Bank of China : Issued Report for 2016Q3 Economic and Financial Outlook

On June 30, 2016, Bank of China issued its report for 2016Q3 Economic and Financial Outlook (hereinafter referred to as the 'report'). In this report, there is an outlook for the global and China's economic and financial situation and the world banking industry in Q3, based on the review of 2016Q2. Meanwhile, some hot issues are analyzed in the report.

Global Economic and Financial Outlook: In 2016H1, the global economy was luggish while CPI remained relatively stable. Developed economies recovered slowly, and the Fed postponed its interest rate hike; the growth of emerging economies slowed down, with such countries as Russia and Brazil still mired in recession. Global financial market was picking up. In emerging countries, the exchange rates rallied following a general and in-depth depreciation, the stock markets went through sharp fluctuations, commodity prices bottomed out and the financial stability improved. According to our prediction, in 2016Q3 and the rest of the year, the global economy will remain luggish, the financial markets will be exposed to non-decreasing risks, the factors, including the Fed's rate hike and the UK's exit from the EU ('Brexit'), will further exert influence upon the risk aversion sentiment. The present report makes the following specific analyses in particular: the boosting of global economic cooperation under G20, the influence on the world economy by the American presidential election and Brexit, as well as the capital flow of emerging markets.

China's Economic and Financial Outlook: Under the effects of multiple factors such as the economic stabilization policy, a booming real estate market, and the government's efforts to streamline administration and devolve powers to units at lower levels, 2016H1 saw stable development of China's economy, improvement of enterprise performance and progress in China's reform efforts to address overcapacity, destock and deleverage. However, due to falling private investment and transitional challenges in the Northeast and other areas, China's economy still faced relatively large downward pressure. In 2016H2, due to many global economic uncertainties caused by the gloomy U.S. economic outlook and sluggish growth of world trade, the external environment for China's economy was not looking optimistic. With its weak domestic demand and growing financial risks, China's economy will have a difficult time rebounding in the short term. All factors considered, China's GDP growth in Q3 as well as the full-year growth are expected to be around 6.7%. China needs to implement more effective policy measures to expand aggregate demand, raise real growth towards the potential, ease downward pressure and create opportunities for structural reforms and development of new growth engines.

Global Banking Industry Outlook: In 2015, overall performance of banks in the Eurozone, the UK and Japan was dragged down by the sluggish growth of their economy, fluctuations of bulk commodity prices, the 'Brexit' and the 'negative interest rate' policy. However, in relative terms, the U.S. banks showed sound operation on a whole. In 2016Q2, Chinese listed banks were under great operating pressure, thus their net profit is estimated to grow by 2% year on year and NPL ratio further to about 1.8%. How to further curb the asset quality deterioration and stabilize growth will become an important task in the next stage. The present report will specifically analyze the internationalization of China's banking industry and leverage ratios of non-financial corporations, among other hot topics.

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