BOC Research Institute released the 2021 Economic and Financial Outlook (the "Report") in Beijing on November 30, 2020. The Report reviews the global and China's economic and financial performance as well as the global banking performance in 2020. It also provides an outlook on the economic and financial situations and the global banking trends in 2021.
As for the global economic and financial situation, the Report notes that world economy sank into a deep recession amid the COVID-19 pandemic in 2020, highly volatile through the year. The global financial markets are stabilizing after drastic turbulences, yet still facing volatility risk. Looking into 2021, the global economic recovery faces three major headwinds. With the COVID-19 impact expected to continue through 2021H1, the global economy will not stage a successful recovery until 2021H2. In the post-pandemic era, the global economy may be characterized by "three lows and three news", which means that low growth, low interest rates and low investment are fostering new drivers, new trends and a new order. In addition, the Report identifies eight hot issues that deserve our particular attention: accelerating evolution of the global political and economic landscape, green recovery becoming a major driver of global economic growth, continuing regional divergence in foreign direct investment, coexistence of crises and opportunities in the international multilateral trade system, rebalancing of global value chains, moderate rise in global inflation, shift in the role of major central banks and a USD downturn.
As for China's economic and financial situation, the Report notes that the Chinese government has made ongoing efforts to coordinate coronavirus containment with economic and social development against profound changes in the global political and economic landscape amid the global COVID-19 pandemic in 2020. With policies implemented to ensure the stability on six fronts and maintain the security in six areas, the Chinese economy became the first to get back on the growth track. China's GDP growth for the first three quarters turned from negative to positive (0.7%), expected to hit around 2.1% for the year. 2021 marks the first year of China's 14th Five-year Plan. The Chinese government will continue to boost domestic demand, support innovative development and improve business environment. Taking into account a low comparison base, China's economic growth is likely to recover to a normal level, if not stronger, and hit about 7.5% in 2021. As for macro policies, China will continue to implement a proactive fiscal policy, make the monetary policy more targeted and flexible, pursue consumption transformation and upgrading, improve the quality and performance of investment and better coordinate innovation with industry.
As for the global banking development, the Report notes that the global banking assets expanded against headwinds. Banks across the world generally experienced a widening gap between growth rates of deposits and loans, sharp contraction in profits, narrowing net interest margin, deteriorating quality of assets and a good level of capital adequacy. The Chinese banking sector showed stable operations, solid expansions in assets and liabilities, and gradual restorations in profits. In 2021, the banking sector is expected to manifest ten major trends of development, namely, the normalization of countercyclical regulation, the slowdown in asset growth, the U-shaped recovery of profits, the mounting pressure of financial risk prevention and control, the refinement of corporate credit modes, the recovery in consumer finance, the cross-border operation focused on the Asia Pacific market, the acceleration in inclusive finance digitalization, and the solid and sustainable development of "technology-driven credit". 2021 marks the first year of China's 14th Five-year Plan, a year when China will face a "dual circulation" development pattern. Some hot issues that deserve special attention will emerge in the year, such as the building of ecosystem scenarios and the adaptation to the Equator Principles in the Chinese banking sector.
