The 2015 Summer Davos Forum will be held in Dalian City, Liaoning Province from Sept. 9 to 11. The new normal of China’s economic growth, global economic growth, the fluctuation of the Chinese stock market as well as other topics will be discussed at the forum.
The forum will focus on the theme of “Charting a New Course for Growth” and conduct more than 100 sub-forums on six topics, including the economic uncertainties, the reform of science, the overthrown industries, the new normal in China, environmental limits and the meaning of human beings. 1,500 representatives from more than 90 countries are expected to participate in the forum.
World economy bogged down, time for raising interest rate by Fed catches attention
Since 2015, the world economy, the Europe and Japan in particular, was dragged down again. According to the data released by the World Trade Monitor, the global trade volume declined by 0.5 percent in the three months ended June. Japan recorded negative economic growth in the second quarter. European countries like Greece, Portugal and Ireland are under the “shadows” of economic stagnation and debt crisis.
The Eurozone countries reached an agreement on the third round of bailout on Aug. 12, planning to provide a bailout loan of up to 86 billion euros to Greece in the following three years. But there are still objections. Germany has been opposing to conducting debt reorganizations in any forms to Greece.
On the other hand, the U.S., the largest economy in the world, shows strong performance. The United States Department of Commerce recently indicated that the annualized economic growth in the second quarter of this year reaches 3.7 percent, far higher than the preliminarily estimated 2.3 percent.
Under the circumstances that the U.S. economy picks up continuously, the U.S. dollar rises higher compared with Euro and other currencies. This pushes the Federal Reserve (Fed) into a dilemma: to conduct the first interest rate increase since 2006 as planned or take no action considering the uncertainty in overseas market?
This session of Davos Forum invited Zhu Min, vice president of International Monetary Fund (IMF), Marcos Vinicius de Souza, secretary of the Innovation Department of the Ministry of Development, Industry and Foreign Trade, etc. to have relevant discussion.
With sluggish manufacturing industry and highlighted emerging industry, where can Chinese economy go?
The latest statistics data released recently shows that China is suffering the “pain” of economic restructuring: China's official manufacturing purchasing managers index (PMI) , released by the National Bureau of Statistics (NBS) on Sept. 1, fell to 49.7 percent which is below the critical point of 50 percent. Previous data released by NBS shows that China’s GDP growth recorded 7 percent in the first half year and the economy saw continuously slowing growth.
Zhao Qinghe, senior statistician of NBS, interpreted the PMI data as that it is mainly caused by insufficient power in manufacturing industry. Some traditional industries see larger structural adjustment, prices of bulk commodities including crude oil continue to drop and manufacturing industry experiences weak demand this year.
Despite the slowdown, China’s economy enjoys the highest growth in 6 years, and has become increasingly influential in the world. In 2014, China’s economy surpassed 10 trillion U.S. dollars for the first time, contributing 25.8 percent to the global economy in the same year, 1.1 percentage points higher than the U.S. and ranking first in the world in terms of its contribution.
The manufacturing sector is sluggish, while the tertiary industry and some emerging industries continue to grow steadily, suggesting that China’s economic reform has yielded remarkable results. In the first half, the tertiary industry accounted for 49.5 percent of the GDP, up by 2.1 percentage points year on year. The transformation from an industry-led economy to a service-led one remained to be a trend. As the “Internet plus” strategy has swept various industries in recent years, emerging industries, such as cloud computing, new material robot, energy saving and environmental protection, have also achieved substantial progresses.
Li Daokui, professor at Tsinghua University, Jing Ulrich, managing director of JPMorgan Chase & Co. and Wang Hongzhang, president of China Construction Bank Corporation (601939.SH) are also invited to the Davos to discuss the “new normal” of China’s economy and its influences to the world.
Pension fund’s participation and other bullish news highlight future stock market
Chinese stock investors have experienced ups and downs in the year. Since the beginning of the year, the SSE Composite Index climbed all the way up from the 3,234 points at the end of last year to a peak of 5,166 points on June 12, hitting a new high in recent years. Yet what followed was unexpected: impacted by the international market, the SSE Composite Index began to slide. On Aug. 24 and 25, the index plummeted by 8.49 percent and 7.63 percent, back to where it started at the beginning of the year.
Recently, relevant policies have been successively launched to stabilize financial market. The State Council released the Regulation on Basic Pension Fund Investment on Aug. 23, which is expected to introduce 600 billion yuan to stock market. The China Securities Regulatory Commission, the Ministry of Finance, the State-owned Assets Supervision and Administration Commission of the State Council and the China Banking Regulatory Commission jointly issued the Notice on Encouraging Listed Companies in Merger and Acquisition, Cash Bonus and Share Repurchase on Aug. 31 evening, which encouraged cash bonus and share repurchase by various ways.
The central bank released document on Aug. 25 evening to announce cut in benchmark interest rate and reserve requirement ratio (RRR). It would lower the RRR by 50 basis points and remove the interest rate ceiling for deposits longer than one year. In addition, it was reported that the central bank conducted 150 billion yuan of seven-day reverse repurchase agreements (repo) on Sept. 1 aiming to further release liquidity.
Zhao Xijun, deputy director of the Finance and Securities Institute at Renmin University of China, expressed in an interview by journalists from finance.cnr.cn that the central bank lowering the benchmark interest rates and RRR intended to strengthen investors’ confidence and reduce enterprises’ costs to obtain capitals so as to improve their profitability.
With so many bullish policies unveiled, the future of China’s stock market still affects the feeling of investors.
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