On September 28, 2018, the BOC Institute of International Finance released the Report on Economic and Financial Outlook for 2018 Q4 (hereinafter the “Report”) in Beijing, which reviewed the economic and financial situation of the globe and China and the operation of the global banking industry in the third quarter of 2018, and gave an outlook of the economic and financial situation as well as the trend of the global banking industry in the fourth quarter.
In terms of the global economic and financial situation, according to the Report, the global economy grew modestly but there was a divergence in the recovery trend. The US economy picked up speed in economic growth, the Eurozone and Japan witnessed a slight slowdown of growth, and growth momentums in some of the emerging economies were weakened. The operation of world economy was tested by a multiple of events, e.g. trade decline, inflation rise, liquidity tightening throughout the globe and financial fluctuations in the emerging markets. National currencies of many emerging markets devalued drastically, while the countries with fragile economic fundamentals, imperfect policy frameworks and high geopolitical conflict and domestic political risks will be further challenged in the future. Protectionism has been spread into the investment field from trade sector. The developed world has been tightening the review of foreign investment, accompanied by an increasingly higher risk of generalizing review and fragmenting rules. However, developing countries are expected to play a more important role. The US is experiencing the historically longest economic recovery, but potential risks are emerging. Its economic expansion cycle lies in the latter half due to such factors as trade protectionism, tightening of monetary policy and increase of fiscal deficit.
Regarding China’s economic and financial situation, the Report concludes that China’s economic operation in the third quarter of 2018 was generally stable and expects the GDP to grow by 6.6% around thanks to such factors as further rapid growth of exports, continued recovery in manufacturing and private investment and sustained fast growth of new growth drivers. Looking forward to the fourth quarter, with the steady strengthening of endogenous growth drivers in domestic economy and the readjustments of macroeconomic policies, the downward pressure on China’s economy will ease. It is expected that China’s GDP growth will increase by 6.7% in the fourth quarter and around 6.7% for the whole year. In the next step, the macroeconomic policies will focus on promoting the implementation of the “Six Stabilizers” tasks (remain employment, finance, foreign trade, investment, and expectations stable) policy according to the arrangement of Politburo meeting on July 31, pay more attention to coordination and cooperation of policies, bring the combined role of proactive fiscal policy and prudent monetary policy into play, further propel the implementation of tax cut and fee reduction measures, and unclog the transmission mechanism of monetary and credit policies.
As to the development of the global banking industry, according to the Report, in the first three quarters of 2018, the growth of global banking industry remained stable as a whole while a higher interest rate level facilitated the significant improvement of profitability and brought about a sound risk picture; the Chinese banking industry carried forward a stable business trend, with significant improvement in profitability and further enhanced risk compensation capabilities. Looking forward to the whole year of 2018, the overall development of the global banking industry will remain stable, but we should still pay attention to the impact of the Fed’s interest rate hike, emerging market volatility and global trade wars; China’s banking industry will be able to maintain the stability of its profitability and continue to consolidate its risk compensation capabilities. Facing the environmental constraints such as economic landscape change, financial regulation tightening and market competition since 2008, to be lighter has become a major trend in the development of the global banking industry. While transforming towards lighter, the banking industry should focus on policy changes, improve business layout and introduce digital technology.
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