Yuejian Extraordinary (Financial Practitioner)
In view of the current complex international geopolitical environment and the deep-seated contradictions in the domestic economic and financial structure in the post-epidemic period, macro risks such as international geopolitics, international economic finance, international supply chain, domestic macroeconomic finance, real estate, financial market, local bonds, and high leverage may lead to increased uncertainty in the banking operating environment and market changes. Commercial banks should focus on the long-term sustainable development of China's economy and finance, strengthen forward-looking research, adopt measures to deal with various macro-financial risks, optimize and dynamically adjust resource allocation, and enhance sustainable development and support the development of the real economy.
1. International geopolitical risks
Although we live in a peaceful country, the world is constantly prone to turbulent and flammable political and military conflicts: in addition to Ukraine-Russia, which is in a hot war, the Taiwan Strait of China, the Korean Peninsula, India, Pakistan, Kashmir, Israel-Palestine, the South and East China Seas, China-India, Syria-Turkey, Armenia-Azerbaijan, the Horn of Africa, Egypt-Ethiopia, Western Sahara, Sudan-South Sudan, South Asia, Sri Lanka and Bangladesh are unrest... The ideal situation is to maintain the status quo and allow time to defuse conflicts and solve problems. But the ideal is plump, the reality is skinny. Many geopolitical risks extend from 2021 to 2022. In Eurasia, the United States, the European Union and Russia have engaged in fierce confrontations over NATO's eastward expansion. The NATO side has made it clear that it will not make a commitment not to expand NATO. Differences between the parties are difficult to bridge, and there is a risk that the conflict will exacerbate in the long term. In the Asia-Pacific region, the United States has gradually shifted its global strategic focus to this region to suppress and contain the rise of great powers. Specifically, the United States and other countries will continue to use the issues of Taiwan, the South China Sea and the Diaoyu Islands to contain major powers and create a new security framework, which is a risk point that we need to focus on.
After the outbreak of the Russia-Ukraine conflict on February 24, 2022, global geopolitics entered a period of fierce collision. In the second half of this year and in 2023, the most worthy of our attention are still two main aspects: first, the United States, the European Union, NATO on the one hand, and Russia on the other hand, continue to carry out a fierce game of "hot war + cold war" mixed in the Eurasian region with Ukraine as the focus; The second is the increasingly obvious strategic competition between the United States and the Western bloc with major powers in the Asia-Pacific region. Professor Zheng Yongnian regarded the rebound of the new crown epidemic, the conflict between Russia and Ukraine, the rise of major powers, and the changes in Sino-US relations as the four main factors affecting the changes in the geopolitical and international order in the world today, and there are currently huge uncertainties in the above four aspects. For the overall situation of the medium- and long-term stable development of the world and the continent in the future, the biggest risk is the international geopolitical risk, once the international environment of peaceful and harmonious development is lost, the development and operation of all walks of life, including commercial banks, will be greatly and unpredictably affected.
When and how will the new crown epidemic of the century end, will it have a long-term impact on human beings, and what unknowable viruses such as "monkeypox" will suddenly impact human life? What is the final outcome and huge spillover effect of the Russia-Ukraine conflict? What major impact will the geopolitical pattern of the division and confrontation of the new world camp that will never go back "after the Russian-Ukrainian war" have on the international environment for the long-term development of the Chinese nation? One of the most basic judgments is that the United States will not allow the emergence of challengers within the Western system or the existence of external challengers.
We must also see that the impact of the rise and competition of emerging powers on the world pattern is also very huge, so the world politics of this planet is not only Sino-US relations, but also the relations between other regions and major powers to deal with, and we cannot only focus on Sino-US relations in the reconstruction of the future world order. In recent years, especially since the outbreak of the Russian-Ukrainian conflict, we have seen that Russia in the Emerging Seven (E7) has been trying to re-establish its international sphere of influence through strong diplomacy, and we are pursuing a peaceful rise. India, whose population soon surpassed China's (1.393 billion people), is both ambitious, and assertive among international powers, gradually showing the charm of "a powerful country with sound and color". Indonesia, a region of 17,000 islands with an extremely important geographical location in the Asia-Pacific region and a large population of 268 million people, has taken advantage of the G20 meeting and the Russia-Ukraine conflict to shuttle diplomacy between Ukraine-Russia-Europe-China-the United States, and has the potential to return to the role of pre-1997 ASEAN leader under the current leader, President Joko Widodo.
In this Russia-Ukraine conflict, Turkish President Recep Tayyip Erdoğan (Turkish: Recep Tayyip Erdoğan; Recep Tayyip Erdogan) strives to maintain a relatively independent foreign policy, condemning both Russia's invasion of Ukraine and NATO's eastward expansion, while actively shuttling between the opposing sides to promote peace talks, and pulling the two sides of the conflict to hold peace talks in Turkey. Since the outbreak of the Russian-Ukrainian conflict, Turkey, the "cactus" of the Middle East, which was originally sharp on regional issues and feared by everyone, has taken the initiative to extend an olive branch to its "old enemies", which has become a "fragrant food" that all forces are vying to win over, even if Putin the Great, who is visiting from far away, is disrespectful to "two minutes waiting", he has no complaints.
In addition, Brazilian President Jair Messias Bolsonaro claims to know how to "resolve" the Russian-Ukrainian conflict, making his attempts to make the international scene visible. Mexico's position on the Russian-Ukrainian conflict is "ambiguous", both voting to condemn Russia's "invasion" when the UN General Assembly draft resolution on Ukraine votes, but also refusing to join the ranks of Western countries to impose sanctions on Russia. In addition, ASEAN, as an important economy in the Asia-Pacific region, plays a role in shaping the post-war geopolitical landscape of the Asia-Pacific and Indo-Pacific cannot be underestimated. Multipolarization of the world is an unstoppable trend, and we are happy to see the multipolarization of the world order. However, in the future multipolar world, the international strategic game will increase geometrically.
The Russia-Ukraine conflict has a huge impact, and the factor full of uncertainties is still the Sino-US (Western) relationship. The core problem of Sino-US relations is that the United States is interfering in China's internal affairs without a bottom line on the Taiwan issue. Commercial banks must not take this lightly, have a high degree of risk awareness in resource allocation and risk control, and resolutely implement the principles and policies of the Party and the state. In recent years, with China's rapid rise, the United States has almost reached hysteria in containing China. The United States has adopted a policy of cutting into China through a high degree of control over the Indo-Pacific region, and is actively strengthening the strategic containment of China and Russia by forming an Asian version of NATO in the bilateral and multilateral layout of the Indo-Pacific, or introducing NATO into the Indo-Pacific region. Considering the comprehensive strength of the United States and its global layout, especially in the Asia-Pacific region, the uncertainty of Sino-US relations is an important external variable affecting China's future development. East rising and west falling are generally correct, but the concept of east rising and west falling must have a scientific analysis.
According to Professor Zheng Yongnian's observation, the various crises that are fermenting in the United States today are no deeper than in the 60s of the 20th century (for example, the assassination of President Kennedy, the black civil rights movement, the quagmire of the Vietnam War, the Cold War confrontation between the two camps of the United States and the Soviet Union, and so on). Looking back at history, we see that every time the United States experiences a major crisis, the level of technology will rise to a higher level, and the crisis has not brought the US technology and economy to a standstill. The United States is a country with a strong sense of crisis, and "decline" without "falling" will be the norm for the United States for a long time, and the possibility of economic expansion driven by a major technological revolution in the post-epidemic Russia-Ukraine conflict cannot be ignored. On the one hand, the sustained prosperity of the United States is beneficial to China's economic development, but on the other hand, the United States, relying on its comprehensive strength advantages, pursues hegemonism and international bullying, which is a challenge to China.
Especially on the mainland Taiwan issue, by the end of the new US presidential election in 2024, if politicians in the United States, Japan and Europe and Taiwan independence diehards further take risks, the Taiwan Strait issue may become the biggest "gray rhinoceros" that will trigger a Sino-US hot war and impact the short-term economic and financial development of the region! Some time ago, the political circles of the United States, Japan, and Europe entered a crazy period of playing the Taiwan card, and there was no limit on the Taiwan issue. Politicians from the United States, Japan, and Europe have visited China's Taiwan region one after another, and many high-ranking Japanese officials have successively "sneaked into Taiwan," and they even vainly try to make the Taiwan issue "their own affairs." European politicians are clamoring that they are "no longer naïve about the Taiwan issue," and some politicians have already visited Taiwan Province. The visit of former US House Speaker Pelosi to Taiwan is undoubtedly a fire and a malicious provocation that challenges the one-China principle. The mainland has issued a "more severe warning than before" to the United States about Pelosi's visit to Taiwan. The warning of Pelosi's plan to visit Taiwan is almost the harshest the mainland has made to Washington in recent years, and the next "rules of the game" will also change greatly. Foreign Ministry spokesman Zhao Lijian pointed out the egregious nature of this possible incident: four serious. "It seriously violates the one-China principle and the provisions of the three Sino-US joint communiques, seriously damages China's sovereignty and territorial integrity, seriously impacts the political foundation of Sino-US relations, and sends a serious wrong signal to the 'Taiwan independence' separatist forces."
In the face of the drastic changes in the international geopolitical situation in the second half of this year and even in the next few years, the mainland will speed up the construction of a unified market, and at the same time continue to open up to the outside world for the third time, unite international friends who can unite together, and avoid interrupting the historical process of China's modernization and the great rejuvenation of the Chinese nation due to vicious competition and even conflict between China and the United States. In the second half of this year and 2023, commercial banks should focus on fighting a "tough battle", adhere to a unified approach and coordinated promotion, actively promote comprehensive operation, realize resource sharing and marketing linkage between brother companies, head offices and branches under the platform in accordance with laws and regulations, and implement incentive policies such as profit distribution and assessment tilt to achieve "1+1> 2" effect. Banks should closely track the geopolitical environment and changes in macroeconomic and financial policies at home and abroad, strategic development and resource allocation, pricing, etc. should closely focus on the national strategy, vigorously support the construction of a unified national market, pay close attention to regional dynamic risks, support the development of digital economy, support rural revitalization and county economic development, support the layout and upgrading of economic and financial industries in the central and western regions, support the upgrading and development of high-end manufacturing, and support sustainable green industries.
Second, the risk of international macroeconomic recession
On July 27, 2022, General Secretary Xi Jinping emphasized in an important speech delivered by major leading cadres at the provincial and ministerial levels at the seminar "Study the Spirit of General Secretary Xi Jinping's Important Speech to Meet the 20th National Congress of the Communist Party of China": "At present, the great changes in the world unprecedented in a century are accelerating evolution, and the characteristics of world changes, era changes and historical changes are more obvious. The development of the mainland is facing new strategic opportunities, new strategic tasks, new strategic stages, new strategic requirements and a new strategic environment, and the risks and challenges that need to be dealt with and the contradictions and problems that need to be resolved are more complicated than ever. "The world's century-old changes superimposed on the century epidemic, but also encountered the impact of emergencies such as the Russian-Ukrainian conflict, what is more alarming is the ambition of the US (Western) bloc to try to frantically accelerate the replication of the so-called "Ukrainian model" in East Asia.
In addition to North America and the European Union, Northeast Asia is a region where wealth is concentrated (as of the end of June 2022, China's foreign reserves were $3.07 trillion, South Korea's was $447.7 billion at the end of May, Japan's was $1.32 trillion, Hong Kong's was $447.3 billion, and Taiwan's was $548.9 billion, totaling about $5.84 trillion, accounting for 46% of the world's total foreign exchange reserves of $12.55 trillion!). Close to half. The fundamental purpose of anti-China forces such as the United States and the West is to plunge East Asia into an unprecedented quagmire of war by creating a crisis in East Asia, and then interrupt its modernization process by imposing comprehensive sanctions and blockades that are many times more cruel than on Russia, while greatly weakening China, South Korea, Japan, and China in East Asia. The economic and financial strength of Taiwan Province of China and the Hong Kong and Macao Special Administrative Regions (at the end of 2021, the GDP of six economies in East Asia, China, Japan, South Korea plus China's Hong Kong, Macao and Taiwan was US$25.6 trillion, accounting for the world's top ten regions, followed by the United States and Canada in North America with a GDP of US$24.9 trillion), driving away the wealth of high-net-worth residents in the region, high-tech enterprises such as chips, high-end manufacturing, and a large amount of foreign capital back to the United States, continuing the economic and financial life of the United States. Therefore, the future world economic recovery faces many new risks and challenges, and the world is entering a new era of great differentiation, great restructuring and great change.
First, the risk of the new crown epidemic has not dissipated. Internationally, as of July 30, 2022, the global new crown infection exceeded 570 million, 6375916 deaths, and the cumulative number of new crown vaccine doses exceeded 12.331 billion. There have been cases of infection in 221 countries and regions outside China, and the cumulative number of infected people has reached 181; The cumulative number of infections in the United States is about 91.3 million, the world's largest, with India exceeding 44.01 million cases and France exceeding 33.82 million cases ranking second or third; More than 1,000 cases have been confirmed in 55 countries in Africa, 45 in Asia, 44 in Europe, 33 in the Americas and 4 in Oceania.
At present, the so-called "herd immunity" in the West is temporarily inaccessible, and the transmission of the Omicron variant virus is still uncertain. While the coronavirus rebound and variants are unlikely to lead to a 2020-like shutdown in the United States, it does have the potential to cause further disruption to global economic activity. More specifically, the ongoing disruption of global supply chains by the pandemic is likely to be further exacerbated or prolonged. For the rest of 2022 and even the next two years, it remains to be watched whether the rebound or variant of the pandemic in the world's major economies will have any significant economic impact on the world economy and the economies of the economies of the economies concerned.
Second, global economic growth is burdened. After the stimulus of unlimited quantitative easing monetary policy in the world's major economies in 2021, by the first half of 2022, the global economy is at the end of the recovery cycle, but a new round of new crown epidemic rebound (coupled with tens of thousands of new cases of monkeypox virus infection, of which the United States has confirmed more than 5,000 cases), inflation once in 40 to 50 years, and global supply chain disruption have increased the difficulties and challenges of the global economic "soft landing" in 2022 and 2023.
Based on the analysis of relevant experts, the current world economy generally presents the characteristics of "three highs and one low": first, high costs and high prices. Due to major intestinal obstructions in the global supply chain due to the Russia-Ukraine conflict and other factors, the prices of commodities such as oil and natural gas fluctuated at high levels, and some developed economies such as the United States and Europe faced the most serious inflation in more than four decades. For example, in June, the CPI in the United States reached 9.1%, especially the price of oil and gas and food rose sharply, making life difficult for many low-income families. Although mainstream institutions predict that global inflation will cool in 2022, the trend of global inflation is still uncertain, and the growth rate of inflation indicators in most economies may still be higher than the pre-pandemic level.
At this stage, "inflation" has become a catalyst for "stagnation", and the risk of inflation expectations "getting out of control" is rising. The actual global energy consumption has not surged, and the supply side is mainly "artificially" suppressed due to the energy transition problem. Extrapolating from the current pattern of supply and demand, the global energy crisis may last at least half a year to a year. This is followed by high interest rates. In 2021, inflation in more than 80 countries and regions around the world hit a five-year high. In 2021, Turkey's central bank was the first to announce a 200 basis point increase in the key interest rate to 19%, and almost simultaneously the central bank of Brazil announced a 75 basis point increase in the benchmark interest rate, from 2% to 2.75%. By the end of 2021, 27 economies around the world had raised interest rates one or more.
Entering 2022, especially after the outbreak of the Russian-Ukrainian conflict, the Fed adopted an aggressive interest rate hike policy in the face of the most serious inflation in 40 years. The Fed is expected to continue raising interest rates for the remaining months of the year. The European Central Bank also announced interest rate hikes after 11 years, and Europe's three key interest rates, namely the main refinancing rate, marginal lending rate, and deposit rate, have all surfaced, bidding farewell to the era of "negative interest rates" in one fell swoop. Most Gulf countries have also chosen to raise interest rates to varying degrees, and Argentina has significantly increased short-term interest rates. It is worth noting that each unusually large interest rate hike will lead to a sharp contraction of global liquidity, affecting the stability of financial markets such as the global foreign exchange market and stock market, and its spillover effect will also make other economies face interest rate pressure to rise. According to CITIC Securities, combined with the Fed's future tightening pace and the actual impact of the previous round of interest rate hikes and balance sheet reduction.
Again high risk. Most developed and emerging market economies have entered a tightening cycle, as well as international geopolitical turmoil, and other factors, global black swan and even gray rhino events have caused one after another. For example, some European countries are facing an energy crisis, and many developing countries are facing a comprehensive crisis of food, debt, finance, economy and politics. Since the beginning of this year, there have been political turmoil, national bankruptcies, strikes and waves of anti-epidemic in emerging markets and developing countries such as Kazakhstan, Sri Lanka, Bangladesh and Serbia. According to the IMF, the debt-servicing burden of middle-income developing countries is at its highest level in 30 years. Of the 69 low-income countries, 8 were in debt distress and 30 were at high risk by the end of March this year, accounting for 55% of all low-income countries. Ethiopia, El Salvador, Tunisia, Pakistan and Ghana are the countries most at risk due to excessive government debt and soaring yields on government bonds. Turkey, Egypt, Vietnam, the Philippines and Poland are the five countries most at risk of Russia-Ukraine conflict.
These countries and regions are important economies in the mainland's Belt and Road cooperation, so the turmoil and difficulties of these countries and regions will pose a serious threat to the investment security of various enterprises in the mainland, and will inevitably increase the asset quality risks of corresponding banks. At the same time, the operation of the global supply chain and industrial chain is unstable and smooth, and the risks of the US stock market, bond market and housing market have increased, and there may be spillover effects, which will affect the investment and economic growth of other countries, including China. Among them, the current round of international supply chain bottlenecks is the result of the superposition of "new and old factors", including the impact of the epidemic on production capacity, the imbalance between global supply and demand, and the old factors include trade protection, the continuous role of industrial policies, and the cyclical bottleneck of global shipping capacity. Finally, there is the low growth rate.
As mentioned earlier, under the combined effect of the epidemic and a series of macroeconomic policy factors, the speed of world economic growth will be sharply corrected, and China's economic growth will also be affected. According to the latest forecast of the World Bank at the end of June 2022, the world economy will grow by 2.9% this year and 3.0% next year, respectively. The International Monetary Fund's (IMF) July 2022 Global Economic Prospects Report lowered its forecast for global economic growth to 3.2%, arguing that this year is a difficult year for the global economy, and the global political and economic situation in 2023 will be even more difficult, with an increase of 2.9%, while the risk of a world recession is rising sharply. The agency's forecast for April was 3.6 percent, compared with 4.4 percent in January, a continuous decline. According to the forecast of the National Foundation, the United States will grow by 2.3% this year and 1.0% next year; China is growing 3.3 percent this year and 4.6 percent next year; India is growing 7.4 percent this year and 6.1 percent next year. (Source: WeChat public account "Yuejian Extraordinary", this article is the author's opinion, does not represent the position of this headline)