In 2015, the international mismatch of economic cycle continued, as reflected in the different economic growth rate and goods price tendency in different countries and consequently the enhanced conflicts in monetary policies . The global differentiation in economic tendency and monetary policy made the international financial market more volatile. Emerging market countries faced the serious challenge of capital outflow and exchange rate depreciation , while China should be vigilant against the potential pressure arising from the international mismatch of economic cycle (Wang 2014). The Chinese economy entered the “new normal ” in 2015 and China successfully fended off the financial risks through the flexible use of monetary and financial policies. More effective fiscal policies were adopted, the economic growth slowed down steadily, commodity price in production sectors was low, the economic structure was continuously improved and innovation and entrepreneurship created new driving forces. The year 2016 is the first year of the 13th five-year period , and understanding, adapting to and leading the new normal is the paramount task in China’s economic development at present and for some time to come. Generally speaking, China still faces downward pressure on economic growth, but it is likely to bottom out with the emergence of new growth drivers . Against the background of the international mismatch of economic cycle, China will step up the supply-side reform in 2016. In face of the pressure of capital outflow and RMB depreciation , we will need supportive macro policies on the demand side, prevent the supply-side reform measures such as de-capacity and de-stocking from dragging down short-term economic growth, prevent economic and financial risks and maintain steady economic operation in the reasonable medium- and high-speed range.
1 Deepening of International Mismatch of Economic Cycle1
1.1 Global Economic Growth Slowed Down, Economic Cycle Mismatch Worsened
1. Global economic growth slowed down; Brazil and Russia were in economic decline. According to the forecast released by IMF in October 2015, the global economic growth rate would reach 3.1% in 2015, 0.2% less than the forecast in July. Among that, developed countries would reach the economic growth rate of 2.0%, 0.1% less than the forecast in July; emerging market countries would reach 4%, 0.2% less than the July forecast. The global economic growth rate was expected to reach 3.6% in 2016, 0.2% less than the July forecast, 2.2% for developed countries and 4.5% for emerging market countries . As far as developed countries were concerned, IMF expected the US to reach the economic growth of 2.6% in 2015, 0.1 percentage point less than the July forecast. In comparison, the economic growth in EURO zone and Japan remained sluggish. IMF maintained the 1.5% forecast for the EURO zone and reduced the forecast for Japan’s economic growth by 2 percentage points to –0.6%. As to emerging market countries , IMF expected India to surpass China and be the fastest-growing economy and forecast its economic growth to remain at the 7.3% and 7.5% growth rate in 2015–2016. It maintained the 6.8% forecast for China’s economic growth. On the other hand, IMF reduced the economic growth forecast for other emerging market countries such as Russia and Brazil notably. It expected Russia’s and Brazil’s economy to slow down by 3.8% and 3%, respectively, in 2015, 0.4% and 1.5% down from the July forecast. Its forecast for their economic growth in 2016 was pessimistic too, which was −0.6% and −1%, respectively (Table 1.1).
Table 1.1
Forecast of economic growth rate worldwide
2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|
World | 3.3 | 3.4 | 3.1 (−0.2) | 3.6 (−0.2) |
Developed countries | 1.4 | 1.8 | 2.0 (−0.1) | 2.2 (−0.2) |
US | 2.2 | 2.4 | 2.6 (0.1) | 2.8 (−0.2) |
EURO zone | −0.4 | 0.8 | 1.5 (0) | 1.6 (−0.1) |
Japan | 1.6 | 0.1 | 0.6 (−0.2) | 1.0 (−0.2) |
Britain | 1.7 | 2.9 | 2.5 (0.1) | 2.2 (0.0) |
Emerging market countries | 5.0 | 4.6 | 4.0 (−0.2) | 4.5 (−0.2) |
China | 7.7 | 7.4 | 6.8 (0) | 6.3 (0) |
India | 6.9 | 7.3 | 7.3 (−0.2) | 7.5 (0) |
Russia | 1.3 | 0.6 | −3.8 (−0.4) | −0.6 (−0.6) |
Brazil | 2.7 | 0.1 | −3.0 (−1.5) | −1.0 (−1.7) |
South Africa | 2.2 | 1.5 | 1.4 (−0.6) | 1.3 (−0.8) |
2. Of the three major economies, the American economy increased, European economy was recovering and Japan was in decline. Of the three major economies, the US maintained steady economic growth with an annualized GDP growth rate of 2.1% in Q3, to which personal consumption contributed 2.05%, government consumption and investment contributed 0.29% and the contribution by net export of goods and services and domestic private investment was negative. The steady economic growth boosted employment, which then increased income and eventually boosted the consumption and economy, forming a benign cycle. Although the expansion of the manufacture industry slowed down a little, the real estate market was still in good shape and consumers were positive about economic prospects. It is expected that in 2015Q4, the recovery of the real estate market will help drive the economy, and the steady improvement in employment will help increase people’s income and consequently boost domestic demand. Moreover, the holiday season represented by Thanksgiving and Christmas will invigorate the consumption even though the bullish USD will still exert limited adverse effects on the economy.
The EURO zone registered a year-on-year GDP growth of 1.6% and quarter-on-quarter GDP growth of 0.3% in Q3, basically on a par with the Q2 growth. In terms of specific countries, France had a year-on-year GDP growth of 1.2% and quarter-on-quarter GDP growth of 0.3% in Q3, better than expected; and that in Germany was 1.7% and 0.3%, respectively, dragged by its weak export and investment, indicating a narrowed advantage over other countries in the EURO zone . It is expected that the EURO zone will continue the economic recovery in Q4, manufacture expansion will speed up and the relaxed monetary policy adopted by the European central bank and the weak Euro will further bolster the economy despite the downward pressure of inflation.
The actual initial GDP in Japan was decreased by 0.2% quarter-on-quarter and 0.8% year-on-year in Q3, with the second quarterly negative growth in a row. In Q4, Japan’s sluggish economy does not improve, corporate investment is reduced considerably, inventory decreases quarter-on-quarter and enterprises are reluctant in production and investment. While the employment market is steadily reaching the state of full employment , Japan will suffer from weak domestic demand and export as well as low inflation.
Under the impact of a range of factors, such as weak demand, exchange rate fluctuation and the adjustment of global industrial chains and economic structure...