Facing the triple pressure, how does China’s economy “tiger tiger wind”?

2022-06-16 0 By

In the year of the Ox, China’s economy continued to recover in the face of a complex and grim international environment and the spread of COVID-19 at home.As the Year of the Tiger approaches, the Novel Coronavirus pandemic remains on the horizon, and the global economic recovery faces multiple constraints.How can China’s economy thrive in the face of challenges?The World Bank, the International Monetary Fund and other institutions have recently lowered their forecasts for global economic growth in 2022 by varying degrees due to repeated outbreaks of COVID-19.After the Central Economic Work Conference pointed out that China’s economic development is facing the triple pressure of demand contraction, supply shock and weakening expectations, we can foresee more severe challenges in the future.Domestically, Han Wenxiu, deputy director in charge of daily work at the Office of the Central Financial and Economic Commission, wrote in an article that consumption and investment growth had weakened, supply chains were blocked, and companies were facing shortages of factors of production, including core, electricity, cabinets and workers.Cost pressure on micro, small and medium-sized enterprises is increasing, and market expectations are unstable.There are many risks and hidden dangers in the economic and financial sectors.Internationally, world economic growth is characterized by instability, uncertainty and imbalance.The COVID-19 pandemic, especially the mutant strain, has hit global production and logistics, increased inflationary pressure in major countries, and the withdrawal of ultra-loose policies in developed countries may have strong negative spillovers. At the same time, unilateralism, protectionism and populism are on the rise, making the external environment more complex and challenging.In particular, the most recent Fed rate-setting meeting statement was more hawkish than market expectations, which was widely interpreted as a gradual rate hike and shrinking of the balance sheet.This means that some emerging market countries will face the risk of large-scale cross-border capital outflow, and entering the Year of the Tiger, the pressure of the international financial market risk transmission to China will increase.Li Yang, an academic member of the Chinese Academy of Social Sciences and chairman of the National Finance and Development Laboratory, said the fed’s policy changes will have an impact on interest rates, exchange rates and asset prices in emerging and developing economies.However, China, as the largest developing country, has its own management rules, and China has not fully liberalized capital flows, so the RMB exchange rate adopts a managed float, so it will insulate itself from this shock to a considerable extent., director-general of the department of the People’s Bank of China monetary policy guo-feng sun also give “too-big-to-fail”, according to China’s macro economic dimension, strong toughness, adhere to the implementation of normal monetary policy since the outbreak response, no flood irrigation, but do well across the cycle of design, the reasonable abundant liquidity, financial support the real solid economic strength, enhanced autonomy and financial system stability,The RMB exchange rate is expected to remain stable, which will help mitigate and respond to external risks.While coping with external shocks, the Chinese economy in the year of the Tiger needs to strengthen its internal driving force.In 2021, domestic demand will contribute 79.1 percent to China’s economic growth, up 4.4 percentage points from the previous year.But there is no denying that consumption, which has been significantly affected by the epidemic, needs to pick up further, and the decline in investment growth needs to be reversed.”The potential of domestic demand is our advantage”, Han wenxiu pointed out that we should implement the strategy of expanding domestic demand, promote sustained recovery of consumption, actively expand effective investment, pay attention to the combination of steady growth, structural adjustment and people’s livelihood.Infrastructure development should be carried out appropriately and ahead of time, and investment should be increased in areas such as pollution reduction and carbon reduction, new energy sources, new technologies, and new industrial clusters. This will not only boost short-term demand, but also boost long-term growth drivers.In this context, Chinese ministries and commissions have recently opened their toolboxes around expanding domestic demand.The National Development and Reform Commission put forward a series of policy measures to implement the strategy of expanding domestic demand;Central bank officials mentioned efforts to build a system of financial products and services that are more conducive to the income growth and consumption upgrading of urban and rural residents.The Ministry of Finance also pledged to fully tap the potential of domestic demand and play the role of fiscal stability and investment in promoting consumption.”This is a realistic need based on China’s national conditions.”Sheng Songcheng, a professor at the China Europe International Business School (CEIBS), said that western countries’ efforts to boost consumption through massive subsidies can only have short-term effects, while China’s macro policies focus on the combination of short and long periods, with more emphasis on boosting domestic demand by boosting employment and income.China’s economy will continue to face challenges and thrive in the year of the Tiger, as policies combine to boost high-quality development with booming domestic demand.