(Source: Panoramic Vision)
Economic columnist Internet reporter Li Xiaodan China’s economy is still in a critical period of “big adjustments”, and this process will continue for 3-5 years. This is the opinion of the Bank of China on November 20 in the Report on China's Economic and Financial Perspectives. The report also predicts that next year China’s GDP growth rate will be around 6.5%, and we must protect ourselves from the superposition of external shocks and internal “big adjustments”.
Zhong Hong, deputy director of the Institute of International Finance at the Bank of China, said that the US dollar would raise interest rates once in December 2018 and raise interest rates 2-3 times in 2019. The US economy will maintain positive growth, but growth will decline.
“Global tightening of liquidity can lead to fluctuations in the securities market, bonds and exchange rates in developed countries. The vulnerability of emerging economies is high leverage, large external financial needs, short-term foreign currency debt, unstable investors, and risks of friction in trade. said Jun Hong.
Director of the Institute of International Finance of the Bank of China Chen Weidong (Chen Weidong) said that the world economy still faces many uncertainties in 2019, and the world economy is facing increasing risks of decline. China has to cope well with the expected management.
Three major risks of the global economy in 2019
In 2018, the world economy supported the recovery trend, but the situation with differentiation was obvious. The growth rates of the main economies were close to peak, and in some emerging market countries financial shocks were observed.
The report notes that the risks of reducing risks associated with the global economy will increase. Raising interest rates will be the main topic of monetary policy in 2019. At the same time, peaks in US economic growth and the global debt burden can be a potential risk that deserves high vigilance.
From a regional perspective, economic expansion in the United States has entered a more advanced stage, and European recovery has slowed, Asia-Pacific is generally stable, and some countries have increased financial fragility: Latin America, the Middle East and Africa are expected to gradually recover from the fluctuations.
The current model of international trade is facing restructuring, the multilateral trading system is frustrated, WTO reform is difficult to advance, and regional trade agreements are developing rapidly. Global liquidity in dollars is declining, and emerging markets will face enormous challenges.
Zhong Hoon said that in 2019, the global economy faced three major risks: economic growth in the United States had been achieved, trade friction between China and the United States had sharply increased, and the global debt burden.
Currently, the non-financial sector in developed countries is severely undervalued and growing, and its total debt increased from 113 trillion dollars in 2008 (200% of GDP) to 167 trillion. Doll. USA (about 250% of GDP). An increase in debt expenses with interest rates will affect the profitability and ability to repay debt, which will lead to a decrease in credit quality and bank lending.
2019 is also the year in which emerging economies are most indebted. Nearly 2 trillion dollars in bonds and loans expire, and foreign currency debt in the non-banking sector is 14% of GDP, only slightly below the historical maximum in 1999. The point is 17%. Among them, dollar debt rose to 3.7 trillion. US dollars.
The report suggests that as the US dollar continues to appreciate, financing costs are rising and investors' appetite for risk decreases, the balance sheets of countries that largely borrow foreign currency will be under pressure, and pressure to repay debt and refinancing will increase. . The continued slowdown in world trade will further reduce foreign exchange earnings in emerging market countries, increase the current account deficit and further increase the difficulty of refinancing elite companies with foreign debts. The weakening of the local currency, the debt burden and the pressure of capital outflows may continue to grow, leading to a vicious circle.
The report also indicated that while tax incentive policies, such as Trump's tax cuts, were implemented, their effects would gradually disappear by 2020. As US taxes on subsidies and monetary policy decline, the sustainability of US economic growth looks more problems, the global economic recovery faces more uncertainty, and will also affect the confidence of financial market participants, causing fluctuations in US stocks and even in global capital markets .
For China, countries with developed economies are tightening their liquidity, and they need to pay special attention to trends in capital flows.
Wang Yuxin, international financial researcher at the Bank of China’s Institute of International Finance, said that current capital flows in China are relatively stable overall, while capital flows in 2019 will remain stable.
However, starting from the third quarter, the risk tendency is increasing, and the situation with payments related to external payments is also the same. This phenomenon must be given full attention.
Van Yuxin believes that to ensure a stable flow of capital, China can use good regulatory tools, such as price instruments and capital flow regulators, and also expand openness to facilitate the inflow of capital from different countries. From the balance of payments, we see this for almost a year. The net inflow of bonds and equity investments has increased, which indicates that the inclusion of A-shares in Alum contributes to attracting capital inflows.
For the future management of cross-border capital flows, Van Yuxin said management will be more stringent.
External factors and "big adjustments"
In 2018, affected by major changes in the domestic and international situation, economic growth in China stabilized and slowed down, and in general it has the characteristics of “three recessions and two stability”.
The report predicts that GDP in 2018 will increase by 6.6%, which is 0.3 percentage points more compared to the previous year, and the consumer price index will rise by about 2.2%.
“The situation facing the Chinese economy will become more difficult in 2019,” said Jong Liang, chief researcher at the International Finance Institute of the Bank of China.
The report notes that the Chinese economy is in a critical period of “big adjustment”, and large divisions, major adjustments and major integration processes occur between different sectors, different regions, subjects and finances, traditional finance and new finances. China's economic GDP is expected to increase by about 6.5% in 2019, which will be a slight decline from 2018.
Zong Liang said that in 2019, an active fiscal policy should focus on tax cuts and lower fees and a proper increase in fiscal deficit. Monetary policy should facilitate the conversion of a “wide currency” into a “wide credit”. The regulatory policy should follow a general direction, but it should also be monitored. A good rhythm to prevent the "risk of risk", i.e. To solve new risks while preventing new risks.
The report also indicated that in 2019, the Chinese economy should protect against external factors and “reconciliation” of the same frequency resonance. The adjustments that the Chinese economy is currently facing mainly include four aspects: one is the accelerated conversion of new and old kinetic energy into different industries, and the other is “icy” in different regions. “Two heavens”, the southern region is economically active, the structure is accelerating, and the overall performance is good. However, the transition in the northern region is difficult, investment is slowing down, the business environment needs to be optimized, and the overall performance is relatively weak (see details in the section of this report). Traditional finance has undergone a transformation and pressure change. Developing finances moved from “running” to “slow walking”, and the norms became the topic. From the stage of mutual competition to the stage of competition, everyone felt unprecedented pressure. Fourth, from the development stage, China’s economy is in a critical period of recovery through the “middle income trap”. Changes in the market, increased costs, increased competition and strict oversight have had a tremendous impact on the traditional development model. Technological innovations are confronted with “difficulty”, i.e., “Pulling in is difficult” and “innovation is more difficult”. How to ensure the stabilization of the economy at a certain level of growth, and transformation and change is a serious test.
Zhou Jingwei, director of macroeconomics and politics at the Institute of International Finance at the Bank of China, said that implementing the “six stable” policies will adjust the tight supply of financial resources, M2 and social growth will stabilize at a low level, and private and small microenterprises will be able to get financing. Sex is expected to improve.
“Liquidity will remain reasonable, and the interest rate of the money market will be further studied. The stock market is stabilizing and is expected to rebound. It is necessary to pay attention to the deterioration of the financial situation of the enterprise and the strengthening of financing conditions. The local government debt burden will increase, and the Fed will raise interest rates. Financial markets, such as exchange rates, can exceed expectations, ”said Zhou.
Li Peijun, a senior researcher in macroeconomics and politics at the Institute of International Finance at the Bank of China, said that in 2019 this growth was relatively fast. Speeding up investment in infrastructure in 2019 will control the risks of public debt. There are three possible ways to push higher demands and curb local debt risks. First, to speed up the opening of the entrance door and increase the transfer payment of the central government, secondly, to manage projects that were eliminated too quickly in the previous period, and third, to speed up local special projects. The gap in the bundle.
Recommendations of the macroeconomic policy report for 2019: macroeconomic policy should pay special attention to external shocks and “excellent adjustments” for the same frequency resonance in order to avoid rapid economic growth and solve new changes, new problems and new problems in economic transactions. Adhere to the promotion of high-quality development, engage in the relationship between stable growth, reducing leverage and risk prevention, and continue to promote the “six stable” policy (stable operation, stable financial, stable foreign trade, stable external investment, stable investment, stable expectations).
Uncertainty of the global banking industry’s development environment is increasing
In 2018, the uncertainty in the development of the global banking industry increased, and some emerging markets were turbulent, and the banking industry in various countries remained mostly stable, but the influence of the Fed interest rates, trade frictions and regulatory strengthening of the banking industry gradually increased.
The report believes that in 2018 there were some obvious structural changes in the global banking development environment, which limits the growth of banking business and income, some risk factors increase, which affects banking capital and profit margins.
Since 2018, the Fed has supported a rate hike. The target of federal funds rose to 2.25%, which is 0.75 percentage points more than at the beginning of the year. The continuation of interest rates by the Fed has laid the main tone of global monetary policy. Affected by the Fed rate hike, some developed economies raised interest rates one by one, and policy interest rates gradually approached the long-term neutral level. For example, the Bank of England raised the policy rate from 0.5% to 0.75%, and the Bank of Canada raised the policy rate from 1% to 1.75%. The Eurozone and Japan, which are implementing a policy of quantitative easing and a negative interest rate, are also actively considering the possibility of stopping easing and moving to a normalization of interest rates.
At the same time, monetary policy in emerging economies is in a diversified state. In response to the rise in the Fed's interest rate and the lower cost of local capital and capital outflows, some developing countries followed a policy of raising interest rates. In response to the Lira crisis, Turkey raised the policy rate from 7.25% to 22.5%. Indonesia adjusted the base interest rate from 4.25% to 6%, India and Malaysia also raised policy rates, respectively. Some emerging market countries have adopted lower interest rates in response to downward pressure on domestic economic growth. For example, the Brazilian central bank reduced the base interest rate from 14.25% in 2015 to the current 6.5%, Russia decreased from 11% to the current 7.5%; The People’s Bank of China maintained a stable neutral political position, and the center of interest rates was steadily declining.
Wang Jiaqiang, head of banking research at the International Institute of Financial Studies, Bank of China, said that the conversion of assets and liabilities is an important function of the bank. Since the duration of a bank’s liability is lower than the duration of its assets, the monetary environment tends to be neutral in the political cycle. The bank’s net interest margin can be gradually restored, which will be an important support for profit.
In terms of assets and liabilities, at the end of the third quarter, the assets and liabilities of the listed banks amounted to 158.1 trillion yuan and 145.9 trillion. RMB, respectively, with growth rates of 7.1% and 6.7%, respectively. Over the same period, assets and liabilities of banking financial institutions amounted to 264 trillion yuan and 243 trillion yuan, respectively, while the growth rate was 7% and 6.7%, respectively. As of the end of the third quarter, the listed banks accounted for 53.9% of loans, which is 1.8 percentage points more compared to the same period last year, deposits accounted for 73.4% of liabilities, which is 0.89 percentage points more than compared with the same period last year.
The report made ten forecasts for the development of the global banking industry in 2019: 1. The global banking industry has increased environmental pressure; 2. Global financial oversight has become more stringent, and some countries have weakened; 3. The regional structure of the overseas development of the banking industry has been further optimized; 4. The economic growth of developed countries is not synchronized, and the banking industry is highly differentiated 5. The development of the banking industry in developing countries faces new challenges. 6. Returning to the source, the growth of China’s banking industry remained stable with a growth rate of about 8%. The steady growth in profits of China’s banking industry has steadily increased: 8. Banks in China’s list accelerated their reforms in an accelerated period 9. Pratt & Whitney’s favorable policy continues, and digital inclusive financing will become an important development direction. 10. The function of direct financing of the financial system Repair, provides an opportunity to transform the money management business in banks.