On April 3, 2023, the BOC Research Institute released the Report on Economic and Financial Outlook for 2023Q2 (hereinafter referred to as the Report) in Beijing. The Report reviews the global and China’s economic and financial operations as well as the global banking industry in 2023Q1, and looks forward to the economic and financial situation as well as the development trend of the global banking industry in 2023Q2.
With regard to the global economic and financial situation, the Report concludes that, in 2023Q1, the global economy performed better than expected, with a mitigated downside trend in the EU and the US and easing of global supply chain tensions. Central banks in the EU and the US continued to tighten monetary policies, with continuous tightening of dollar liquidity, significant contraction of risk asset prices and plummet of valuations of fixed-income products such as Treasury bonds, inducing liquidity risks in the banking sectors of the EU and the US and rising global risk aversion. Looking forward to 2023Q2, the global economy will see more prominent structural problems and divergence in the areas of consumption, employment and inflation, which is expected to further drag down the global economic growth. Banking liquidity risks in the US and the EU will continue to evolve with possible divergence in the tightening pace of monetary policy and the continued retreat from high of US dollar index, consistently weighing on the global stock market. The report also conducts special researches on hot issues such as the industrial subsidy policies of developed economies, the new pattern of global trade development, the global liquidity austerity and foreign exchange market vulnerability, and the financial resilience of the Russian economy.
Regarding China’s economic and financial situation, the Report observes that 2023Q1 saw China’s economy recovering as the fallout from the COVID-19 pandemic faded substantially and the policies to stabilize the economy were front-loaded. The GDP growth for Q1 is estimated at around 4.1%. Looking ahead to Q2, China’s economy will enter into comprehensive recovery in the post-pandemic era . Consumption will maintain a good recovery momentum, investment in infrastructure and manufacturing will continue to grow rapidly, real estate investment will gradually firm up and exports growth will find a slowing pace of decline. Given the low base for the same period in 2022, the GDP growth for Q2 is estimated to be 7.6%. Macro-policies should be more stable to promote positive interaction and circulation among economic recovery, stronger growth momentum and expectations improvement. In addition, external risks and spillovers should be closely monitored and analyzed.
As regards the development situation of the global banking industry, the Report shows that the world economy has been facing growth challenges in 2023, seeing a financial turmoil triggered by the continuous and sharp interest rate hikes in major economies. The global banking assets are contracting while banking operations are under mounting pressure, which has dented earnings growth and capital replenishment. By contrast, China’s banking environment is improving across the board as the domestic economic recovery is gaining momentum. The fiscal and monetary policies are working effectively. Financial regulators focus on advancing reforms, strengthening weaknesses, promoting development, improving living standards and guarding against risks, navigating solid growth of the financial industry in a sound ecosystem of competition and cooperation. Against such a backdrop, the Chinese banking industry has maintained a fast expansion in an improving environment, showing a solid recovery of profitability and sound asset quality and capital adequacy. Overall, the global and Chinese banking environments have changed profoundly in the post-epidemic era, entailing the push for a new development paradigm.
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