Wang Yiming: China's return to normalcy still faces six major challenges

Reporter Xin Yuan

Wang Yiming, vice chairman of the China Center for International Economic Exchanges, said on Saturday that there is still great uncertainty about the current global epidemic situation, and China's economic recovery is also unbalanced. With the weakening of the base effect, the reverse return of orders and the marginal adjustment of macro policies, the risks accumulated in the previous period may be gradually exposed, and the return of the economy to normal faces six major challenges.

First, the global economic trajectory remains complex and severe. Wang Yiming pointed out that since the second quarter, with the accelerated distribution of new crown vaccines and the increase in vaccination rates, coupled with the policy stimulus of major economies, the economies of various countries have accelerated their recovery, and international institutions have generally adjusted their economic growth forecasts for this year, but the structural impact of the current impact of the epidemic has not been eliminated, and the global recovery is still facing many challenges.

"The divergence of the global recovery is intensifying, and there is a gap between developed economies and emerging market and developing economies, which has caused the policy adjustment between major economies to be out of sync, making the global economic recovery more complicated." He said at a seminar hosted by the National Institute for Development and Strategic Studies at Chinese Min University.

Second, the Fed's monetary policy adjustment may be ahead of schedule, which will have an impact on China's policy environment. Wang Yiming believes that if the Fed starts to reduce the scale of bond purchases from the second half of the year, it may have a relatively large impact on some emerging markets with fragile fundamentals, and will also increase the difficulty of implementing China's monetary policy. In addition, the possible rapid rebound of the US dollar index will have an impact on the RMB exchange rate and the inflow and outflow of funds.

Third, at present, there is an imbalance in China's domestic economic recovery, although the industry is better, but the recovery of consumption and investment is still very weak, how to expand domestic demand, enhance the momentum of domestic demand is a problem that needs attention. Wang Yiming expects that the recovery of consumption in the second half of the year will still be subject to income growth, infrastructure will be constrained by the pressure of local financing platforms to repay debts, and manufacturing investment will also be affected by the rise in raw material prices and squeeze corporate profits.

Fourth, the growth momentum of foreign trade exports may gradually retrace. In Wang Yiming's view, China's economic growth in the first half of the year is inseparable from the contribution of foreign trade. As the epidemic in the United States and Europe improves, especially the gradual recovery of production capacity, this may lead to the return of orders. In addition, the high level of international freight rates and the erosion of corporate interests by the appreciation of the renminbi will have an impact on foreign trade in the second half of the year.

Fifth, rising raw material prices have brought about different steps of recovery in different industries. Wang Yiming pointed out that the factory price (PPI) of industrial products rose rapidly in May, and the rise in raw material prices brought about by higher commodity prices caused a significant squeeze on the profits of downstream enterprises, especially small and medium-sized enterprises.

The industrial profits of enterprises above designated size released by the National Bureau of Statistics on Sunday showed that benefiting from factors such as rising commodity prices, the profit margin of the mining industry in May rose by 3.23 percentage points month-on-month, of which the profit margin of the non-ferrous metal mining industry rose by 3.5 percentage points, and the profit margin of the coal mining and washing industry rose by 4.99 percentage points month-on-month. However, the profit margin of special equipment manufacturing, general equipment manufacturing and other industries has declined, of which the profit margin of professional equipment has fallen by 1.74 percentage points.

Sixth, the pressure to release risks has increased in some areas. Wang Yiming mentioned that at present, the pressure on local government financing platforms to repay principal and interest is large, and the pressure on small and medium-sized financial institutions to supplement capital is also very large, which needs to be paid attention to.

In addition to the above six major uncertainties, Wang Yiming said that it is necessary to pay attention to the pressure of double carbon targets (carbon peaking, carbon neutrality) on economic operations, and some places will take more radical measures in order to reduce energy consumption, such as the implementation of production restrictions for high-energy-consuming enterprises. "Taking coal power as an example, if the production restriction is too large in the short term, it may cause instability in the supply of coal power, which will cause power shortages in some places, which will affect stable economic growth." It is necessary to properly handle the relationship between green transformation and steady growth. He said.

Wang Yiming said that considering that the recovery of demand is slow, the growth rate of foreign trade may also become weaker, the endogenous power of the economy is not strong enough, and the macro policy should maintain continuity, stability and sustainability. With the return of the economy to normal, policy normalization is also an inevitable trend, but we must also pay attention to the intensity, grasp the balance between stable growth and risk prevention, and improve forward-looking policy operations.