues in China and India to fully reflect economic developments in the region.The update of the Outlook comprises two main parts, each highlighting a particular dimension of recent economic developments in the region. The first part presents the regional economic monitor, depicting the economic outlook and macroeconomic challenges in the region. And the second part consists of a special thematic chapter addressing a major issue facing the region. This update focuses on promoting opportunities in e-commerce.