China In The Global Economy – The global economy is expected to slow this year before recovering next year. By historical standards, economic growth will remain weak, as the fight against inflation and the Russian war in Ukraine have a negative impact on economic activity.
While this is an unfavorable situation, the outlook is less bleak than October’s predictions and could represent a turning point as economic growth slows and inflation declines.
China In The Global Economy
Economic growth proved surprisingly resilient in the third quarter of last year, with a strong labor market, solid domestic consumption and solid business investment, and a better-than-expected adaptation to Europe’s energy crisis. Inflation has also improved, with global measures now falling in most countries – although underlying inflation, which excludes the most volatile energy and food prices, has not peaked in many countries.
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Elsewhere, China’s sudden reopening is the path to a rapid recovery in activity. Global financial conditions improved as inflationary pressures began to ease. This and the weakening of the US dollar since its November peak have given emerging and developing countries little relief.
Therefore, we have slightly increased our growth forecast for 2022 and 2023. Global growth will slow from 3.4% in 2022 to 2.9% in 2023, before recovering to 3.1% in 2024.
In the case of advanced economies, the slowdown will be more pronounced and will decrease by 2.7%. last year to 1.2 percent and 1.4 percent this year and next year. Nine out of ten advanced economies are expected to slow down.
US economic growth will slow to 1.4% in 2023 as interest rate hikes from the Federal Reserve weigh on the economy. The situation in the euro zone is more difficult, despite signs of resilience to the energy crisis, a mild winter and generous fiscal support. With the European Central Bank tightening monetary policy and a negative terms of trade shock – driven by rising imported energy prices – we expect economic growth to be 0.7% this year.
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Emerging market economies and developing economies as a group have slowed and growth is expected to increase slightly this year and next, to 4% and 4.2%.
Restrictions and the Covid-19 outbreak in China slowed business last year. As the economy reopens, we expect growth to rebound to 5.2% this year as activity and mobility recover.
India continues to be a bright spot. Together with China, it will account for half of global growth this year, compared with just a tenth for the United States and the eurozone combined. Global inflation is expected to decline this year, but even in 2024, average annual global inflation and underlying inflation are still expected to be above pre-pandemic levels in more than 80% of countries.
The risk to the outlook still tends to deteriorate, although the downside risk has weakened since October and some positive factors have gained importance.
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The news about inflation is encouraging, but the battle is far from won. Monetary policy has become an issue during new home construction in many countries. However, inflation-adjusted interest rates in the euro area and other economies remain low or even negative, and in many countries there is considerable uncertainty about the speed and effectiveness of monetary tightening.
In cases where inflation pressure remains too high, the central bank should increase the real interest rate above the neutral rate and maintain it at that level until the inflation situation is in a decisive decline. Easing monetary policy too soon risks undoing all the gains achieved so far.
The financial environment remains volatile, especially as central banks embark on an unfamiliar path towards reducing their balance sheets. It will be important to monitor the accumulation of risks and address vulnerabilities, especially in the housing sector or the less regulated non-bank financial sector. Emerging economies should allow their currencies to adapt as much as possible to tighter global monetary conditions. Where appropriate, currency intervention or capital flow measures can help reduce volatility or volatility unrelated to economic fundamentals.
Many countries are responding to the cost of living crisis by supporting citizens and businesses with broad, untargeted policies that help absorb the shock. Many of these measures are proving to be costly and increasingly unsustainable. Instead, the country should adopt specific measures that save fiscal space, allow high energy prices to reduce energy demand, and avoid overstimulating the economy.
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Supply-side policies also play a role. It can help remove key constraints to growth, increase resilience, ease price pressures and support the green transition. This will help reduce accumulated production losses since the start of the pandemic, especially in low-income and emerging economies.
Finally, the power of geoeconomic fragmentation is growing. We must support multilateral cooperation, especially in key areas of common interest such as international trade, expanding the global financial safety net, public health preparedness and climate transition.
This time, the global economic outlook is not deteriorating. This is good news, but not enough. The path back to full economic recovery with sustainable growth, stable prices and progress for all is just beginning.
The negative impact of key economic risk mitigation strategies will be felt outside of China, while comprehensive reforms in China could generate significant positive spillovers.
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Special Drawing Rights provide an important boost to countries that need them, but more support to strengthen our unique lending tools is encouraged. China has set a higher-than-expected GDP growth target of around 5.5 percent in 2022, with analysts saying the target can be achieved with serious efforts, leveraging the internal strength of the world’s second-largest economy, and that China will continue to be the main one. the driving force of the world economy and the stabilizer of global economic growth in the face of the headwinds and shadow of the Covid-19 pandemic.
The GDP growth target for 2022 announced by Chinese Premier Li Keqiang on Saturday when he presented the annual report on government work at the opening meeting of the fifth session of the 13th National People’s Congress (NPC), the highest legislature of China, predicted policymakers’ confidence in resilience. China’s economy, although they warned of “greater threats and challenges”.
In what is described as a “warm and strong” message, this year’s Government Work Report also outlines policy priorities in many areas of social and economic development, including epidemic control, job creation, environmental protection and combating trafficking in women and children – all key issues. a problem that affects the lives and livelihoods of 1.4 billion Chinese people.
In the 16,000-word report on Government Work, Li told NPC deputies and members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) that there are various risks and challenges this year, but also emphasized patience and resilience from China. trust.
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When discussing the growth target, Li said the target is to achieve medium and high growth from a high base, which shows that the government has taken the initiative and requires great efforts to achieve it.
For comparison, the annual growth rate for 2019 is pegged at 6-6.5 percent as the economy strives for high-quality growth. The 8.1 percent growth in 2021 is assumed to build on the low base of 2020, which was hit by the coronavirus.
Stability, the keyword in this year’s Government Work Report, was mentioned 76 times, and all regions and government departments have an obligation to take responsibility for stabilizing the economy and actively publicize actions to support economic stabilization.
The annual session of the NPC and the annual meeting of the CPPCC National Committee are collectively called two sessions. It is one of the country’s most important political events each year and provides insight into China’s political priorities for the year.
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China’s growing economy ensures the stability of global industry and supply chain, opens up more opportunities for global trade and investment, and helps global companies fight the pandemic.
Observers say the growth target of around 5.5%, although below last year’s 8.1% growth rate, is still expected to exceed growth in many other major economies and will play a key role in promoting recovery. global amid the pandemic, the crisis in Ukraine. and the growing internal crisis. pressure.
China’s GDP will reach 114.4 billion yuan ($18.11 billion) in 2021, and the 5.5% growth on this basis this year represents the 7.4% growth five years ago or the growth of 10 .5% 10 years ago, said Xiang Dong, deputy director of the State Council. Research Office, he said at a press conference in Beijing on Saturday afternoon.
It also showed economic growth of nearly 9 billion yuan, equivalent to the annual size of the No. 1 economy. painstaking effort.
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The growth target of around 5.5% fully takes into account macroeconomic operations and the economy’s long-term development goals, Zhixin Investment Research Institute said in a note, describing the growth target as reasonable and showing the government calibration to restore the economy. song pre-pandemic path of slow but steady growth.
“It has an impact, but as a large economy, China has a large economic size and many political tools. An effective government size and flexible policies. Even if there are shocks, we can maintain an independent macroeconomic policy” – Yu Yongding, former president of China World Economic Association and director of the Institute of World Economics and Politics at China Economic University.