Upbeat world economic forecast supported by growth, innovation

by Mai Huong

HONG KONG – The International Monetary Fund (IMF) is optimistic about the current state of the world economy while predicting faster growth across all regions and highlighting China’s vital role in promoting globalisation.

David Lipton, IMF first deputy managing director, launched the Asian Financial Forum 2018 on Monday in Hong Kong with his reflections on the “Asian Economic Outlook,” during an early demonstration prior to the IMF’s update on the world economic outlook, to be issued next week.

“Right now, the sun is shining on the global economy,” Lipton said.

With rising investments and demand, the recovery is being spread across the entire globe, particularly in Asia, which contributes two thirds of global growth, driven by continued growth in China and the strengthening of the Japanese and Indian economies.

While being bullish on the outlook, Lipton remained unclear on how long the good news will continue, and highlighted the key challenges that the world needs to address to promote stronger growth.

His main concern, shared by investors and policymakers, is that geopolitical tensions, the risk of unexpected monetary policy developments and exchange rate fluctuations, coupled with the rapid appreciation of asset valuations during the previous years, could swing market sentiments and trigger a sudden reversal of capital flows.

“Worse yet, some developing countries seem likely, once again, to face difficulties from the burden of rising debt” Lipton added while indicating that over 40 countries, including some emerging market countries, will grow more slowly or fall behind developed countries.

China’s global role

Lipton suggested that it is time for the world to consider the “spill-over effect” of Chinese policy-making, as it had previously done with the United States (US) and Japan, given its global importance.

China is a key trading partner to over 100 countries, representing a combined 80 per cent of global GDP. It is also a major investor and creditor, with Chinese lending making up 25 to 30 per cent of the GDP of some recipient countries.

“It is the hub of the global supply chain, a magnet for commodity exporters, and a source of final demand,” Lipton stated.

In terms of globalisation, China has been a voice of reason in preserving and promoting a multilateral trading system, in the context of rising doubts among advanced economies.

However, to cement its leading role in globalisation, Lipton advised the country to look at its own restrictions on trade and investment, which has drawn criticism from certain trading partners. He also called for the further protection of intellectual property rights and the reduction of distorted industrial policies, overcapacity and policies that favour state enterprises.

Concerning recent US-China trade conflicts, Jacob J. Lew, US secretary of the treasury, highlighted several issues that are undermining their two-country bilateral relationship, including China’s monetary measures, which the US says is “money manipulation,” as well as the limited market access for foreign firms.

He also called for increasing trade interactions between the two sides and suggested that they settle trade disputes through a multilateral trading system, such as the World Trade Organisation (WTO), adding that any settlements agreed through a rule-based trading system is not a trade war or a disruption to their relationship.

Growth and innovation

Robust innovation is believed to be the driver of economic growth in the new era of the 4th Industrial Revolution, bringing revolutionary changes to the markets and new experiences to businesses and people, but also posing regular challenges.

In her opening remarks, Carrie Lam, chief executive of Hong Kong Special Administrative Region, highlighted Hong Kong’s role as a premier international financial centre, with innovation being deeply ingrained in its DNA.

 “Innovation, the second key word of this year’s theme, must be seized upon to unlock the full potential of the gains from growth and ensure that Hong Kong stays ahead and remains competitive in the wealth creation process of China’s development,” Lam said.

While sharing insights on how to manage the innovative process for success and positive reinforcement, Jiang Yang, vice chairman of the China Securities Regulatory Commission, said that it is crucial to have a clear regulatory philosophy that is open-minded to modern technologies and appropriate regulations, to guide and ensure that it will serve the whole economy.

The 11th Asian Financial Forum, themed, “Steering Growth and Pioneering Innovation: Asia and Beyond,” has gathered over 2,900 attendees from around the world, including government officials, representatives of central banks and regulatory authorities, and finance and business leaders. The event is co-organised annually by the Hong Kong Special Administrative Region Government and the Hong Kong Trade Development Council. – VNS