Economic growth in the Asia-Pacific Economic Cooperation region will fall behind the rest of the world in coming years as China slows, demographics bite and supply chains readjust, according to a report released on Sunday at the Apec meeting in California.
GDP growth for the 21-member Apec economies is expected to grow by 3.3 per cent this year, up from 2.6 per cent on 2022, and remain in that range in coming years. But projections for the following three years show them lagging behind a compilation of other global economies.
"Apec economic growth is getting more stable than in previous years, we can see that economic growth has improved," said Carlos Kuriyama, director of Apec's Singapore-based research arm and co-author of the report.
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"There are promising signs in Apec, but it is walking a tightrope amid downside risks," he said on the second day of the informal, non-binding economic forum's meeting in San Francisco's Bay Area.
However, much of the focus is on Wednesday's expected meeting between Presidents Xi Jinping and Joe Biden, amid dismal bilateral relations. It will be their second in-person encounter since Biden's election in 2020 and Xi's first visit to the US since 2017.
Separately on Sunday, US Treasury Secretary Janet Yellen held an introductory meeting with Chinese Finance Minister Lan Foan, where she spoke about her meeting last week with Vice-Premier He Lifeng, according to a short US readout.
Yellen "conveyed the continued importance of maintaining resilient communication channels with China", it said.
While Kuriyama identified some regional bright spots for Apec countries, including tourism, domestic consumption and targeted fiscal support, these were overshadowed by a number of factors.
Among them are the after-effects of the pandemic, as well as inflation, higher debt, climate change, trade protectionism, and geopolitical tensions, including those between the US and China, he said.
The report noted a decline in foreign direct investment in North Asia recently in favour of Southeast Asia.
But it is too early to tell whether this is a result of decoupling and "friendshoring" pressure - companies relocating out of China to more favourable venues as US-China relations deteriorate - or whether it is driven by rising production costs and other macroeconomic factors, Kuriyama said.