In the first quarter of 2022, the global economy is still in the process of repair, but the main factors determining the economy are reasons outside the cycle. The prevention and control of covid-19 epidemic and the conflict between Russia and Ukraine disturbed the whole financial market at the beginning of 2022.
For China's economy, the prevention and control of covid-19 epidemic is the key to economic repair. The strictly controlled covid-19 epidemic has affected China's economic growth, directly affecting consumption and service industry, indirectly affecting investment and industry, and national logistics. The current round of GDP growth is expected to be about 5.5 percentage points, which is difficult to complete.
The conflict between Russia and Ukraine has brought changes in the global financial market. The conflict between Russia and Ukraine and the economic sanctions imposed by the international community on Russia have led to the soaring prices of global energy, grain and oil, as well as the tension of global logistics. The process of supply chain rebalancing is the process of rising prices.
Global inflation expectations are rising. Supply chains, industrial chains and sudden geopolitical conflicts make global inflation expectations rise rapidly. The global economy will be disturbed by inflation this year. Inflation in European and American economies has reached a high point, and central banks in developed countries have begun to tighten. Although the European Central Bank announced tightening, Europe may still be affected by Russia and Ukraine, and the expectation of monetary tightening is unclear. Inflation in developing countries is also rising, and the rapid upward inflation in some emerging market countries may bring serious social and political problems. China's inflation is gradually rising, which is characterized by "quasi stagflation" at this stage.
The Federal Reserve raised interest rates in 2022, but at the same time, the downside risk of the US economy increased. The Federal Reserve has started to raise interest rates, but the current environment of the Federal Reserve is not conducive to raising interest rates, and inflation is the main consideration. At this stage, the unemployment rate in the United States has reached a low point, the production capacity is basically close to saturation, and the crude oil price is at a high level. These factors will make the U.S. economy quickly enter recession after raising interest rates. It is expected that the Federal Reserve will raise interest rates rapidly 6-7 times in 2022 and then slowly in 2023. It does not rule out stopping raising interest rates in 2023.
China's economy is slowly recovering. China's decision-makers have issued continuous documents to stabilize the economy, not only from monetary and fiscal policies, but also from various regulatory aspects. China's economy rebounded hard in the first quarter of 2022. The easing of monetary and fiscal policies will promote future economic growth, but the impact of covid-19 epidemic has not ended, and the economic growth is more tortuous.
Long term focus on inflation and short-term focus on epidemic prevention and control. In the next 1-2 quarters, the change of inflation level will still be the focus of global assets. China's short-term focus is the change of covid-19 epidemic prevention and control measures.
Main risks: covid-19 epidemic control measures continue to be strict and inflation is not controlled