On November 28, 2018, the BOC Institute of International Finance released the Report on Economic and Financial Outlook for 2019 (hereinafter the “Report”) in Beijing, which reviewed the economic and financial situation of China and across the globe and the operation of the global banking industry throughout 2018, and gave an outlook for the economic and financial situation as well as the trend of the global banking industry in the next year.
In terms of the global economic and financial situation, according to the Report, the global real economy has arrived at a turning point and faced with an increasingly bigger downward pressure. The world economy is at the following potential risks: there is no further room for the growth of US economy, trade frictions between China and the US are escalating and the globe is under a heavier debt burden. Interest rate rise is seen in the monetary policies of major countries, the global financial market may be exposed to more fluctuations, and some emerging economies with both fiscal deficit and trade deficit are becoming riskier. Geographically speaking, the economic expansion of the US has entered the later stage, Europe is moving slower towards economic resuscitation, Asia-Pacific is stable on the whole, opportunities and challenges co-exist for economic development in the Belt and Road regions, and the economy of Latin America, the Middle East and Africa is expected to gradually recover out of fluctuations. Currently, the multilateral trade system is suffering a setback, the WTO reform is struggling forward, regional trade agreements are thriving, and the landscape of international trade is to reshuffle. The US dollar liquidity is gradually tightening around the world, the US dollar index is strengthening, the trend of making securities investment in the emerging economies is reversed, and the economic growth faces challenges.
Regarding China’s economic and financial situation, the Report concludes that the Chinese economy in 2018 was under bigger downward pressure due to significant changes in the domestic and foreign environment, and was generally characterized by “three declines and two stabilities”. It is expected that the whole-year GDP will grow 6.6% around in 2018 and 6.5% around in 2019. The Chinese economy remains at a critical stage of “great readjustments” instead of entering the so-called “new cycle”. The “great readjustments” will possibly last for another three to five years. In terms of the macro-economic policy, a high alert should be given to the possible resonance of external impact and “great readjustments”, which may lead to excessively fast decline of the economy. The proactive fiscal policy should highlight tax and fee reduction and may reasonably increase the fiscal deficit ratio. The monetary policy should shift to “loose credit” from “loose money”. The regulatory policy, while sticking to the general direction, should keep a proper pace and ward off the “risk of risk disposal”. The progress and effectiveness of the policy “capacity reduction, de-stocking, deleveraging, cost reduction and improving underdeveloped areas” should be reviewed with appropriate adjustments.
As to the development of the global banking industry, according to the Report, the year 2018 reported a lack of growth momentum in global economy, an increase of financial risks, tightening monetary and regulatory environment and further divergence in global banking development. It is imperative to balance the relationship among scale, structure, quality, efficiency, risk and market performance, and sustain the development in face of new uncertainties. Looking into 2019, the pressure for global banking development will intensify, the financial regulation and supervision will become increasingly stricter, banks will refine the regional structure of their overseas development, developed countries will have an obvious divergence in banking development, and banks in developing countries will embrace new challenges. In the new year, the Chinese banking industry will expand the scale steadily, report stable yet higher profit growth, pick up speed in deepening reforms, make greater efforts to develop digital inclusive finance and introduce fresh opportunities into the transformation of wealth management business.
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