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Year-ender: World economy in 2015-Still calm, but far from smooth

Editor: Li Kun 丨CCTV.com

12-30-2015 17:51 BJT

By Niu Huayong, Dean of the International Business School, Beijing Foreign Studies University

The world economy in 2015 can be described as "modest, with clear direction." There were no special improvements or unexpected risks. China's economy had turned into a "new normal." Apart from steady performance of the United States, the economies of European Union, Japan, Russia, and a few developing nations had witnessed declines in their GDP (gross domestic product).

 

Moscow and Tokyo had introduced more macroeconomic reforms that captured much international media attention, but their economic data showed poor results.

The world economy is experiencing profound structural changes, since the balance of economy powers is being broken, along with its engines of growth, monetary system and governance structure.  The global economy has fallen further, and the emerging economies seek a new global governance structure.

Differentiation of global macroeconomic policies

Since last March, the European Central Bank (ECU) has implemented a quantitative easing policy to stimulate the European economy.  Such measures were first adopted during the 2008 financial crisis and has been emulated by major economies worldwide ever since.

At the end of 2015, the Federal Reserve (FED) started another operating cycle to indicate changes of U.S. monetary policy. By contrast, China's economy has gradually adapted to medium and high-speed growth in the "new normal." Beijing supports a moderately loose monetary policy, and favors a reformed supply side.

Facing weak international commodity market prices, China, as a big manufacturing nation, whose domestic demand and exports are facing greater pressure, would unlikely shift its monetary policy.

While low oil prices and quantitative easing policy have not really helped Europe, the European Commission warned the continent's financial crisis would still plague its regional economy, due to high debt levels. 

Accordingly, the Europe's macroeconomic policies would differentiate from that of the United States for a period of time.

Economic globalization speeds up

In June 2015, the China and South Korea Free Trade Agreement was signed, as well as free trade agreements between China and ASEAN (Association of Southeast Asian Nations), Australia and New Zealand.

On December 5, US-led Trans-Pacific Strategic Economic Partnership Agreement (TPP) negotiations had concluded with 12 countries participating. Meanwhile, the ASEAN-initiated Regional Comprehensive Economic Partnership (RCEP) and the US-led Transatlantic Trade and Investment Partner Agreement (TTIP) are being promoted.

Such trade integration addresses problems with WTO (World Trade Organization) development. Regional economic integration is transforming international trade with far-reaching impact on global governance.
 
New changes in global economic governance structure

The existing system of global economic governance has been led by major western industrial countries, who shun the emerging markets.

In 2015, China, as the largest developing country, has made eye-catching achievements in the process of building a new global economic governance system, as the country has established the Asian Infrastructure Investment Bank (ASIIB) and the Chinese currency, RMB, was welcomed into the International Monetary Fund(IMF)'s Special Drawing Rights (SDRS) reserve currency basket.

China, the US and major economies, G20 Summit, APEC Summit, the UN Climate Change Conference, etc., have all made progress on cooperation mechanisms. These developments can rebalance global governance later on.
 
China is a global economic growth engine

Despite China's economic annual growth rate dropping to about 7%, the country had contributed to a third of global GDP growth.  Even if China's economy growth rate has fallen from 10% to 7%, China's status of the world's economic engine remains irreplaceable.

Ten years ago, China's growth engine had outshined all others, while today it continues to enjoy a high rate of economic growth, and the largest new wealth creator.  China's leading role in the global economy stands unchallenged.

(Courtesy to the G20-BFSU Center, Beijing Foreign Studies University)

 

( The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )

 

 

Panview offers a new window of understanding the world as well as China through the views, opinions, and analysis of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

Panview offers an alternative angle on China and the rest of the world through the analyses and opinions of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

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