Abstract: the global economy is facing many challenges: the risk of covid-19 epidemic has not dispersed, but the downward pressure on global economic growth has intensified, the inflationary pressure has continued to rise, the key materials represented by energy products have fallen into shortage, and the international supply chain has been partially paralyzed... At the same time, the global central bank represented by the Federal Reserve is actively moving towards normalization, The global economic cycle has entered a new stage. However, the overall performance of the international financial market is positive, the short-term deviates from the economic trend, and the dual pressure of economic downturn and monetary policy shift may not be fully included, resulting in financial risks. Standing at the crossroads of the recovery cycle after the global epidemic, this paper looks forward to the global economic and financial risks in 2022, and considers the lessons and options of macro policies.
I. global economic risks: five perspectives
In 2021, global economic growth gradually passed through the fastest stage of recovery, but inflation continued to rise and fell into the dilemma of "quasi stagflation". The core factor of this round of "quasi stagflation" comes from supply constraints. The European and American energy crisis and international supply chain bottlenecks are still fermenting. At the same time, the risk of covid-19 epidemic has not dissipated, but the inhibition of the epidemic on demand may be less than the impact on supply. In 2022, the global "stagflation like" interpretation is still highly uncertain.
perspective 1: covid-19 epidemic risk is not dispersed
Since 2021, with the emergence of covid-19 vaccine and the accumulation of epidemic prevention experience in various countries, the threat of the epidemic to public health and the impact on economic activities have gradually weakened. However, the recent covid-19 virus variant Omicron sounded a global alarm, and there are many uncertainties in the development of covid-19 epidemic in the future.
For the global covid-19 epidemic risk in 2022, we have the following judgment:
1) "mass immunization" is not feasible for the time being. "How to get along with viruses" is a proposition that the world needs to actively explore and think about.
2) the risk of mutated virus needs to be treated calmly, but the fluctuation of market sentiment is difficult to avoid. It may be too early to make any pessimistic or optimistic assessment of the impact of the new virus.
3) in the first quarter of 2022, the risk of covid-19 epidemic spread was high. The risk of epidemic spread may be further exacerbated by factors such as mutated virus, possible "expiration" of vaccine protection and rash unsealing of some economies.
4) the global epidemic risk is expected to decline further in the second quarter of 2022 and beyond. Optimistic factors include the new protection brought by the vaccine "strengthening needle" and the marketing and promotion of covid-19 therapeutic drugs.
perspective 2: economic growth carries the weight
since the fourth quarter of 2021, the downside risk of the global economy has come, both inevitable and accidental.
1. Inevitability: from the perspective of post epidemic recovery cycle, with the gradual normalization of national economies and the cessation of policy stimulus, the global economy is at the end of the recovery cycle. Although the potential growth rate of various countries may change slightly, the economic growth rate should basically return to the level before the epidemic.
2. Contingency: Unfortunately, since the second half of 2021, Delta, Omicron and other mutated viruses have caused multiple rounds of epidemics, global inflation and continuous fermentation of supply chain problems, which have formed additional resistance to both ends of supply and demand in the short term, increasing the difficulty of "soft landing" of the global economy.
3. The recovery differentiation between developed and developing economies will still be obvious: developed economies have richer vaccine resources, more radical monetary and fiscal stimulus, and the recovery rhythm is far ahead. It is expected that the Q4 economic growth trend in 2022 will fully return to the predicted level in 2019 (chart 1); The developing economies are more sustained by the impact of the epidemic, with high financial financing costs and limited space. In addition, the recent monetary policy space is also subject to the policy shift of the central banks of developed economies. It is expected that the overall economic growth of developing economies in 2022 will still be lower than the trend growth level in 2019 (Fig. 2).
perspective 3: inflation interpretation exceeds expectations
Under the downward trend of the economy, the global inflation rate rose sharply, forming a "quasi stagflation" pattern. Mainstream institutions predict that the global inflation rate will fall under the base factor in 2022. The specific inflection point is not clear, and it is difficult to prove that "inflation is temporary". However, the global inflation pressure in 2022 should not be underestimated, and the growth rate of inflation indicators in most economies may still be higher than the pre epidemic level. At the same time, since the epidemic, the cycle differences between epidemic prevention policies and resumption of work and production, coupled with the different production capacity cycles of consumer goods in various countries, have misplaced the inflation cycles of some countries and the world. For example, the inflation rates of China and Japan will rise from the bottom in the future, and the global inflation pressure may continue in 2022 (chart 3).
There may be different "stories" behind the interpretation of global inflation in 2021, but they all point to the same result: the recovery of demand in the post epidemic era far exceeds supply, bringing comprehensive and sustained inflationary pressure. At this stage, inflation has become a catalyst for stagnation, and the negative impact of inflation on the economy continues to appear. The rapid rise of inflation expectations experienced by the United States in 2007-08 and 2010-11 has resulted in a sharp decline in consumer confidence, and the production and investment activities of enterprises and the commodity exports of developed economies have been negatively impacted. In the future, we need to be more vigilant against the upward risk of inflation expectation, which is related to the self realization effect of inflation and the space of monetary policy.
Perspective 4: energy transformation meets crisis
The "energy crisis" in Europe, America and even the world is still going on. Global energy prices have continued to rise since 2021 and significantly exceeded the level before the covid-19 epidemic (Figure 4). European and American natural gas inventories fell collectively. Since 2021, IPE UK natural gas has increased by 264% by the end of October. Since most of Europe is gas and electricity, the electricity price soared after the sharp rise of natural gas (Figure 5), which has caused a large reduction in the output of many industrial enterprises in Europe or the temporary closure of factories. Energy prices in other regions have also risen significantly, and coal in Asia (China, India, etc.) has also been in urgent need; The international oil price is still at a high level. The average price of Brent crude oil in October was about US $84 / barrel, with a cumulative increase of about 66% since 2021.
The causes of this round of energy crisis are mainly on the supply side, and most of them come from "man-made" factors: 1) in terms of demand, the global oil and energy demand basically returns to the pre epidemic level, but does not exceed. 2) Supply constraints are the core of this round of energy crisis. The adjustment of producers\' supply capacity is objectively limited, and they also keep a wait-and-see view of high prices subjectively. 3) There are also long-term factors behind the energy shortage, that is, the "boost" of the global green economy wave. At this stage, the supply side of renewable energy is limited and fluctuates greatly. The excessive reduction of investment in traditional energy during the conversion period will exacerbate the shortage of global energy products.
Perspective 5: supply chain bottlenecks are hard to solve
since the second half of 2021, the bottleneck of international supply chain has encountered severe challenges and had a significant impact on the global economy.
The bottleneck of this round of international supply chain is the result of the superposition of "new and old factors". The new factors include the impact of the epidemic on production capacity and the imbalance between global supply and demand. The old factors include the continuous role of trade protection and industrial policies in recent years, as well as the periodic bottleneck of logistics capacity represented by the transportation industry.
1. Strong terminal demand and heavier supply chain load. European and American policy stimulus and vaccine promotion lead the world, and terminal demand recovers rapidly, even exceeding the pre epidemic level, exacerbating the pressure on the supply chain.
2. The supply side is directly impacted by covid-19 epidemic and eroded by long-term ideas such as trade protection and industrial transformation. Since the second half of 2021, Southeast Asian emerging economies have experienced the most serious outbreak of the epidemic, and the export supply has been greatly disturbed. In addition, long-term economic ideas such as trade protection and industrial policy transformation have disturbed the global supply chain.
3. The global supply of new shipbuilding is insufficient, and the global demand recovery is uneven, increasing the logistics pressure. From 2019 to the eve of the covid-19 epidemic, the global new shipbuilding price continued to decline, indicating that it was in the contraction cycle of transport capacity demand, and the ship supply could not meet the logistics demand after the epidemic. At the same time, the dislocation of global demand recovery shows the imbalance of international trade, which further increases the pressure on freight transportation.
4. Labor shortage slows down the recovery process of the supply chain, and transportation and warehousing is the most serious blocking point. Due to concerns about the epidemic situation, the labor force in key transportation and storage industries such as crew and truck drivers is the most scarce. At present, the recovery of employment has not been fully recovered. At the same time, the bottleneck of transportation industry leads to the expansion of warehousing logistics demand, which is transmitted to warehousing logistics and downstream production and consumption subjects.
Looking forward to the sustainability of global supply chain bottlenecks in 2022: on the one hand, if the impact of the epidemic is gradually weakened, coupled with the decline of seasonal demand in the United States and Europe, and the continuous introduction of administrative measures to repair the supply chain, the international supply chain problems are expected to be alleviated in the next 1-2 quarters. However, the "old factors" such as trade protection and industrial policies and capacity bottlenecks in the transportation industry may continue to put pressure on the supply chain, and there is still uncertainty whether the global supply chain can be completely dredged.
II. International financial risks: the test of "water collection"
In 2022, with the continuous economic recovery and the emergence of inflationary pressure, the monetary policy of central banks around the world will actively shift. Starting from the decisions of the central banks of major overseas economies and combined with the resilience and vulnerability of the global financial market, we further consider the impact of the withdrawal of loose monetary policy on the global economy and financial market.
1. Global liquidity: "small differentiation" in the "great contraction"
In November 2021, the Federal Reserve officially announced the reduction of asset purchase (taper), marking a new stage of the Federal Reserve's tightening cycle. However, the market risk of the second half of the Fed's tightening Road (the first interest rate increase from November 2021 to 2022) can not be ignored:
First, the pace of this round of taper and interest rate hikes is faster than history (Figure 6). In the absence of references, market sentiment will fluctuate more.
Second, the US economy is currently in a "stagflation like" pattern. If inflation deteriorates much faster than the economic recovery, the Fed may accelerate the pace of tightening and raise interest rates early, and at that time, the market may lack confidence in the withdrawal of monetary policy.
Third, different from history, this round of Fed tightening may be slower than the central banks of most developed economies (except the European Central Bank), which belongs to the "follower" rather than the "leader". This means that the rhythm of monetary policy in other countries may adversely affect the Fed's decision-making and market expectations, and it also means that it is more difficult for the fed to guide expectations.
In terms of central banks of other developed economies, central banks such as the United Kingdom and Canada are more "hawkish" than the Federal Reserve, the European Central Bank is more "Dove", and the "Dove" guidance of the Bank of Australia fails in the market. The rise of short-term interest rates is an important signal of the tightening of the financial environment in developed economies.
In terms of emerging market central banks, a considerable number of central banks have "rushed" to raise interest rates. The reasons for raising interest rates include: first, curbing inflation. Second, the economy recovered well. Third, the "defensive" interest rate hike. However, the recovery rhythm of emerging markets in this round lags behind that of developed markets as a whole. Under this background, raising interest rates in advance may pose the risk of inhibiting economic recovery.
2. Developed markets: asset prices are "too high to be cold"
since the covid-19 epidemic, global asset prices have generally risen in the context of monetary easing, and asset prices in developed markets represented by the United States have risen more rapidly. At the time of global liquidity tightening, the rationality of asset prices in developed markets needs to be examined.
1) US stock market: triple risks of fluctuation, style switching and deep correction. In 2022, as inflation continues and the Federal Reserve tightens, the overall interest rate level of the United States rises, and the infrastructure expenditure, social expenditure and tax increase bill of the Biden government are implemented, many factors are not conducive to the US stock technology and growth sectors. The probability of US stock style switching is not small, and the process of style switching is also easy to cause overall fluctuations. In 2022, the probability of the Federal Reserve raising interest rates is not small. The interest rate increase will not only involve the adjustment of the profit model of US stocks, but also aggravate the cost of repurchase, which is an important factor supporting the rise of US stock prices (chart 7). If US inflation continues to exceed expectations, the Fed may be forced to accelerate tightening and raise interest rates early. At that time, US stock prices will bear various pressures, and the possibility of in-depth adjustment will not be ruled out.
2) US bond market: "stagflation trading" may be reversed, and risk appetite may fall. At this stage, the price of US bonds is still relatively high: behind the high price of US bonds in the past 10 years is the interpretation of "stagflation transaction" (Chart 8). The pessimistic expectation of the market on the economy is suppressing the real interest rate of US bonds, which also means that the fluctuation of market sentiment in the future is easy to trigger the rapid adjustment of US bond interest rate. In terms of corporate bonds, the price of high-yield corporate bonds in the United States is at an all-time high (Chart 9). With the advance of the tightening cycle of the Federal Reserve, the overall interest rate level of the U.S. financial market will still rise, the approximate rate of U.S. bond price will be adjusted, and the price of overseas financial assets anchored by U.S. bond interest rate will also be adjusted.
3) bulk commodities: the price expectation is difficult to stabilize. The commodity market is one of the most "fanatical" markets in the post epidemic era. Since 2021, the growth of international bulk commodities has expanded, the prices of major commodities have been significantly higher than the level before the epidemic, and the price fluctuations have increased significantly (Chart 10). In 2022, commodity prices are expected to be very unstable and the price trend is highly uncertain. First, there is uncertainty in macro factors such as covid-19 epidemic development and Fed tightening. Secondly, since the current commodity cycle is mainly driven by insufficient supply, and part of the supply is suppressed by "man-made" rather than simple market behavior, the supply impact caused by the sudden adjustment of future policies cannot be ruled out. Third, because of the sharp rise in the price of some commodities, the existence of speculative trading may give rise to commodity price bubbles. Finally, there may be interaction between commodity prices and other financial asset prices in the future, and the risk of market fluctuation will further rise.
4) us real estate: the bubble risk is relatively controllable, but it may interact with inflation. From the second half of 2020 to 2021, the housing prices of the major developed economies represented by the United States rose significantly, but the risk of real estate bubble is relatively controllable. However, U.S. House prices may continue to push up housing costs, and the wealth effect brought by asset prices may also increase consumer demand and boost inflation.
3. Emerging markets: new resilience and vulnerability
In the process of normalization of central bank policies in developed economies such as the Federal Reserve, emerging markets are objectively facing capital outflow pressure. However, compared with the "austerity panic" in 2013, the current round of emerging markets as a whole is expected to show greater resilience.
First, in terms of economic fundamentals, most emerging markets are in better economic and financial conditions and are expected to show greater resilience in the face of pressure. Secondly, in terms of financial policy, in addition to the preventive interest rate hike, most emerging markets (such as China) have stronger exchange rate flexibility in recent years, which can provide a buffer for the pressure of capital outflow to a certain extent. Thirdly, after experiencing the "dollar shortage" in March 2020 and the upward impact of US bond yield in March 2021, the risk of capital outflow has been partially released. Finally, in the memory of the "tightening panic" in 2013, the Federal Reserve was more cautious in the "turning" process, and the allocation of international capital to emerging markets was more defensive. Emerging markets objectively or do not have the basis for significant capital outflow in the future.
However, this round of emerging markets also have new vulnerabilities, among which the fiscal deficit and space problem are the most prominent. First, the current round of expansion of deficit ratio in emerging markets is smaller than that in developed markets. Secondly, compared with 2013, the fiscal deficits of most emerging market countries have expanded from 2020 to 2021, and the space for fiscal stimulus may be more limited. Finally, the so-called "flies don\'t bite seamless eggs", there is also differentiation between different emerging markets. Turkey, Argentina and other markets have serious economic and financial problems such as inflation and debt. Some economies are also impacted by natural disasters and policy disturbances, which objectively creates the "thrust" of capital outflow.
Third, macro policy thinking: how to break the situation of "quasi stagflation"?
The global epidemic risk has not dispersed, the economic downside and inflation upside risks have increased, but the economic rescue policy is brewing to withdraw. How can the problem of "quasi stagflation" faced by the global economy be broken? From the perspective of macro economy and policy, we provide some policy thinking from the five dimensions of epidemic prevention, currency, exchange rate, energy and foreign trade.
1. Epidemic prevention policy: weighing public health security and economic cost
Nearly two years have passed since the emergence of covid-19 virus. A cruel fact is that at this stage, it is still difficult to curb the epidemic by relying on vaccination alone, and there is still a long way to go in the global fight against the epidemic. But on the other hand, due to the stronger transmission of the mutated virus, the cost of strict epidemic prevention measures is objectively higher than before.
We believe that the strict epidemic prevention measures at this stage can not be relaxed, but this does not prevent us from conducting policy research and thinking in advance. Our current background is that the threat of covid-19 epidemic to health has been significantly weakened. In the future, with the promotion of "strengthening acupuncture" and the listing of "specific drugs", the threat of disease to residents\' health may be more controllable. As overseas economies continue to attempt economic unsealing, there are more observation samples of policy effects. We first maintain the dynamic clearing strategy and observe the "first try" of developed countries, which will produce an "opening gap" with developed economies in stages. Under the downward pressure of economy in 2022, the coordination between epidemic prevention policy and "steady growth" policy may need to be strengthened.
Monetary policy: balancing "stagnation" and "inflation"
For developed economies, the central bank seems to have reached a certain consensus on the monetary policy since the covid-19 epidemic, paying more attention to "stagnation" rather than "inflation" in the balance of monetary policy. For emerging markets, different from the "memory" of developed markets, most emerging markets have not experienced the pain of premature tightening of monetary policy. They have more experienced the injury of capital outflow, so they are more motivated to choose defensive interest rate hikes. The central banks of some emerging economies choose to raise interest rates in advance, which can alleviate the inflationary pressure to a certain extent and prevent the risk of capital outflow. However, the pace of economic recovery in emerging markets is relatively backward. Under the premise of unstable economic recovery, monetary policy may be tightened or there may be a risk of economic stall.
For the global central banks, although historical experience is an important reference, the monetary policies of various countries need to "keep pace with the times" and "focus on me", that is, focus on their own economic problems and implement appropriate monetary policies. In this regard, the Central Bank of China is an example. This round of China's post epidemic recovery leads the world, and the economic cycle is also misplaced with most countries. In 2022, with the tightening of the central banks of overseas economies, the pressure of imported inflation will also be relieved, and the pressure of "stagnation" of China's economy will be greater than "inflation". The stable and loose monetary policy should be a relatively determined general direction. Considering that China's economic fundamentals are still solid, there is plenty of room for the debt interest margin between China and the United States, and the RMB exchange rate can be more flexible, these very favorable economic and financial conditions enable China's monetary policy to support China's steady growth more "self-centered".
3. Exchange rate policy: make good use of the "buffer" of exchange rate floating
From the second half of 2020 to the beginning of 2021, in the process of rising US bond yields, the appreciation of RMB helped maintain the relative stability of RMB asset prices and eased the pressure of capital outflow to a great extent. Since the second half of 2021, with the continuation of the high export boom and the positive trend of China US economic and trade relations, the RMB exchange rate has risen rather than depreciated under the background of the appreciation of the US dollar.
Looking back, is the ideal direction of RMB exchange rate up or down? We believe that a moderate depreciation of the RMB exchange rate may be more appropriate. First, in 2022, the U.S. economy will remain relatively strong and monetary policy will be tightened. Under the background that the U.S. dollar exchange rate is still supported, RMB appreciation will be more difficult and more intervention measures will be required. Second, the moderate depreciation of RMB will benefit exports, especially under the background that China's export boom may fall further in 2022, it can help exports "land smoothly". Third, at present, the RMB exchange rate has been strong for one year. The exchange rate adjustment can release the space of China's monetary policy and meet the loose demand of monetary policy under the current economic situation.
4. Energy policy: taking into account the contradiction between supply and demand and energy transformation
The current round of global energy crisis reflects the contradiction between the short-term rise in energy demand and the medium and long-term goal of energy transformation. Over the past decade, the carbon emissions of the European Union and the United States have shown a slight downward trend, while China's carbon emissions have risen sharply.
This may mean that China urgently needs the guidance of energy transformation policy, but it also means that China may lack a "buffer period" similar to Europe and the United States, and the pressure of China's energy transformation is relatively greater. How China can survive the global energy crisis relatively smoothly is an urgent problem to be considered. In 2022, under the background of early warning of overseas energy crisis and great pressure on China's steady growth, considering the development or time demand of energy transformation technology, the rhythm of energy transformation may be more moderate in stages, and further strengthen the expected management of energy supply and price, so as to achieve a smooth transition in the transformation process as far as possible.
5. Foreign trade policy: help repair the supply chain and stabilize inflation
China's foreign trade has played a more important role in China's economy in the post epidemic era. In 2020, China's exports will contribute 28% to the annual GDP growth. At the same time, the trade deficit of the United States after the epidemic has expanded to an all-time high, and its dependence on imports has increased significantly. However, the serious imbalance of Global trade demand may lead to "double loss": for the world, the imbalance of trade demand intensifies the pressure on the supply chain. For economies with excessive imports such as the United States and Europe, they face prominent trade deficit problems, and their dependence on imports is not conducive to the consolidation and renewal of their own industrial chain. For export-oriented economies including China, on the one hand, resources and energy consumption need to be considered. Especially under the background of shortage of raw materials and energy products, excessive export activities will eventually lead to China's inflationary pressure, which is not conducive to the goal of medium and long-term energy transformation. On the other hand, we need to be vigilant that the high export boom may mask the downward pressure on the short-term economy. At the policy level, we may need to further peel off the economic vulnerability in order to better "suit the remedy to the case".
Opportunities and challenges coexist. The economic characteristics of the post epidemic era urgently require countries to strengthen cooperation and jointly overcome international economic challenges, which also provides a rare opportunity to alleviate medium - and long-term "contradictions". In 2022, in China's foreign economic and trade strategy, it may be necessary to more actively grasp the current window period of easing Sino US economic and trade relations, and form friendly agreements conducive to medium and long-term economic and trade development in this special period, which will have a far-reaching positive impact. In addition, while ensuring exports, we can also consider further making good use of imports, such as appropriately increasing imports Shenzhen Agricultural Products Group Co.Ltd(000061) , energy products and other commodities with future supply pressure, managing the "advance quantity" and being more comfortable in the policy of ensuring supply and stabilizing prices.
Capital markets support global economic recovery
After the outbreak of the global epidemic, governments of various countries (or regions) have strengthened macro policy coordination, comprehensively applied macro policies such as finance, currency and employment, and spared no effort to restore economic and financial order. Since 2021, the global epidemic has been repeated, the pressure of "stagflation like" has continued, the spillover effect of marginal adjustment of monetary and financial policies in major economies has gradually emerged, and the global economic recovery and stable development are facing new challenges. How to prevent and resolve various risks in the global capital market, enhance the ability to support the real economy and support the stable recovery of the global economy has put forward higher requirements for the market players and decision-makers of the financial industry in various countries. In this situation, global regulators should enhance mutual trust, strengthen cooperation, overcome difficulties, jointly deal with risks and challenges, deepen practical cooperation in capital markets, and jointly assume the major responsibility of promoting the stable development of global economy and finance.
Overall, the global capital market withstood the impact of the epidemic, showed strong resilience and quickly returned to normal function. On the one hand, the stock markets of major economies performed well, which played an important role in stabilizing confidence and improving expectations. On the other hand, the basic functions of the capital market have been effectively brought into play, which has strongly supported the recovery and development of the real economy. China's capital market still adheres to the direction of marketization, legalization and internationalization. It has achieved remarkable results in deepening reform, expanding opening up, strengthening supervision and enhancing cooperation, and has played an important role in coping with the epidemic and promoting economic and social development. Looking forward to the future, China's capital market will strengthen overseas international regulatory cooperation, actively adapt to new business forms and models, cooperate to deal with new problems and tests, and continue to play a positive role in promoting the CSRC to learn from international experience, promote the reform and opening up of the capital market and the stable and healthy development of the new ecology of the capital market.
