Bank of China : Issued Report for 2017 Economic and Financial Outlook

On December 8, 2016, Bank of China issued its report for 2017 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 2017, based on the review of 2016.

Global Economic and Financial Outlook: In 2017, the global economy is expected to improve moderately, the U.S. economic growth is likely to accelerate，the European economy recover Steadily amid Multiple Challenges，the Japan economic growth is expected to edge up. Emerging economies in Asia Pacific are expected to maintain relatively higher growth and continue to be the key forces in promoting the steady growth of the global economy. The Fed's rate hike may be accelerated，USD will maintain its strong position，global stock market will fluctuate downwards，the bond yield of developed countries will increase，commodity market will seek further re-balance。the policies of the Trump administration, Fed's rate hike and the general elections in European countries are potential risk points. The implementation of expansionary fiscal policy and foreign trade protectionism that Trump mentioned will be beneficial to the U.S. economy. The capital flow in the Asian emerging markets may be worse. Global policy coordination should be enhanced.

China's Economic and Financial Outlook: In 2016, the Chinese economy continued to grow steadily, with downward pressures mitigated somewhat, under the influence of the cumulative effects of policies to stabilize growth, continued heating up of the real estate market and rising commodity prices. In 2017, China will press ahead with supply-side reforms, and witness further transitions from old growth engines and models to new ones. The national economy is expected to stabilize as a whole, with GDP to grow at around 6.7%. However, more complicated and ever-changing development environments and conditions at home and abroad will definitely lead to greater uncertainty. Macro policy should focus on stabilizing growth, suppressing bubbles and preventing risks. China should maintain a proactive fiscal policy, and is likely to further strengthen such a stance; monetary policy will remain moderate and adequate, and is unlikely to either tighten or loosen substantially. In advancing the 'elimination of excess capacity, deleveraging, destocking, cutting costs and overcoming weaknesses', China will attach more importance to steering industrial transformation and upgrading, and to coordination and collaboration among policies during supply-side reforms, and put more stress on controlling house prices, destocking and establishing relevant mechanisms in its efforts to regulate the real estate sector.

Global Banking Industry Outlook: In 2016, global large banks showed such features as rally of size, reduction of profitability and accumulation of systematic risk overall，the U.S. banking industry was sound in general; the Eurozone and Japan banks had to bear great pressure if they want to improve business results; the UK banking industry faced great uncertaintie. In 2017, the size of China's listed banks will continue to expand at double digit. The contribution of non-interest income to total income will be kept above 30% steadily. The rise of NPL ratio will be slowed. Retail banking will enter into a new phase of development. FinTech will penetrate into traditional banking steadily. Listed banks will seek for strategic optimization in their internationalization drive. Net profit growth rate will be basically flat, but the businesses with interest difference are still challenged. Cost-to-income ratio will come to the inflection point. Capital adequacy pressure will become heavier. Securing sound operation and maintaining sustainability is the key to improve banks' competitiveness.

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