IFF Newsletter Issue 136

TIME：2024-08-16

From the Editor

The gross domestic product of the Guangdong-Hong Kong-Macao Greater Bay Area will expand by more than 5 percent this year thanks to a gradual recovery of foreign trade and strong economic growth in Hong Kong and Macao, a report by Guangzhou University and Social Sciences Academic Press China predicted.

The European Union’s proposed reform of its foreign direct investment screening regulation is mainly directed at China and the United States andis driven by concern about how the two nations will impact domestic EU industries such as semiconductors and new energy, according to a Chinese specialist.

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Latest from the IFF

Xinhua News Agency Interviews Lin Jianhai, Executive Vice President of the IFF

Xinhua News Agency's Economic Reference News conducted a written interview with Lin Jianhai, Executive Vice President of the International Finance Forum (IFF) and former Secretary-General of the International Monetary Fund (IMF). In the interview, he expressed his insights on how to view the world economy which is full of changes, what the highlights and challenges of the world economy are, and how China's economy will develop. Lin Jianhai analyzed that the performance of the world economy this year presents four major features: a slow and uneven pace of economic growth; improved global trade prospects, but a long-term trend that is still not optimistic; from the perspective of monetary policy, market-determined interest rates in developed economies have begun to decline, but will still be higher than the pre-epidemic level; and from the perspective of the U.S., the world's largest economy, its growth has stabilized, but the problems are still serious. Lin warned of several major challenges facing the global economy: the high level of debt in various countries, which casts a shadow over future economic development; the heightened risk of decoupling in the world economy and trade; the turmoil of regime change, which adds more uncertainty to the global economy; and geopolitical relations and global security tensions, which are likely to continue, leading to a high degree of uncertainty in world energy and food prices.

IFF Members William Rhodes and John Lipsky authored an op-ed for Project Syndicate

IFF member William R. Rhodes, Co-Chair of the Bretton Woods Committee's Sovereign Debt Working Group and former Chairman and CEO of Citibank; and John Lipsky, Co-Chair of the IFF Advisory Board and Co-Chair of the Bretton Woods Committee's Sovereign Debt Working Group and former First Deputy Managing Director of the International Monetary Fund, published a joint op-ed in Project Syndicate titled 'Addressing Global Challenges Requires Financial Innovation'.This paper provides an in-depth discussion of the positive role of multilateral institutions in addressing global and existing challenges, particularly emphasizing the constraints posed by insufficient financial resources on concerted action. Notably, the authors propose Sovereign Climate Debt Instruments (SCDIs) as an important path for attracting private funds to participate in global governance. By flexibly adjusting the terms of debt servicing, SCDIs provide a safety cushion for borrowing countries to cope with unpredictable risks open up a new profitability space for investors, showing the potential for the in-depth fusion of financial innovations and sustainable development goals.

IFF Institute Contributing Fellow Haiyan Li Publishes Research Article on Carbon Neutrality

Li Haiyan, a contributing researcher at the IFF Institute, wrote a research article entitled 'Thinking about Future Development in China from the Nature of Carbon Neutrality'. The article provides an in-depth discussion on the definition of carbon neutrality, its impacts on human society, and why carbon neutrality is regarded as part of the fourth industrial revolution. It argues that carbon neutrality is not only an energy revolution but also a reconfiguration of industries, which will profoundly change the development pattern and geographical layout of various industries. The article further analyzes why carbon neutrality is a huge opportunity for China. As the world's largest producer of industrial products, China has a significant advantage in renewable and clean energy. At the same time, China's latecomer advantage allows it to draw on the carbon-reducing technologies and products that developed countries have accumulated over the past decades. In addition, China's institutional strengths provide a strong guarantee for a rapid transition in the area of carbon neutrality.

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China News

The Top-level Design Document for A Comprehensive Green Transition is Out

On August 11, the CPC Central Committee and the State Council issued the Opinions on Accelerating Comprehensive Green Transformation of Economic and Social Development. This is the first time the central level has systematically deployed the acceleration of a comprehensive green transformation of economic and social development. The Opinions put forward a series of goals: by 2030, the scale of the energy-saving and environmental protection industry will reach approximately 15 trillion yuan; the proportion of non-fossil energy consumption will increase to about 25%; the carbon emission intensity of operational transport per unit of turnover will decrease by about 9.5% compared with 2020; the annual utilization of bulk solid waste will reach about 4.5 billion tons, and so on.

China's Greater Bay Area Economy to Grow Over 5% This Year, Report Says

Foreign trade of the nine cities in Guangdong reached a record high ofRMB 4.96 trillion (USD690.9 billion) in the seven months that ended July 31, up 14.3 percent from a year ago. The figure in July rose 16.1 percent to RMB 769.7 billion (USD107.2 billion) year-on-year.

China's Plastics Exports Soar 7.2% in First Seven Months as Producers Target Emerging Markets

China’s plastic exports surged by 7.2 percent in the seven months that ended in July from a year ago in US dollar terms, despite weak worldwide demand and a slow recovery. Many Chinese plastic makers are turning to emerging markets and the growing overseas recycled plastics market to boost sales.China’s plastics manufacturers have increased exports to Southeast Asia and makers of plastic daily commodities, whose main markets are China, Europe, and the US, are making a greater effort to expand to emerging markets.

PBOC Adds USD14 Billion of Refinancing to Help Farmers, Small Firms in Need of Disaster Relief

The People's Bank of China has decided to add CNY100 billion (USD14 billion) of refinancing to support agricultural and small businesses in 12 provincial-level regions that havebeen ravaged by floods. The move is aimed at bolstering flood prevention, disaster relief, and post-disaster reconstruction in the severely hit areas, as well as boosting credit support for businesses there, especially micro and small firms, sole proprietors, agricultural companies and individual farmers, the central bank said. The regions that will receive the additional refinancing, PBOC loans to financial institutions, are the provinces of Fujian, Guangdong, Henan, Heilongjiang, Hunan, Jilin, Jiangxi, Liaoning, Shaanxi, and Sichuan, as well as the municipality of Chongqing and Guangxi Zhuang Autonomous Region.

China’s Affordable Housing Real Estate Investment Trusts Outperform Other REITs Amid Policy Support

The price of China’s five real estate investment trusts based on affordable houses, subsidized by the government, have grown faster than other REITs this year, thanks to the implementation of supporting policies.

The CICC Xiamen Affordable Rental Housing Infrastructure Close-End Infrastructure Fund [SHA: 508058] and the China Beijing Affordable Housing Center Rental Housing Close-End Infrastructure [SHA: 508068] soared more than 30 percent so far this year.

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International News

WMO: Heat Has Devastating Effects

The World Meteorological Organization says hundreds of millions of people were hit by scorching heat throughout July, breaking records in recent decades. Thisindicates that greenhouse gases from human activities are seriously altering the global climate.

July 22 was the hottest day on record globally, and July 23 was a virtual tie. For 13 consecutive months from June 2023 through June 2024, the average monthly global temperature set a new record.

Widespread, intense and prolonged heat waves have hit all continents over the past year. In at leastten countries, daily maximum temperatures exceeded 50°C in several regions.

Investor Confidence in the Eurozone and German Economies Collapses

Investor confidence in the eurozone and the German economy collapsed in August, giving the ECB another reason to cut interest rates the following month. The ZEW Eurozone economic sentiment index fell sharply by 25.8 points to 17.9, the largest decline since the early days of the COVID-19 outbreak in April 2020.

Ukraine Estimates the Budget Deficit Will be Close to A Quarter of GDP This Year

Ukraine's finance minister has called on Western allies to speed up the disbursement of a $50 billion loan, claiming that delays in weapons deliveries have exacerbated the country's budget deficit, leading to a situation where Kiev has had to find ways to raise money to pay for the military.

The slow disbursement of Western military aid has contributed in part to the $12 billion increase in military spending. He called on Western allies to expedite the disbursement of loans.

EU’s FDI Screening Plan Targets China, US, Academic Says

The key reason why the EU is setting up investment and trade barriers under the guise of regulation is because the region is not in the first tier when it comes to the new economic areas of chips, new energy, artificial intelligence, and biotechnology, said Zhao Yongsheng, a professor at the University of International Business and Economics and a doctoral supervisor at the Sorbonne University in Paris.

Crude Rally Stalls After IEA Forecasts Oil Surplus

A week-long rally in crude oil, driven by a supply shortfall, eased on Tuesday as the west’s energy watchdog forecast that global inventories would grow next year.

The International Energy Agency predicted that growth in demand for crude would soften as the summer US driving season ended inthe coming weeks and be further covered when planned production increases hit the market later this year.