These include the rise of global trade and value chains which offer access to lower-cost inputs, lowering the price of final imported goods and services 8; demographic trends which have added to the economy’s labour supply, lowering wage costs 9; and increased automation and flexibility in the jobs market holding down wage growth and potentially flattening Phillips curves.10 Chart 7: UK GDP after the Great Depression and Great Recession  50 Cumulative percent change 40 30 20 10 0  Years 0  -10  t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8 t+9 t+10 t+11 t+12 The Great Depression  The Great Recession  Source: ONS and Bank calculations. These structural factors would, in theory, be expected to cause a downward shift in the price level rather than in the rate of inflation. But because these factors have played out over a lengthy period, they may have shown up in a persistent drag on measured inflation rates. For example, Faijgelbaum and Khandelwal (2016) estimate that global trade integration has lowered the price of the typical household consumption basket by between a quarter and two-thirds – a huge effect. This subdued pattern for global inflation, driven by demand and supply-side factors, has occurred against a backdrop of global monetary policies remaining highly accommodative, itself in part a response to these disinflationary forces. For example, in the aftermath of the global financial crisis, central banks lowered  8  Johnson (2018). Goodhart and Pradhan (2020). 10 Haldane (2018).

More importantly, in recent years, China has become a net exporter of direct investment into Malaysia, contributing to significant source of capital for development in various sectors such as infrastructure construction, power plant and steel manufacturing. Outstanding direct investments from China and Hong Kong SAR had grown significantly, almost reaching USD11.1 billion in first half of 2016, as compared to USD6.5 billion three years ago (end-2013). China’s recent One Belt One Road initiative has also added more excitement and opportunities for countries like Malaysia, which is strategically located along the maritime Silk Road. Joint initiatives had been developed to upgrade several ports in Malaysia, with significant investments in the development to come from China. The high-speed rail development between Malaysia and Singapore paired with China’s initiative to develop the network within Southeast Asia and Central Asia will further enhance the connectivity within the region. In fact, today’s headlines carried more developments on the East Coast Rail project with again, strong participation of China in the financing and construction of the project. As you know, our Prime Minister is leading a delegation to China discussing areas of bilateral cooperation, regional and international issues, as well as investment. Malaysia is also a member of the Asian Infrastructure Investment Bank (AIIB). Recently, the Parliament passed the AIIB Bill 2016, granting approval for Malaysia, a founding member, to contribute capital for the institution. Beyond trade and investment, China- Malaysia bilateral relation expands further with people to people connection, through culture, tourism and education.