In 2023, the world will emerge from the quagmire of the pandemic for three years and usher in the year of "normalization".
But what economists did not expect was that the process of "normalization" did not go as they had envisioned. Global inflation persists, economic growth is slow and uneven, geopolitical conflicts are frequent, and the impact of the Ukraine crisis is becoming more and more far-reaching, casting a shadow over the recovery of the world economy.
On January 24, "Changes and Responses: Global Economic and Financial Trends and China's Future", edited by Zhu Min and Zhang Liqing, was officially released at PBC School of Finance, Tsinghua University.
At the book launch, Zhu Min, vice chairman of the China Center for International Economic Exchanges and initiator of the Global Economic Governance 50 Forum, said that the world is in a situation of "warm stagflation", which will become a "new normal" in the process of economic downturn and financial easing to contraction. He predicts that the global economy will grow at around 2.8% in 2024, down from 3.1% in 2023. In this situation, financial risks are rising, the asset structure is also changing, and turbulence in the stock market is inevitable.
Zhu Min believes that at a time when financial risks are still accumulating and the global political environment is facing tremendous uncertainties, technological progress and the prosperity of the digital economy have brought great hope and will become a very important direction for future development.
The following is compiled from the on-site sharing of the guests at the press conference, as well as part of the content of "Changes and Responses".
01
From "three lows and one high"
To "three highs and one low"
Since the 2008 financial crisis, the world has been in a stable state of "three lows and one high", that is, low growth, low inflation, low interest rates, and high debt. Enterprises' investment in expanding production capacity and increasing employment are sluggish, residents' willingness to consume is decreasing, and aggregate supply and aggregate demand are in a state of "low equilibrium".
After the epidemic, the rise in aggregate demand driven by strong stimulus policies has broken this equilibrium, and changes in household consumption behavior have caused the supply of goods to exceed demand, leading to high inflation in food, commodities and other fields. Global supply chain pressures have reached their highest level in nearly 25 years, supply "bottlenecks" have become prominent, and factor prices have risen sharply as a result, and the "scissors gap" between PPI and CPI in major countries has widened, exacerbating structural inflation and increasing the pressure on inflation to be transmitted downstream.
At the same time, the Ukraine crisis continues to increase global short-term and long-term inflationary pressures, pushing the high inflation driven by global monetary and fiscal stimulus policies after the epidemic to persistent high inflation.
In the short term, the Ukraine crisis will drive global inflation mainly by increasing upward pressure on energy and commodity prices, as well as exacerbating supply chain disruptions. In the medium to long term, the Ukraine crisis will accelerate the established trend of "de-globalization" and carbon neutrality, and together with the aging of the population, it will become the main force driving long-term global inflation.
The era of low inflation since the outbreak of the financial crisis in 2008 may be over, and the world has entered a new situation of "three highs and one low" of high inflation, high debt, high interest rates, and low growth.
At this stage, the central banks of various economies represented by the Federal Reserve are more inclined to the former in the dilemma of "maintaining growth" and "controlling inflation", and factors such as excessive liquidity and supply chain disruptions have caused inflation to explode, and global inflation has gradually changed from "temporary" and "single" to "persistent" and "comprehensive". Combined with factors such as long-term decline in labor productivity, aging population, geopolitical supply chain disruptions, and energy crises, the Ukraine crisis has "fueled the fire" and accelerated the world economy into "stagflation".
Overall, the global economy is heading for "stagflation". "Stagflation" will cause profound changes in the world economic pattern. From the perspective of "stagnation", the superposition of long-term and short-term factors affecting economic growth has caused the global economy to enter a low-track growth. From the perspective of "inflation", the current situation of the global economy is very similar to the "great inflation" of the 70s of the 20th century, the inflation of both eras stems from large-scale fiscal policy and quantitative easing monetary policy, and the current round of inflation is developing more rapidly, the external environment is more complex, and it is only one step away from getting out of control.
The central banks of various economies, represented by the Federal Reserve, will face a dilemma of solving the problem of "stagnation" or "inflation", and policy uncertainty may bring greater volatility to the world economy and finance. At the same time, the Fed's interest rate hikes and high debt also increase the probability of a debt crisis or financial crisis.
02
Geopoliticization intensifies
Economic uncertainty
Now there are many new concepts in the world, new globalization, new Washington Consensus, new industrial policy, new capitalism, new regionalism, new supply economics and so on. All "new" is, in the final analysis, a word, geopoliticization.
In recent years, the U.S. government has implemented strategies such as the return of the U.S. manufacturing industry, friendly shore outsourcing and nearshoring outsourcing, which have broken the world industrial division of labor model formed in the era of economic globalization and had a major negative impact on international investment and international trade patterns. These changes not only increase the uncertainty and risks of the global economy, but also reduce the efficiency of the division of labor, thereby weakening the potential for world economic growth in the medium and long term.
The Russia-Ukraine conflict has further exacerbated the uncertainty of world economic growth, and geopolitical and security factors have increasingly become important constraints on economic development and international cooperation of all countries. In response, major emerging market economies have strengthened their cooperation, and the BRICS countries have successfully expanded and are expected to continue to expand. The trend of fragmentation and blocization of the global economy may be taking shape.
In such a new international environment, China should also create a more open, more market-oriented, and more law-based environment, and doing its own thing well is the most important thing. To do our own thing well is to continue to comprehensively deepen reform and opening up and the building of the rule of law, and to promote science, the rule of law, and the internationalization of the economy, which may be a choice for China in such an international environment.
03
The data element market is becoming
A new highland of international cooperation and competition
In the past year, artificial intelligence technology has achieved breakthrough progress represented by large models.
Despite the growing risks in finance and the huge uncertainty in politics, technology, GPT, and large models bring great hope for the future, and in addition to the revolutionary impact of artificial intelligence technology, the systemic changes that have taken place in digital technology are reshaping the world economic landscape. A Artificial Intelligence (AI), B Blockchain (Block Chain), C Cloud Computing (Cloud), D Big Data (Big Data), E Edge Computing (Edge Computing) constitute the main content of the current "ABCDE" digital technology.
The rapid development and wide application of "ABCDE" digital technology has promoted the rise of the digital economy, a new economic form in many fields such as product consumption, manufacturing, urban governance, medical and health care, education and research and development. Data has become the fifth type of production factor alongside land, technology, capital, and labor, and plays an increasingly important role in economic production activities.
As a new economic form based on breakthroughs in digital technology, the digital economy has strong innovation capabilities and the potential to promote economic growth. Data elements are the core production factors that give birth to the digital economy, and the data element market provides a platform for the transaction and sharing of data elements, so that data can flow and circulate. This means that the construction of a data element market will not only help promote the release of the value of data elements, but also allow data to be more widely used and utilized between different organizations and fields, so as to maximize the value of data.
From the perspective of its own development, the data element market will help promote the innovation ability and competitiveness of domestic enterprises and release economic vitality. The development of the digital economy has brought innovation opportunities and competitive advantages to local enterprises. A high-quality data element market can give enterprises a convenient opportunity to embrace the dividends of the digital age, and promote enterprises to innovate in products, services, production processes, marketing, etc., so as to enhance their competitiveness.
In the face of the great changes in a century, Zhu Min, former Deputy Managing Director of the IMF and Dean of the National Institute of Financial Research of Tsinghua University, and more than a dozen experts and scholars from the Global Economic Governance 50 Forum discussed the opportunities, challenges and responses of China's economy and finance from the macro perspective of global economic governance, and deeply analyzed the new trends in the evolution of the global economic and financial landscape.