The world is still on the track of low-to-medium growth rate——Analysis and outlook of the world economic situation

　　The world is still on a low-to-medium growth trajectory

　　——Analysis and Outlook of the World Economic Situation (Part 2)

　　Zhang Yuyan

　　If the huge difference in vaccination rates between developed economies and poor countries cannot be eliminated, the global recovery will be hindered and the cumulative loss of global GDP in the next five years will reach 5.3 trillion US dollars.

Even if the impact of the epidemic gradually subsides, the recovery of the world economy still faces various constraints that existed before the epidemic, some of which have become more severe due to the response to the epidemic.

　　The trend of the epidemic directly affects the global economy

　　In the medium and long term, the factors holding back the global economy include debts that have climbed to the highest level in history, slow labor productivity growth, the suspension of the WTO Appellate Body of the multilateral trading system, and difficulties in reaching a consensus on reform negotiations, persistent loopholes in financial supervision, and economic nationalism. It is the rise of resource nationalism.

Cybersecurity, which is closely related to economic activities, has always been a threatening "black swan".

The long-term Treasury bonds of the United States are the core of the global financial system. Almost all countries have U.S. debt reserves and are used as collateral for almost all items and assets, while more than 99.9% of U.S. Treasury bonds exist in purely electronic form.

If someone can invade the U.S. debt system, financial market confidence may collapse, and the global monetary system and financial markets will fall into chaos.

　　Risks, challenges or constraints do exist, but it is also a fact that the global economy as a whole is going up and returning to the mid- to long-term development track.

In the first half of 2021, the economic recovery of major economies was strong, but after entering the third quarter, the overall slowdown and the divergence of growth rate showed the characteristics of rapid and slow growth.

From a global perspective, although the pace of recovery of different economies is not consistent, given that most advanced economies can regain their “lost ground”, it can be said that a significant recovery of the world economy throughout the year is a foregone conclusion.

It is estimated that the global economic growth rate in 2021 will be around 5.5%, and the possibility of growth of 4.5% in 2022 is relatively high.

At the same time, the GDP of emerging markets and developing economies (excluding China) may still be lower than before the epidemic by 2024.

　　In the short term, the biggest risk facing the world economy is probably policy risk.

The improper monetary and fiscal policies of major developed economies to deal with inflation and maintain recovery will trigger turbulent and plummet asset prices, stifle the fragile economic recovery and may push the economy into a stagflation channel, which in turn will affect emerging economies and developing countries.

In the medium and long term, it is still inconclusive under the influence of various factors, such as the result that is beneficial to mankind and the planet. The "business consensus" formed by oligopoly companies in the past 10 years (accustomed to high profits, low investment, and weak competition) Whether it will come to an end remains to be seen. We believe that the world is still on a low-to-medium growth track, and the world's economic growth rate will remain at a low-to-medium level in the next 3 to 5 years. Of course, there will be significant differences in growth rates between countries and regions.

　　Supply chain damage risk and resilience

　　Over the past year or so, the world has witnessed and felt the pain of blocked supply chains. Chip shortages, insufficient energy supplies, poor shipping and skyrocketing freight rates have become the main pain points of global supply chains.

The International Finance Association has issued a warning that the possibility of supply chain disruption in the US production system has increased. The current manufacturing delivery delay is as serious as the situation in Japan after the Fukushima nuclear disaster in 2011, and it has begun to spread to the world.

This also forces companies to bet on an inefficient but resistant supply chain, which ultimately pushes up prices.

The Drewry Shipping Index, which measures container costs, increased by 291% in September 2021 from a year ago. For example, freight rates on busy routes from East Asia to Europe’s largest port, Rotterdam, reached six times what they were a year ago.

Coal prices have tripled in the past year, natural gas prices have increased fourfold, and electricity prices in Germany have more than doubled since February 2021.

The reason for the skyrocketing energy prices is related to the supply chain obstruction, while the root causes are repeated epidemics, economic recovery faster than expected, and insufficient investment in the oil sector: oil and natural gas investment will fall by 20% in 2020.

　　Supply chain resilience has become a hot topic in the past two years.

For enterprises, trade tensions among major economies, severe impacts on the multilateral trading system, frequent occurrence of climate and natural disasters, and frequent cyber attacks have increased the possibility of supply chain disruptions in different dimensions.

Due to technological progress and proliferation, especially the unstoppable trend of production digitization, the space for labor cost arbitrage has gradually become narrow.

With the popularity of online shopping, consumers' demand for fast delivery has risen, and whether it can be delivered quickly has become an important part of the competitiveness of enterprises.

The impact of the epidemic has made companies realize that it is profitable to thoroughly reassess the value chain, shorten the supply chain, dilute or diversify the supply chain, and invest in a more resilient supply chain.

　　From a national perspective, the continuous increase in economic interdependence has always been regarded as the source of geopolitical stability, but now it is considered by some to be the Achilles’ heel, because the high concentration of supply in the eyes of some means a high degree of dependence. "National security" is about the game of great powers.

Based on this, the United States and other countries have successively introduced or planned to introduce a series of policies aimed at increasing the self-sufficiency rate or localization rate, encouraging the return of the manufacturing industry or diversifying the supply chain, and some people even publicly advocated the so-called "decoupling", which is mainly aimed at China.

A typical example is that US President Biden signed Executive Order No. 14017 on "U.S. Supply Chain" on February 24, 2021, instructing the government to conduct a comprehensive review of the U.S. critical supply chain to identify risks, address vulnerabilities, and formulate strategies to improve resilience .

To this end, the U.S. government has established a working group covering more than a dozen federal departments and agencies to consult with hundreds of stakeholders from business, academia, Congress, and U.S. allies and partners to identify loopholes and formulate solutions. The key products involved include semiconductor manufacturing and advanced packaging, high-capacity batteries, key minerals and materials, medicines and APIs.

　　However, although from the perspective of the enterprise level and the big country game level, some people are pulling the global supply chain to deviate from globalization, but the reality of at least 2021 does not support the above judgment, especially the data related to China. Counterexample.

The main reason lies in China's continuous and firm opening-up policy and market size.

According to a survey conducted by the American Chamber of Commerce in Shanghai and PricewaterhouseCoopers China in September 2021, 78% of the 338 interviewed companies indicated that they are “optimistic or slightly optimistic” about the company’s business prospects for the next five years, which is nearly higher than the same period last year. 20%, while 10% of companies feel "pessimistic", compared to 18% a year ago.

　　Accelerated demographic changes have far-reaching impact

　　Population is a medium- and long-term variable, and when accumulated to a certain extent, it will have a significant effect in the short term.

Demographic changes are mainly reflected in the population size, age structure, ethnic group ratio, and cross-border population mobility.

Population forecasting is an important planning and risk management tool for governments, enterprises, non-governmental organizations and individuals.

The government needs to estimate people’s needs for schools, hospitals and other public services through short- and medium-term plans, help with long-term financing of infrastructure construction, plan the necessary skills and knowledge for the future workforce, invest wisely in health research and development resources, and understand the potential Environmental, military, geopolitical and other risks, and implement prevention or mitigation strategies.

For companies engaged in investments with long-term returns, population forecasts are equally important.

At the same time, ordinary individuals will also pay attention to whether there are enough workers to pay taxes to support the pension and medical benefits of retirees.

In addition, demographic changes also involve international and national security and stability.

According to the United Nations Department of Economic and Social Affairs (UNDESA), the global population will increase from the current 7.7 billion people to 8.5 billion in 2030, 9.7 billion in 2050, and reaching a peak of 11 billion in 2100.

　　From the perspective of age structure, industrialized countries or economies generally enter an aging society. In 2020, the elderly over 65 in Japan accounted for 28% of the total population, 20.3% in the EU27, 16% in the United States, and 15% in Russia.

Among emerging economies and developing countries, 11% of China’s elderly people over 65 years old have taken the steps to move towards an aging society.

In stark contrast to the rapidly aging society is the population explosion in some developing countries.

At present, the fastest population growth rate is Africa, with a total of 1.3 billion people, which is expected to increase to 2.6 billion by 2050.

A high proportion of the young population can generate a demographic dividend, but the reaping of the demographic dividend must be combined with the continuous accumulation of human capital, the savings rate and the investment rate, and the system and mechanism reforms that can greatly reduce transaction costs and uncertainty, social stability, and sustainable development of the ecological environment It can only be achieved by combining with others.

　　The aging of the population in developed economies has a huge impact, which is mainly reflected in the following aspects.

The first is the decrease in labor supply, which may reduce the potential growth rate; the second is the increase in financial expenditures related to social security and medical insurance, and the resulting deficit pressure may drag down the long-term economic growth; the third is the decline in the ability and willingness of the elderly to innovate, which affects labor Productivity increases; fourth, consumption demand decreases, investment growth and structure will be changed; fifth, immigration policies may be forced to adjust, and domestic society will be split as a result; sixth, the political participation of a large number of elderly people has risen, and internal political games in various countries The process and results are changing. Seventh, automation has caused a large number of unskilled laborers to lose their jobs. By automating more knowledge-intensive tasks (such as analyzing consumer credit ratings and providing financial advice), it reduces the need for human participation in work.

　　In a sense, the most certain trend in the next 20 years is a major change in the demographic structure.

Some scholars describe this transformation vividly in three "colors": more gray (aging), more green (increased output per hectare with technological progress), and less white (in the United States). And the proportion of whites in the total European population is declining rapidly).

Some scholars understand the demographic transition or "turning point" as the end of the largest and high-quality labor force growth in history.

　　(The author is a researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences, and a professor at the University of Chinese Academy of Social Sciences)