World economy entered into the "new bottleneck" period, and the issue of China is the issue of the world
The international financial crisis has past seven years. During the past seven years, the governments of the world have done a lot of work, but it seems that this crisis is not really over. The prospects for economic recovery are still relatively slim. So we see that even the terrorist attacks happened in Paris, the theme of the G20 summit held in Turkey is still unchanged- economic growth and also continue to coordinate macroeconomic policies and promote the world economy growth more balanced. It indicates the economy has entered into a new stage, or in a new normal. This new normal is not cyclical but a new state.
IMF used a new term to describe the world economy-new bottleneck. It is likely to predict such a result that the future world economy in the middle of a very long cycle remains a low growth, low inflation. And the policies of all counties will be a low interest rate policy, more relaxed monetary policy and more proactive fiscal policy, hoping to sustain this process.
If this is a new state, we notice that there are two risks: first, from 2012, the growth rate of world trade is lower than the growth rate of GDP, which is unimaginable in the past. In the era of globalization, there are two main indexes, GDP is growing, but the growth rate of international trade is far faster than GDP growth, and the pace of international financial development is far faster than the speed of international trade development. If the world trade growth rate is lower than the GDP growth rate for three years, it means that protectionism may become a real danger. So I noticed that during the G20 summit, chairman Xi Jinping especially pointed out that the international trade growth rate is lower than the GDP growth rate in consecutive three years in his speech.
Second, even though many countries have adopted a lot of policies, the economy has not been further recovered and the leverage ratio continues growing. Professor Greenspan also mentioned this problem that not only the United States debt to GDP ratio continued growing but also China. With the growing debt, can the economy sustain its growth? Will there be a new risk? Many economists have been discussing will there be a new financial turmoil the next year.
Comparing with the past, we can see that the loose demand-oriented monetary policy and fiscal policy have come to an end. Is the world is changing the policies? That is structural reform and its core is system reform. We hope this reform could have a new impetus on the world economy, especially in new industries, new technologies appearance. From this perspective, with the traditional view, the global economy is hoping a new scientific and technological revolution and the new scientific and technological revolution will create new soil and new environment.
In China, I personally think that the sustainable growth of China's economy has become a global issue. This year China's exports are negative growth and imports are worse negative growth, so there is a recession. China's macroeconomic policy, China's reform policy and China's sustainable growth policy will become the world's concern. We entered into the world’s vision with this kind of identity and this new state to discuss the issues of China but also the issues of the world.
This article is Cao Yuanzheng’s speech in Caijing Annual Conference 2016: Forecasts and strategies
