On April 1 2024, BOC Research Institute released the Economic and Financial Outlook for 2024Q2 (hereinafter referred to as the “Report”) in Beijing. The Report reviews the economic and financial operations both globally and in China as well as the operations of the global banking industry in 2024Q1. It also provides an outlook on the economic and financial situations and the trends of the global banking industry in 2024Q2.
In terms of global economic and financial situations, the Report notes in 2024Q1, the growth momentum of global economy became weaker. In developed economies, the growth of consumption moderated, investment was sluggish, and government spending tended to be tighter. But manufacturing recovered from earlier weakness, services maintained good performance, and global trade recovered slowly. Driven by improved supply and sliding demand, inflation declined worldwide. Major economies tightened fiscal policies, and came to a turning point in monetary policies. Globally, foreign exchanges fluctuated more drastically, financing rates remained high, and stock prices continued to climb. In 2024Q2, the growth of global economy is expected to decline slightly. Shrinking demand will become a major drag on the economy, while global production is likely to extend the trend of steady recovery. Inflationary pressure will be further eased worldwide. Global supply of liquidity will be generally stable, stock investment will shift directions gradually, and commodity prices will be relatively stable. The Report also provides a special analysis on the following hot issues: the latest adjustment of industrial chain policies in Japan and its impact on China, and the structural vulnerability and potential risks of the US money market funds.
In terms of China’s economic and financial situations, the Report notes, China’s economy was off to a good start in 2024Q1. Globally, international trade picked up as market demand recovered, leading to a quick rebound in China’s export growth. Domestically, economic policies were further improved, strengthening the internal momentum of economic growth, with service consumption and manufacturing investment offering major support. It’s initially estimated that GDP grew by around 4.8% year-on-year in 2024Q1. In 2024Q2, China’s economic climate index is expected to pick up slightly. Consumption will remain the “cornerstone” of China’s economic growth, and the potential of service consumption is expected to be further unlocked. Industrial transformation and upgrade will be a stronger trend, while new quality productive forces will be further nurtured. With the foreign demand to be boosted as the world enters a restocking cycle, plus a lower base in the previous year, export recovery is likely to continue. Estimates put GDP growth in Q2 at around 5.1%, about 0.3 percentage points higher quarter-on-quarter.
In terms of global banking situations, the Report notes, in 2023, thanks to high interest margins, the global banking industry showed certain desire for expansion, with net profits improved and asset quality and capital position kept relatively stable. In the first half of 2024, as the outlook of global economic recovery is filled with more uncertainties, the banking industry will see a challenging operating environment and slow down expansion. Net interest income will grow at a slower pace, leading to a sharp decline in profitability. Risks associated with small and medium-sized banks in Europe and the US will attract market attention again, adding to the risk of asset deterioration. By contrast, with the recovery of China’s economy, the banking sector will enjoy a better operating environment, and the financial industry will operate soundly on the whole. Upholding the political consciousness and people-centeredness of finance, the banking sector will increase support for the high-quality development of the real economy, solidly expand operation, steadily enhance profitability and continuously improve asset quality, contributing to China’s initiative to build itself into a financial powerhouse.
In addition, BOC Research Institute also released the Economic and Financial Outlook for the Yangtze River Delta Region. According to the Report, the Yangtze River Delta has achieved great headway in integrated development over the last five years, but still sees room for further improvement in areas like international competitiveness, the level of regional integration, industrial collaboration and megacity governance. In 2024, the economic growth of the Yangtze River Delta is expected to be higher than the national average, with regional integration focused on accelerating the development of new quality productive forces, improving systems and mechanisms, driving higher-level cooperation and openness, strengthening the joint protection and governance of the ecological environment and improving the capacity of safe development. Seizing the opportunity arising from the integrated development in the Yangtze River Delta, commercial banks scaled up operation in the region by strengthening resources input and innovation, recording high asset quality but declining asset returns, and diverging from each other in performance. Next, they will press ahead with reform and innovation, and strive to write a new chapter of integrated and high-quality development in key areas including technology finance, green finance, inclusive finance, pension finance and digital finance as well as cross-border finance.
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