BOC Research Institute released the Report on Economic and Financial Outlook for 2020 (the “Report”) in Beijing on November 28, 2019, which reviews the economic and financial performance of China and across the globe as well as the global banking performance throughout 2010. It also gives an outlook for the economic and financial situations and the global banking trends in 2020.
With regard to global economy and finance, the Report suggests marked downtrends in the world economy in 2019 with a projected growth rate of 2.6%, the lowest in years. The world economy is highly financialized, featuring high liquidity, slow growth, mild inflation and big bubble. Looking into 2020, the world economy is expected to further slow down in the first half on interwoven political and economic factors, and bottom out in the second half, with annual growth rate down 0.1 percentage point from 2019. Changes in the global trade landscape have given rise to new trends in regional cooperation. RCEP aims to build a framework agreement on regional free trade area, expected to become a model for global economic and trade cooperation. Technological development and new economic sectors represent the future trends in global economic development. Global cooperation in innovation investment needs to be strengthened to help the real economy truly bottom out.
As for China’s economy and finance, the Report states that 2019 has witnessed greater complexities in both internal and external environments of, and higher downside pressure to, the Chinese economy. The GDP growth, recorded at 6.2% for the first three quarters, is projected to be around 6.1% for the year 2019. China’s economy and finance are mainly exposed to the risks of US-China trade frictions, pork price hikes, subdued demand of the real economy and the likelihood of the bond default risk spreading to credit market. Looking into 2020, the Report sees more risks and challenges in the Chinese economy, yet with a “cautiously upbeat” tone. Given the current internal and external market environments, the natural growth rate of China’s economy is likely to fall below 6% in 2020 if no major policy adjustments are made. To achieve the three objectives of “two doubles”, building a moderately prosperous society in all respects and striding over the “middle income trap”, the macro-economic policies for 2020 should keep worst-case scenarios in mind and enhance the awareness of potential challenges. The macro control policies are suggested to be focused on ensuring stable growth, especially ensuring the GDP growth will not fall below 6%.
As for the global banking development, the Report notes that, in the past decade, the global banking sector remained in an economic environment of slow growth, low inflation and low interest rates and a financial environment of strict regulation, high risk and high cost. Such an environment had a sustained impact on banking development, including declining rate of return and low market valuation. Looking into future, the banking environment will remain complex. In a new development landscape, the banking sector should create an assessment framework for high-quality development, and promote organizational reform and strategic transformation, so as to seek breakthroughs in development. The blockchain technology makes it possible to create a brand-new credit mechanism for the financial sector. Banks should adopt appropriate development strategy to expand the application scenarios for the blockchain technology. In addition, China’s banking sector has an exposure to significant risks alongside its remarkable achievements made during almost 20 years of rapid development. In the future, it will be even more important for banks to strengthen the management of non-performing assets.
