01 Global Economic Forecast Released

Amidst the backdrop of recurring pandemics, the Russia-Ukraine conflict, energy crises, and inflation, 2022 is drawing to a close. The data indicators of the world's major economies have gradually approached the most authentic levels for the full year. Recently, the global economic forecast for 2022 has been released. So, how do the data look? Particularly, how do China and the United States perform?

Let's first take a look at the economic data of the world's major economies for the first three quarters.

The United States' nominal GDP for the first three quarters increased, totaling approximately $18.79 trillion, with an increase of about 1.9%!

Germany's GDP for the first three quarters of this year grew by about 1.11% year-on-year, with a total GDP value reaching $3 trillion, still maintaining its position as the largest economy in the European region.

Now, let's look at China. The GDP value for the first three quarters could reach $13 trillion. As for GDP growth, the actual year-on-year increase could be around 3%.

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Let's also take a look at the forecast values for 2022. The Organization for Economic Cooperation and Development (OECD) has released its latest economic outlook report.

The report points out that the global economy is predicted to grow by 3.1% this year, but it is far from the 5.9% increase last year. The growth rate for 2023 has also dropped to 2.2%, and it is expected to grow by 2.7% in 2024.

This means that this year and in the following years, the global economy will be in a downturn, with inflation remaining high! However, amidst the global downturn, there is actually a divergence among countries!

The economies of the United States and Europe are falling into recession, while Asia becomes the "main force" driving global economic growth!The OECD forecasts that the United States' economic growth rate for this year will be 1.8%, with growth rates of 0.5% and 1% for 2023 and 2024, respectively. Although still growing, these rates are not comparable to the 5.9% growth rate in 2021.

Looking at the Eurozone, it is expected to grow by 3.3% this year, but the economic growth rates for the next two years are hardly worth mentioning. The growth rate for the 19 Eurozone countries in 2023 is only 0.5%, and it will only slightly accelerate to 1.4% in 2024, increasing by 0.9%.

Against the backdrop of the economic downturn in Europe and America, Asia's economic growth rate is看好. Of course, whether it's the United States or Europe, not only the OECD is pessimistic, but also the International Monetary Fund, Goldman Sachs, and Morgan Stanley are not optimistic!

Regarding Asia, the OECD stated that the growth in the international economy in 2023 mainly comes from emerging market countries in Asia, which will account for three-quarters of the world's growth next year.

What about China? The International Monetary Fund's forecast for China's overall economic growth rate this year is 3.2%, and the actual growth rate for the first three quarters is 3%. This indicates that the fourth quarter's growth rate is increasing on a quarter-over-quarter basis!

Undoubtedly, whether it's China and the United States or Japan and Europe, the economy and growth rates are declining compared to last year!

Relatively speaking, our decline is more moderate, especially entering the next two years, but the decline in Europe and America will accelerate! According to data, Asia's economic growth rate will rise from 3.6% in the first quarter of next year to 5% in the second half of the year, at which point it may return to the level of 2018-2019.

02 Economic Warfare Amid Recession

In fact, this year's economic recession has undoubtedly evolved from an economic downturn under the backdrop of the pandemic into an economic war!

We say that this is a global recession. Under the backdrop of the pandemic, no one can resist the overall trend. However, Western countries led by Europe and America have undoubtedly turned this recession into an economic war mixed with interest disputes, technological suppression, geopolitical issues, and forced decoupling.Let's examine what the United States has done during this economic recession.

Firstly, the U.S. leveraged its dollar hegemony to reap a global harvest, as evidenced by the exchange rates of various countries. The U.S. initially flooded the market, driving up global inflation, and then raised interest rates to bring dollars back home. Other countries suffered from capital flight and devaluation, particularly export-oriented economies such as the Eurozone, Japan, and Turkey. Of course, our renminbi also depreciated significantly! The borrowing and importation of goods became more expensive for these countries, with most enduring the pain of imported inflation.

The severity of this data is such that if the dollar appreciates by 10%, the average inflation rate of other countries would rise by 1%. For economies highly dependent on imports, this figure would be even higher. As a result, global inflation is projected to reach 8.8% this year, 6.6% next year, and around 5.1% by 2024.

Secondly, there is the U.S.'s suppression of China, especially in the technology sector. To curb our technological development, the U.S. has been suppressing and sanctioning at every turn, particularly in the chip industry chain. Not content with its own sanctions, the U.S. has also dragged the Netherlands and Japan into the fray. However, the Netherlands has forcefully pushed back. In this era of global division of labor, suppressing China is inevitably self-defeating! The U.S.'s series of actions, forcing decoupling, has dragged both the Chinese and American economies into the water. Of course, the signs of U.S. recession are more apparent, after all, we are their largest market!

Thirdly, Europe and the U.S. have been meddling in the Russia-Ukraine war, with European countries once again acting against their own interests. While the U.S. has been making a fortune from arms sales and oil profits during the Russia-Ukraine war, Europe has essentially sold itself out. By providing money and aid to Ukraine in the conflict, they have angered Russia, leading to a cutoff of gas and oil supplies, plunging themselves into an energy crisis, soaring inflation, and an accelerated economic recession!

The economic growth rate of Europe largely depends on its dependence on Russian energy. Given the current situation, the Russia-Ukraine war is not expected to end in the short term, which implies that Europe's high inflation will continue. In terms of inflation, the OECD estimates that the Eurozone, the most affected by the energy crisis, will record 8.3% this year, 6.8% next year, and 3.4% in 2024. This is a drag on the global economy!

03 The Direction of Sino-American Economies

So far, it has become quite clear that under the recession of both Chinese and American economies, the future will head in two directions!

In the previous content, we discussed that the petrodollar hegemony is collapsing, which also means that the dollar hegemony faces a certain crisis. It is not easy for the U.S. to build a new generation of hegemony. After gold and oil, what else is there? Currently, the U.S. has triggered de-dollarization in multiple international incidents, especially in this year's global harvest, causing a loss of credibility in the dollar. Once the dollar loses its credibility, it will lead to a domino effect of abandonment!

The U.S. still faces a severe inflation problem. Although the Federal Reserve has raised rates by nearly 400 basis points this year, inflation remains high. Even though the CPI increased by 7.7% year-on-year in October, and the core CPI increased by 6.3%, showing a decrease in inflation, the inflation rates for the current and next year will record 6.2% and 6.8%, respectively, and will continue to be higher than the Federal Reserve's 2% target range for a long period. The Federal Reserve also expects that it will only slow down the pace of rate hikes later, rather than stopping the rate hike altogether.The persistently high inflation not only causes global distress but also brings shocks to the capital market, with the market value of large U.S. technology stocks continuously shrinking!

At the same time, against the backdrop of an economic downturn, layoffs in the United States continue unabated, from the internet to Silicon Valley, and then to Wall Street, layoffs have become the norm. Of course, we also have downward capital markets and layoffs in our country, which is a situation that all will face under an economic downturn!

The difference is that our economic expectations will be positive, and our renminbi is gradually moving towards internationalization, which is the big trend of the future!

In fact, we can also see that we have the advantage of domestic and international markets, which can prevent the economy from hard landing under the background of rampant epidemics. Moreover, in previous articles, we analyzed that compared with consumption and investment, our trade has not been greatly affected, which is still under the background of the United States' comprehensive blockade, which is our advantage!

Overall, once the epidemic improves and epidemic prevention policies shift, our recovery process will accelerate, but the United States may not necessarily!