Launch of the IMF World and China Economic Outlook

2018-10-18 IMI

On the afternoon of October 18th, the International Monetary Fund (IMF) Representative Office in China, the International Monetary Institute of China Renmin University (IMI), and Huachuang Securities Co., Ltd. co-hosted the publishing ceremony of the Report on the World and China Economic Outlook at the Beijing Financial Street International Hotel. Alfred Schipke, Chief Representative of IMF in China, Wei Benhua, former Deputy Director of the State Administration of Foreign Exchange and former Chinese Executive Director of the IMF, Chen Qiang, former Director of the International Department of the People's Bank of China and General Manager of Huachuang Securities Co., Ltd., Zhao Xijun, member of the IMI Academic Committee and deputy dean of the School of Finance and Finance of Renmin University of China, Lian Weicheng, economist of the Research Department of the International Monetary Fund, Zhang Longmei, deputy representative of the IMF in China, Guan Qingyou, dean of the Rushi Financial Research Institute, Niu Bokun, deputy director of the Huachuang Securities Research Institute and director of macro strategy research, Xia Le, chief economist of the Research Department of the Spanish Foreign Bank, and Zhang Yu, head of macroeconomic research at the Huachuang Securities Research Institute, and many other financial professionals and experts from management departments, research institutes and financial institutions from Europe, the United States and Asia attended the ceremony and delivered speeches. More than 70 media covered the news. The ceremony was hosted by Zhang Zhixiang, member of the IMI Academic Committee, former Director of the International Department of the People's Bank of China, and former Chinese Executive Director of the IMF. Director Zhang Zhixiang hosted the opening ceremony. He mentioned that the IMF's biannual global and regional economic outlook reports are of great significance because they concentrate the main issues worthy of IMF members’ attention at different stages. When trade disputes are likely to escalate, all parties must draw their attention to risk control, reform deepening and the promotion of multilateral systems. The IMF’s launch event for the “World and China Economic Outlook” report, when held regularly, will provide a platform for academia, businesses and financial organizations to thoroughly exchange their ideas. Zhao Xijun, member of the IMI Academic Committee and Vice President of the School of Finance of Renmin University of China, and Chen Qiang, General Manager of Huachuang Securities delivered opening remarks. Zhao Xijun said that experts and scholars from Europe, America, Asia and other regions will discuss the risks in and the key policies for China's and global economic prospects at the launch event of the IMF’s report in this autumn. The World Economic Outlook Report of October 2018 shows that the use of both monetary and fiscal policies is the core driving force for global economic recovery, but policy stimulus is not sustainable. Digitalization will reshape China’s economy by improving efficiency. However, the new challenge is how to maximize the benefits of digitalization while reducing the risks associated with labor demand plunge, privacy violations, emerging oligopoly and financial risks. With China's comprehensive deepening of reforms and the relentless efforts of IMF and other international organizations, the international community will improve its ability to coordinate policies and jointly respond to risks. Chen Qiang mentioned in his speech that the global economy is mainly facing two major uncertainties in 2018. First, the rule-based multilateral trading system is in crisis，eroding a foundation of globalization. For example, the developments of Sino-US relations trigger market reactions. Second, emerging markets are suffering currency crisis, and the global capital market becomes volatile. Global monetary policy in on the track. Currency plunge of emerging markets has basically indicated a crisis. In times of uncertainties and challenges, IMF economists, government leaders, scholars & professors of Renmin University of China, and Huachuang Securities Research Institute will take advantage of the platform of IMF’s World and China Economic Outlook Report, look forward to the world and China's economic development, and provide meaningful thinking and help for investors to “cross the fog”. Alfred Schipke delivered a speech on "World Economic Outlook." He said that future trade may slow down compared to April. That is because higher oil price rise and tighter financial policies affect emerging markets. Other indicators like trade remain strong, but a few become weak. Looking into 2018-2019, he first believes that global growth is still steady. Specifically, advanced economies may slow down in the medium term, but emerging markets will be steadier. From a risk perspective, market conditions changed, and policy became more uncertain in the past few months. This trend is likely to continue. Lian Weicheng delivered a speech on the theme of “Monetary Policies of Emerging Markets in the Context of Normalized Global Financial Conditions”. He pointed out that in the first decade of this century, emerging markets had low and stable inflation. In terms of factors affecting inflation, inflation expectations are the key and domestic factors have a greater impact on inflation evolution than external factors. The stability of the economy in response to external shocks depends on the anchoring of inflation expectations. The higher the degree of anchoring, the more countercyclical it can operate, the less it is constricted to exchange rate fluctuations. It will also reduce inflation persistence and improve monetary policy trade-offs. At the same time, the degree of anchoring depends on the fiscal and monetary policy framework. The emerging markets are improving the anchoring of inflation, but there are still large differences between countries. He believes that policy implications include enhancing the sustainability of public finance, establishing fiscal rules, maintaining and rebuilding fiscal buffers when necessary, and improving the feasibility of the central bank, enhancing independence, and being more timely, transparent, and open. Zhang Longmei delivered a keynote speech entitled "China's Digital Economy--Opportunities and Risks". Zhang Longmei pointed out that China's digital economy is not globally dominant no matter under the narrow definition of the ICT field or the broad definition of the G20 countries. However, China has already achieved global leadership in some areas of digitalization, such as financial technology and e-commerce, artificial intelligence and cloud computing. The reasons can be summarized as three aspects: population effect, scale effect and comprehensive digital economic ecosystem. In addition, digitalization also has a certain impact on economic growth. In general, 1% of digital growth can bring about 0.3% of GDP growth. Digital economy can promote de-intermediation, but it may also bring oligopoly and other issues. Although the digitalization of traditional sectors is expected to be accelerated, and will support the mid-term growth of China to some extent, China’s growth will still slow down. Therefore, the Chinese government should further expand the advantages brought up by digitalization, improve the welfare of laborers, promote the virtuous competition in each sector, increase the efficiency of public services, and further strengthen the protection of intellectual property and data privacy. Niu Bokun delivered a speech with the title of “Causes and Future of the Debts of Local Governments in China”. Firstly, she emphasized local governments’ important role in promoting economic growth and the development of industrial clusters. The leverage ratio of Chinese local governments seems not too high when compared with the global leverage ratio, but we need to notice that Chinese local governments are burdened with a huge amount of hidden debts and are inefficient in terms of capital expansion and project development. In addition, the expansion of local SOEs, which comes with the debts of local governments, also causes the problem of “the state advances, the private sector retreats”, which also calls for much attention. There’s also a positive change: in the 2017 National Financial Work Conference emphasizes the control over the expansion of the debts of local governments, and related documents have been issued and are already taking some effects. In the future, local governments can resolve debts year by year through making good use of existing financial capital, including it into budgets, and transferring local SOEs. At the same time, it is also proposed during the 19th National Congress of the CPC that Chinese local government won’t take GDP as the major goal orientation, and need to pay more attention to the quality of economic growth, environment protection, industrial and talent upgrade, etc. This fundamental adjustment in incentive and constraint mechanism will solve many root problems related to the debts of local governments. The roundtable discussion was chaired by Zhang Yu, IMI researcher, head of macroeconomic research at Huachuang Securities Research Institute. In the discussion, Zhang Longmei noted that the normalization process of global monetary policy basically matches market expectations, and the risks brought about by the trade tensions are still regional. Lian Weicheng believes that the important factor for the core economic growth of China in the future is external ones. He believes that the middle-income trap is not unavoidable can be circumvented by deepened structural reforms. Alfred Schipke believes that China is one of those that benefit from globalization. And based on this, sustained open policies will bring productivity to China. Further improvement should be made on the reduction of risks which are caused by globally rising debts. Director Wei Benhua believes that under the current global debt pressure, we need to strengthen financial regulatory policies, strengthen debt management of local governments and maintain a good financial environment. Guan Qingyou believes that if monetary policies cannot turn normal, debt problems are principally unsolvable, but the China's performance should not be measured only by debt scale, but also by aspects such as the income of enterprises and residents. At the same time, market's role should be respected; Xia Le thinks that transforming local government-owned assets can contribute to solving the debt problem. But China's economic growth are not faced with huge threat, China's economic growth potential is still considerable. It is reported that the World Economic Outlook Report is an economic overview written by researchers of the International Monetary Fund (IMF). It focuses on analyzing the world's macroeconomic situation and prediction. It is published twice a year, in spring and autumn. International Monetary Institute (IMI), Renmin University of China, as a long-term stable partner of IMF, publishes reports every year to study monetary and financial strategies.

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Launch of the IMF World and China Economic Outlook

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