US-China tensions are threatening innovation and growth in both countries, according to the World Bank’s economic update for Asia. The report found that research and development collaboration and restrictions on tech flows between the two nations could harm knowledge and corporate innovation. Ursula von der Leyen, the European Commission’s president, has called for the EU to develop “new defensive tools” to protect trade in sensitive technologies. Although diversification of manufacturing to India and southeast Asia provided an initial boost to the countries, further US-China decoupling could disrupt trade flows and raise costs, stymieing investment and green technologies. The Asia-Pacific region is projected to grow by 5.1% this year, with a 0.5% increase on the World Bank’s October forecast, and China is expected to achieve its 5% growth target for 2023. However, without the implementation of economic reforms, China’s reliance on exports and investments could lead to slowing growth. Excluding China, the region’s economic growth is expected to fall to 4.9% in 2023.

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