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BOC Institute of International Finance Releases the Report on Economic and Financial Outlook for 2019Q2


2019-05-09

On March 28, 2019, the BOC Institute of International Finance released the Report on Economic and Financial Outlook for 2019Q2 (hereinafter the “Report”) in Beijing, which reviewed the economic and financial situation of China and the world at large and the operation of global banking industry in 2019Q1, and gave an outlook for the economic and financial situation as well as the trend of the global banking industry in 2019Q2.

Looking at the global economic and financial situation, the Report concludes that the downward trend of global recovery further continued, global trade and investment performance remained sluggish, manufacturing growth weakened, and the growth of major economies decelerated year to date. Global economy was mainly exposed to the risks arising from the downturn of US economy, protectionism, asset bubbles and geopolitical conflicts. International financial market remained stable on a whole. It is expected that the US financial risks will increase modestly, while the financial pressures of emerging economies will ease up slightly in 2019Q2. Under the weak global economic recovery, major economies have slowed down the normalization of monetary policy, and some economies may stop raising interest rate or start lowering interest rate. With the global liquidity picking up, the positive factors in the global stock markets will be stronger than the negative factors in 2019Q2. Facing a rise in the Eurosceptic sentiment and anti-establishment political groups, Europe will hobble ahead amid conflicts.

With respect to China’s economic and financial situation, according to the Report, in 2019Q1, China’s economy still faced big downward pressure under the influence of both favorable and unfavorable factors. On the one hand, exports growth turned from positive to negative amid slowing global recovery and Sino-US trade frictions. On the other hand, with a series of policies launched and implemented, including the “six-pronged policy to boost stability”, the economy saw a rising number of stabilizing factors. GDP is expected to grow by about 6.2% in 2019Q1. Looking forward to Q2, domestic policy and market environment will be improved in spite of many uncertainties in the external environment, and the economy is expected to stabilize, with GDP to grow by about 6.3% in Q2 and 6.4% for the whole year. As for macro-economic policies, first, China will speed up the implementation of policies laid out in the Report on the Work of the Government. Second, China will pay close attention to price changes and properly control the pace and intensity of monetary and credit policies. Third, considering the great uncertainties loom in external environmental changes, we suggest keeping close track of them and putting in place policy buffers and contingency plans.

Regarding the development trend of the global banking industry, the Report comments that the operating environment of global banks has remained stable overall since 2019, and predicates that the banking industry of major economies will continue with divergent development and keep their profitability and risk profile at a stable level. China’s banking industry has maintained a steady expansion in balance sheet and further enhanced its risk absorbency. Chinese banks have increased support for micro and small businesses and private-sector economy, supported the supply-side structural reform in the financial sector through strengthening the service capabilities and shoring up service weaknesses, and promoted the high-quality development of the real economy. Global large banks are actively strengthening their capital base by means of introducing innovative capital instruments and reducing risk-weighted assets, etc., and placing increasing emphasis upon improvement of the expertise in key sectors and risk management in terms of business diversification.

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