According to news on August 18, Zhu Min, former vice president of the International Monetary Fund and dean of the National Institute of Finance of Tsinghua University, said that the probability of the second wave of the global epidemic has risen, and the world economy will not grow within two years.
The International Monetary Fund believes that this epidemic has caused the most serious worldwide economic recession since the Great Depression of the last century, and that both developed and developing countries have entered a recession period at the same time. The global economy will fall by 3% this year, and trade will fall by 11%, which has already surpassed the 2008 economic crisis. Zhu Min predicts that by the end of 2021, the world GDP will return to the level of 2019.
China's bailout funds are 6 trillion yuan, accounting for 3.6% of GDP, which is relatively modest. Because corporate debt is relatively high in the world, it cannot be leveraged.
Because China's economy is getting stronger and stronger, more and more countries and companies will use the renminbi, and the overall proportion and share of the renminbi will increase accordingly. It is also inevitable that the renminbi will go international. Zhu Min believes that China's financial technology is ahead of the world. China has the world's largest banking system. If it can be fully technologicalized, it will have a pivotal position in the world.
Major economies generally improve
Look at the Eurozone first. Last year, the Eurozone economy recovered beyond expectations, presenting the best situation in the past 10 years and becoming a new bright spot in the global economy. Germany and France have performed steadily, while the situation in the UK and Greece is improving. Spain has returned to its pre-crisis level. Central and Eastern European countries have recovered significantly. In the third quarter of last year, Eurozone GDP grew at an annual rate of 2.4%, maintaining growth for 18 consecutive quarters. The OECD estimates that the Eurozone’s GDP growth rate last year was 2.4%, significantly higher than the 1% average of the past 10 years. From the perspective of economic prosperity, various PMI indexes in the Eurozone have increased significantly and hit new highs. In November, the manufacturing PMI was 60.1%, the highest since April 2000; the demand side continued to improve, and the consumer confidence index continued to rise. It rose to 0.1 in November, the first time since 2001 that it has turned from negative to positive; trade and investment have grown significantly, and the unemployment rate has continued to drop to the lowest level since the financial crisis. The Eurozone economy has recovered steadily and has become an important engine for global economic growth.
Look at the United States again. The US economy has recovered steadily, and the economy has maintained an upward trend. In the first quarter of last year, the US economy had a seasonally weak start, but it was significantly better than the same period last year, and there was a significant rebound in the second quarter. In the first two quarters, US GDP grew by 1.2% and 3.1% respectively. In the third quarter, despite the impact of hurricanes, GDP grew by 3.2% month-on-month, maintaining a good trend. According to statistics from the Bureau of Economic Analysis of the U.S. Department of Commerce, the U.S. economy has continued to grow for 102 months by December 2017, and is expected to show the second-longest expansion cycle in history. Major agencies predict that the U.S. economy may grow slightly faster in 2018 than in 2017. The OECD report predicts that the U.S. GDP growth rate will reach 2.5% in 2018. The December meeting of the Federal Reserve's Open Market Committee raised its 2018 GDP growth forecast to 2.5%. The recent implementation of the US government’s tax reform plan will boost the total domestic demand in the United States and stimulate economic growth in the short term, which is conducive to economic growth. According to expert calculations, Trump's tax reform will promote a 0.7% increase in US GDP in 2018.
Then look at emerging economies. Asia’s economic growth is still good. It is the most dynamic and fastest growing region in the world. It contributed nearly half of the global economic growth last year and will continue to lead global economic growth this year. The IMF raised the expected economic growth rate of emerging markets and developing economies by 0.1 percentage point to 4.9% in 2018. Morgan Stanley expects that the GDP growth rate of emerging markets will reach 5.0% this year. Of particular note is China. China's economic development is more resilient, has more room for maneuver, improved quality and efficiency, and measures such as supply-side structural reforms have laid the foundation for the stable development of China's economy in the future. India has gradually gotten rid of the impact of the "cashing order" and the reform of goods and services tax. Benefiting from the strong performance of the manufacturing industry, the economy has begun to rebound. Morgan Stanley predicts that India's economic growth rate will reach 7.5% in 2018. Thanks to the rebound in commodity prices and the frequent rate cuts by the central bank, economies such as Brazil and Russia have maintained a strong recovery momentum and have also contributed to the increase in global economic growth.
Long-term growth prospects are hardly optimistic
Experts pointed out that despite the general improvement in the global economy, it is not appropriate to be too optimistic about the long-term growth prospects. Many risks that affect the prospects of economic recovery still exist. For this round of world economic recovery, it is generally considered a cyclical recovery. When an economy deviates from its long-term development trend for a period of time, it always returns to its original trend. World Bank President Jin Yong pointed out that “the broad-based recovery of global growth is encouraging, but now is not the time to be complacent.”
Geopolitical risks, terrorism and other issues are still affecting the stability and development of the world economy. The UN's 2018 World Economic Outlook report believes that the risks faced by the global economy include changes in trade policies, the sudden deterioration of the global financial environment, and increasing geopolitical tensions. Schwab, the founder and executive chairman of the World Economic Forum, said, “Due to the collective failure of inclusive development and the protection of world resources, our existing global governance systems are facing the risk of failure at the same time. To avoid this situation, The first thing we should do is to establish a new cooperation model, and such cooperation must exclude narrow views of interests and must be based on the common destiny of mankind."
The Bank of America Merrill Lynch report believes that in terms of the downward pressure on the global economy in 2018, geopolitical risks, trade protectionism and higher-than-expected inflation growth will be the three most worthy of attention. The World Bank’s latest report emphasizes that there are still downside risks in the outlook for global economic growth: the sudden tightening of global financing conditions may subvert the trend of economic expansion, and the escalation of trade restrictions and increased geopolitical tensions may affect confidence and economic activities.
The deterioration of the development environment also restricts the sustainable development of the global economy. Chen Fengying, a researcher at the China Institute of Modern International Relations, believes that the current global economic growth has been out of touch with the development environment, with strong growth and environmental degradation exceeding expectations. On the one hand, the trend of economic globalization may be reversed. Under the leadership of policies such as "America First", the Trump administration has stepped up protectionism, abandoned TPP, re-talked about the North American Free Trade Area, conducted a 301 investigation against China, and joined forces with Japan and Europe to oppose China's market economy status. This requires cooperation from all parties Willingness drops and trade frictions continue. On the other hand, the multilateral cooperation mechanism is frustrated. The World Trade Organization (WTO) is facing unprecedented challenges. The new round of ministerial meetings ended in fruitless due to differences in interests between developed and developing countries. WTO Director-General Azevedo said that once the WTO stops, it will be an irreversible disaster for the world. In addition, the return to normalization of US monetary policy and the tax reform plan may push up the nominal and real yields of US Treasury bonds, intensifying international capital flows, and emerging markets will therefore be under double pressure.
"Gray Rhino" is coming
The global debt level remains high and is considered a major hidden danger in the current world economy. Nobel Laureate in Economics Spence pointed out that the world economy will face a series of serious challenges in the coming months and years. One challenge that is looming is the mountain of debt, which makes the entire economic system more vulnerable to instability and impact. influences.
Statistics show that the current global government debt is at a relatively high level. The total US government debt/GDP continued to rise, from 107.1% in 2016 to 108.1% in 2017. Japan's government debt situation continued to deteriorate, with total government debt/GDP rising from 239.3% in 2016 to 240.3% in 2017. Sovereign debt risks in the Eurozone still exist. Italy’s government debt/GDP reached 133.0% in 2017, an increase of 0.4% over the previous year. This is also the case in Britain and France. UK government debt/GDP continued to rise from 89.3% in 2016 to 89.5% in 2017, and France continued to rise from 96.3% in 2016 to 96.8% in 2017. The total debt/GDP of emerging markets and developing economies rose from 46.8% in 2016 to 48.4% in 2017. At the same time, the debts of residents and companies in various countries have also been accumulating, leading to a rising ratio of global non-financial sector debt to GDP. According to estimates by the Bank for International Settlements, from 2015 to 2016, the ratio of global non-financial sector debt to GDP rose from 231.7% to 234.8%, and in the first quarter of 2017 it further rose to 238.4%. The continuous increase in the overall level of global debt continues to threaten the stability of the global economy.
The ever-expanding asset price bubble, like a high-hanging Damoxli sword, threatens the global economy. In recent years, low interest rates and loose monetary conditions in advanced economies have given rise to rising asset prices. The US Standard & Poor's 500 Index, the Dow Jones Industrial Average and the Nasdaq Composite Index have set new highs recently. As of the first ten days of January 2018, the closing prices of the three major indexes had reached 2786 points, 25803 points and 7261 points, respectively, 1.9 times, 1.8 times and 2.5 times the highest value before the financial crisis. In terms of real estate market prices, the Standard & Poor's/CS house price index in 20 large and medium-sized cities in the United States reached a peak of 207 points in July 2006, which subsequently triggered the subprime mortgage crisis and the global financial crisis. Since 2012, housing prices in the United States have begun to rise, and the index is now very close to the highest level before the subprime mortgage crisis. In developed economies such as Europe and Japan, similar asset prices continue to rise rapidly. The stock markets and real estate markets of emerging market countries are also experiencing rapid price increases. In particular, the increase in capital inflows from emerging markets accompanied by the depreciation of the U.S. dollar in 2017 has led to a sharp rise in emerging market asset prices. Negative interest rates and quantitative easing policies in Europe and Japan will continue to generate asset bubbles.
The current asset bubbles in countries around the world have become an important factor threatening the stability of the world economy. The Yellow Book of the World Economy issued by the Chinese Academy of Social Sciences believes that the longer the global asset price rise lasts, the greater the harm caused by the burst of the bubble. Once the asset bubble bursts, the world economy, which has just recovered, may fall into a downturn again.
