BOC Research Institute released the 2022Q3 Economic and Financial Outlook (the “Report”) in Beijing on July 5, 2022. The Report reviews the global and China’s economic and financial performance as well as the global banking performance in 2022H1. It also provides an outlook on the economic and financial situations and the global banking trends in 2022H2.
In terms of the global economy and finance, the Report notices a downward pressure on both supply and demand sides of the global economy in 2022Q2. Industrial production, corporate investment, consumer spending and international grade slowed down as the economic growth softened markedly and the inflation went hotter across the board. Global financial markets remained volatile, with the US Dollar Index going strong, major stock markets undergoing a bumpy downturn and commodity prices moving higher. Looking into Q3, the world economy will further slow down with stubbornly high inflation, facing a mounting risk of “stagnation”. Major economies will tighten their monetary policy at a faster pace to catalyze a financial cycle shift. Higher financing costs in the market will have bigger adverse impact on the economy, and the world’s financial markets will continue to move sideways. This Report also provides a special analysis on hot issues, including the global food trade protectionism and potential financial risks in ASEAN countries during the shifting of global financial cycle.
As for China’s economic and financial situation, the Report notices mounting “triple pressures” on the Chinese economy in 2022H1 amid a number of unexpected factors, including the Russia-Ukraine conflicts and related sanctions as well as COVID-19 resurgence in China and its virus containment policy. Market expectations worsened as both demand and supply softened. GDP growth was 4.8% in Q1, estimated to be around 1% for Q2. Looking forward to H2, domestic demand will replace foreign demand as the key stabilizer of the macro-economy in a tougher and more complicated global environment. With the COVID-19 policy fine-tuned, the pandemic’s economic fallout will further abate and an array of stabilization policies will gradually work to warrant a recovery of China’s economy from quarter to quarter. Given the uncertainty in COVID-19, the quarterly GDP growth in 2022Q3 is estimated to be around 3.2%, 4.6% and 6%, and the annual GDP growth in 2022 is estimated to be about 3.2%, 4% and 4.7%, under the pessimistic, baseline and optimistic scenarios, respectively. It is suggested to implement the Policy Package for Economic Stabilization in an all-out effort to keep the growth, employment and expectations table.
With regard to global banking developments, the Report sees a slowing global economy that poses rising uncertainties to the banking sector in 2022Q3. With a stable expansion in size and divergence in profitability, the global banking sector may see new risks emerging. China’s macro-economy remains on course for an overall recovery. The Chinese banking sector will continue to expand with the profitability ratcheting up in prudent operation, manifesting good quality of assets. China’s financial and economic systems are still facing challenges in 2022, including sporadic coronavirus outbreaks, escalating geopolitical conflicts and faster shift in developed economies’ monetary policy. The banking sector should play a pivotal role in supporting key industries and rural vitalization, enhance risk management and help stabilize the broader economy with higher-quality financial services.
