There is no doubt that the global economy is entering an era of recession. Overall, the world's major economies have experienced slowdowns in growth and inflation.
The US economy has contracted for two consecutive quarters this year, while the growth rate of G7 (G7 ) in the second quarter was only 0.2%, which is achieved with the help of Italy and Canada.
In EU and the United States, inflation rates remain high. Despite several rounds of rate hikes, it still hovered above 8%. Fed 's interest rate hike seems to be going on for some time.
The strengthening of the US dollar and capital inflows have caused a devastating ripple effect worldwide, especially for emerging economies with heavy burdens on foreign debt denominated in US dollars.
So far, as my country's inflation level is still low and the depreciation of the RMB is still under control, so China has not been affected compared to other countries. At the same time, my country's extremely flexible export trade is still playing a huge role in promoting the economy, bringing us surprises month after month, quarter after quarter.
But some say our country's export engine is losing momentum because the weakness in the global market will eventually be reflected in demand for Chinese-made goods.
Global economic growth slowdown and inflation seem to continue, but it is worth noting that the economic problems we are currently facing are completely different from those of the United States and the European Union, so macro policy tools are also different. Whether the world's three largest economies can coordinate and lead the global economy out of recession remains a huge challenge.
As far as the US economy is concerned, the root cause of the problem lies in overheating of total demand. Multiple rounds of "money printing plans" related to COVID-19 have finally begun to work. Even after several major interest rate hikes, the US job market remains very strong, with the unemployment rate in August below 4%.
U.S. inflation is the result of a combination of multiple forces, including the rise in commodity prices, the continued impact of major relief during the epidemic, and the cumulative effect of long-term low interest rates that drive excessive investment. In short, this is an economic imbalance characterized by the total demand exceeding the total supply.
The EU also faces imbalance, but this is caused by a shortage of energy supply. Soaring energy prices and energy shortages are currently affecting production in Europe. As an economic power in the euro zone, many German companies face operational difficulties, and some companies have been completely driven out of the industry. Essentially, the problem with is that the supply is too cool.
However, in my country, the supply chain network is still producing products, which shows that it is correct to make efforts in exports. The biggest challenge of is the insufficient domestic demand.
Domestic consumption needs to recover now, and the country is also promoting fiscal policies through infrastructure projects and other public expenditures, but these things often take a little time to penetrate into people's pockets.
Usually, demand will rebound strongly immediately after the pandemic, just like it was after the Spanish flu in 1918. But now, domestic companies do not want to bear more debts, so this policy has not yet seen much progress after its implementation.
But in fact, China's situation is easier than the United States and the European Union, Because from the perspective of macro-policy, the challenges facing our country are easier. The United States and the EU must deal with the pain of reducing demand, and in China the opposite is true – demand needs to be increased.
So my suggestion is also very simple. Persevere patiently for a while, wait for more relaxed policies to be implemented, and wait for the return of consumer sentiment. It is only a matter of time before China can break through this "level".
