In 2020, the world economy is in recession due to the epidemic; in 2021, can it repair the wounds and recover?
According to the report “World Economic Situation Analysis and Forecast 2021” released by the Chinese Academy of Social Sciences in Beijing on the 28th, this process is still full of uncertainty in many aspects.
From government to enterprise, global “high debt”
Affected by large-scale economic rescue and stimulus policies, global government debt levels will rise sharply in 2020.
The report shows that the total government debt-to-GDP ratio of developed economies rose from 105.3% in 2019 to 125.5% in 2020, an increase of 20.2 percentage points in one year. The share of total debt to GDP in emerging markets and middle-income economies rose from 52.6% in 2019 to 62.6% in 2020, an increase of 10 percentage points, and overall exceeded the international warning line of 60%.
Corporate sector debt is also rising. The report cited data from the Bank for International Settlements that the total debt-to-GDP ratio of the global non-financial enterprise sector rose from 92% to 95.1% from the end of 2018 to the end of 2019, and further rose to 96% in the first quarter of 2020. The recession caused by the outbreak will significantly reduce corporate revenue and global corporate debt levels will rise by the end of 2020.
Globalization will welcome multiple games.
Under the epidemic, the debate about whether globalization is “ebbing” has resurre.
The research team of the Academy of Social Sciences believes that the “super globalization” led by developed countries and characterized by the rapid flow of factors of production and optimal configuration on a global scale has ebbed. However, the development of the digital economy and artificial intelligence, the enhancement of emerging economies’ ability and willingness to participate in global governance, the industrialization process of developing countries and the objective demand for integration into the global economic division of labor will continue to support the development of globalization.
The report judges that the future globalization will be the globalization of multiple forces playing games and weighing each other.
From the perspective of the market, the domestic market of developing economies represented by China is growing, which will attract multinational companies to form a new regional agglomeration model around terminal demand. From the perspective of technology and cost, with the change of global factor endowment pattern, the global industrial chain will show a trend of knowledge, digitization and capitalization in the medium and long term. From the perspective of government and policy, the impact of security orientation in the global industrial layout has increased, thus guiding the regionalization and diversification of the global industrial chain.
U.S. stocks do not rule out another meltdown.
After four short-term meltdowns at the beginning of the year, the U.S. stock market has rebounded significantly from April to the present. Looking forward to next year, where will the U.S. stocks go?
The report points out that the negative impact of the epidemic on the U.S. economy is very significant. The outbreak of the epidemic and the economic recession will lead to a decline in the performance of listed companies in the United States and seriously damage the fundamentals of the stock market. But at the same time, the valuation of the U.S. stock market is significantly higher than before the epidemic.
In the view of Yao Zhizhong, deputy director of the Institute of World Economy and Politics of the Chinese Academy of Social Sciences, this is a relatively dangerous signal. He mentioned that before the world financial crisis in 2007-2008 and the collapse of the Internet bubble in 2001, the earnings ratio of the U.S. stock market rose rapidly, reflecting the obvious deviation between stock prices and the world economy.
The report believes that the economic and political uncertainty of the United States will continue to be high in the coming period, and the volatility of U.S. stocks will still rise, which does not rule out the possibility of another sharp decline under certain shocks, nor does it rule out the possibility of another meltdown of U.S. stocks.
The prospect of international direct investment is uncertain.
The impact of the epidemic on international direct investment will appear in 2020. Entering 2021, its outlook is still highly uncertain.
The report, for example, will have the most direct and strong impact on international direct investment; uncertain economic prospects will inhibit the new FDI plan; and financial difficulties and liquidity problems also limit the investment space of many multinational companies.
In the long run, TNCs will pay more attention to increasing supply chain elasticity and supply of key products, and better balancing cost savings and risk diversification strategies to meet the challenges that new external shocks may bring in the future. At the same time, the host country will also formulate policies to achieve self-sufficiency in key products and expand the production capacity of strategic industries.
In addition, affected by the epidemic, the return of international direct investment to China and the trend of regionalization will intensify, and regional transfer and domestic substitution of global value chains will occur, all of which pose challenges to the future development of international direct investment. ( End)