The four intersecting risks that may hit the global economy. Several things that have nothing to do with one another on their surface—a dysfunctional U.S. House of Representatives, tumbling bond prices, war in the Middle East and tensions with China—are creating an intertwined set of risks for the global economy. (Axios)

Israel's economy and finances face wartime strain. Israel's economy, already under strain before the Hamas terror attacks this month, is rapidly shifting to a war footing. (Axios)

Palestinian ambassador urges UN to ‘stop the killing’ as Israel pounds Gaza. Riyad Mansour says certain nations that he did not name were applying a double standard on the war. (Al Jazeera)

Global EV battery supply chain puzzles over China graphite curbs. Beijing's move to restrict graphite exports will have a disproportionate impact on foreign makers of electric vehicle battery components who have not yet shifted to using as much synthetic material as Chinese counterparts, industry insiders and experts said. (Reuters)

UN agencies reduce Gaza aid operations as fuel runs out. UN aid agencies say they have begun to significantly reduce their operations in the Gaza Strip because they have almost exhausted their fuel reserves. (BBC)

How Poland’s election results could reshape Europe. After nearly a decade in power, Poland’s dominant Law and Justice Party fell short of a new mandate in 2023. A new multi-party coalition government is likely to draw closer to the European Union. (Council on Foreign Relations)

Europe’s central bank halts rate hikes as war in the Middle East casts a shadow over the economy. The European Central Bank left interest rates unchanged Thursday for the first time in over a year as the Israel-Hamas war spreads even more gloom over already downbeat prospects for Europe’s economy. (AP)

US economy delivers blockbuster performance in third quarter. The U.S. economy grew almost 5% in the third quarter, again defying dire warnings of a recession, as higher wages from a tight labor market helped to fuel consumer spending and businesses restocked at a brisk clip to meet the strong demand. (Reuters)

Kremlin says Russian economy ready to handle more sanctions. Russia’s economy has adapted well to Western sanctions and Moscow does not fear the prospect of more such measures, the Kremlin says. (Al Jazeera)

Your evening briefing: Xi battles slowdown as Country Garden falters. Chinese leader Xi Jinping appears to be redoubling his efforts to combat an economic slowdown, with his government unveiling a sovereign debt package amid a persistent housing downturn. (Bloomberg)

Bank of Canada expected to keep rates steady on dour growth outlook. Confidence among businesses and consumers is eroding, analysts say, evidence that higher rates are cooling activity. (WSJ)

S&P logged over 200 supply chain-related credit actions since 2020. In a recent report, the ratings agency traced how global volatility and disruptions can ripple into corporate finances. (Supply Chain Dive)

The US, South Korea and Japan are piloting a supply chain warning system. What does that mean? As the U.S. looks to counter China’s dominance in critical mineral supply and processing, it’s leveraging alliances to better share data and resources. (Supply Chain Dive)

US and China commercial property markets face headwinds but UOB is optimistic on Southeast Asia. Commercial real estate markets in the U.S. and China are economic pain points to monitor in a higher-for-longer rate environment, said Singapore’s United Overseas Bank. (CNBC)

Harm From ‘De-Risking’ Strategies Would Reverberate Beyond China

Diego Cerdeiro, Siddharth Kothari, Dirk Muir, IMF Blog

China’s importance in the global economy has increased dramatically in recent decades, and it has been a particularly crucial driver of trade integration in Asia.

China’s medium-term growth prospects, like that of other countries, will be determined in part by major forces such as convergence to advanced economies’ income levels and demographics. Yet key structural policy drivers, including domestic reform momentum, and external factors, including geoeconomic fragmentation, also significantly affect this path.

What would be the potential implications for Asia and beyond from these different growth paths? In our latest Regional Economic Outlook for Asia and the Pacific, we assess the potential effects of a downside scenario from ‘de-risking’ between China and Organization for Economic Co-operation and Development economies.

As the Chart of the Week shows, so-called de-risking strategies by China and the United States and other OECD countries that aim to reshore production domestically or friend-shore away from one another can result in a significant drag on growth around the world even assuming no new trade restrictions with third countries—especially in Asia.

While reshoring would be particularly painful to everyone, it is notable that friend-shoring does not generate net benefits for third countries in the long term. That’s because the benefits from trade diversion are offset by the effects of the contractions in both China and the OECD.

For the region, the results suggest that third countries should not expect to passively benefit from friend-shoring policies, but rather actively pursue reforms that can help them further integrate into global supply chains. For systemic economies around the world, there is an urgent need for constructive dialogue to resolve underlying sources of tensions and resist costly fragmentation outcomes.

In China, the risks that fragmentation poses on medium-term growth underscore the need for comprehensive structural reforms that would help income levels converge more rapidly with those in advanced economies—such as closing productivity gaps between state-owned and private firms and further opening up sectors to competition. Our research shows that achieving this would also have significant positive spillovers for other economies in Asia.

See the Asia-Pacific Department’s recent blog outlining its latest economic outlook for the region: Asia Continues to Fuel Global Growth, but Economic Momentum is Slowing.

This article originally appeared on IMF Blog.

 

Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate