Review of the world economy in 2016： adjustment and change continue to coexist with opportunities and challenges

　　In 2016, the world economy continued to adjust deeply, and the risks brought by various changes were also increasing. The global economic growth rate has slowed down compared with 2015, the growth pattern of developed economies has diverged, and the overall growth rate of emerging markets and developing economies has gradually stabilized. During the year, the growth rate of international trade continued to be sluggish, global capital flows intensified, and commodity prices rebounded due to capital flows, but fluctuated greatly.

　　The negative impact of the sustained slowdown in world economic growth has gradually become prominent, and the changes in the world economic structure are also continuing. Among them, the rise of protectionism and anti-globalization has threatened the world economic growth, and there are also global efforts to strengthen macroeconomic policy coordination. More importantly, China has actively participated in global economic governance, taking the G-20 Hangzhou Summit as an opportunity to make inclusive and coordinated development deeply rooted in people’s hearts and pointed out the direction for continuing to promote economic globalization.

　　In 2017, the task of strengthening global macroeconomic policy communication and coordination is still urgent. The impact of monetary policy changes in major economies on the world should not be underestimated. Whether the development results of economic globalization can benefit more people as soon as possible will also have an important impact on the world economic trend. Continued promotion of reform and innovation, policy coordination and enhancement of medium-and long-term growth potential are still problems that all countries in the world need to seriously face.

　　Features: the overall growth rate is sluggish, and policy coordination promotes the increase of unexpected risks.

　　On the whole, the characteristics of the world economy in 2016 can be summarized by three words: sluggishness, coordination and risk.

　　The world economy is still in the stage of deep adjustment after the crisis, and the growth expectation is constantly lowered. Since the beginning of the year, the growth of developed economies has been sluggish, the growth of private investment has slowed down, consumer demand is weak, and there is no strong recovery momentum; The growth of emerging economies has slowed down and stabilized, but the trend of differentiation has intensified. The structural problems of single economic structure and high fiscal deficit in some economies have not been fundamentally improved. However, it should also be noted that in the context of the overall slowdown of the world economy, China’s gross domestic product (GDP) increased by 6.7% year-on-year in the first three quarters, which provided a strong support for the gradually slowing world economy while maintaining a generally stable and steady development trend. The "Belt and Road Initiative" promoted by China and the related initiatives of international capacity cooperation are vigorously opening up new spaces and fields of international cooperation and injecting new impetus into world economic growth.

　　The world has taken important steps on the road of strengthening communication and coordination of macroeconomic policies. The continuous downturn of the world economy has stretched the macro-policy means of major economies in the world, weakened the effect of policy implementation, and loose monetary policy alone is not enough to restore economic vitality. Fiscal policy should play a more important role. At the same time, the level of public and corporate debt in the world’s major economies is at a high level, and the room for further leverage is limited. This requires major economies to form policies and actions to maintain international market stability and promote global economic growth. The "Hangzhou Consensus" promoted by China at this year’s G20 Hangzhou Summit has contributed to the global policy coordination with a "China prescription" that addresses both the symptoms and root causes and comprehensively implements policies.

　　The degree to which the world economic recovery is threatened by various risks has increased. Brexit triggered global financial market turmoil and impacted macroeconomic policies of major economies. This will have a great impact on the process of economic globalization and EU economic integration, leading to a more complicated global economic and financial environment. Not only that, economic imbalance has triggered a series of development problems, geopolitical conflicts, big countries intervening in hot spots and hot issues, and traditional and non-traditional security issues have intensified. These problems are intertwined and mutually causal, which has become an important factor to enhance the global economic vulnerability.

　　Difficulties: the prospect of monetary policy turning is difficult, and protectionist noise threatens growth.

　　Since the outbreak of the international financial crisis, the deep-seated impact is still continuing. The continuous loose monetary policy in developed economies is on the decline, but the shift of monetary policy is particularly difficult this year because the economic growth is less than expected. The slow recovery of the global economy and the sluggish market demand, especially the lack of inclusiveness in development, have led to the growth of anti-globalization thoughts in some countries. These two problems are worthy of attention, and they are also two major problems in the slow recovery of the world economy.

　　First, the monetary policy of developed economies has turned difficult. Due to the delay in economic growth, the United States started raising interest rates again after a year; Although the European Central Bank continued the basic framework of easing policy, it also indicated that it would make adjustments according to the changes of inflation, leaving a hole for the monetary policy shift. Although Japan claims to be optimistic about its economic prospects, its decision to maintain easing policy at the end of the year is a reflection of its economic dilemma.

　　We need to be alert to the impact of the expected changes in US interest rate hikes on the global economy. A report released by the Institute of World Economics and Politics of China Academy of Social Sciences recently pointed out that since November 2016, the expectation of the Fed to raise interest rates has gradually increased in the international market, and international capital has started to flow out of emerging economies on a large scale, and it has also flowed to the United States, resulting in a rapid rise in the US dollar index and a sharp depreciation of the currencies of other countries, especially emerging economies. "This situation will recur with the repeated fluctuations of the US economy and changes in interest rate hike expectations, and the international financial market will also experience repeated turmoil."

　　Second, with the significant slowdown of world economic growth, the tendency of global trade protectionism is becoming increasingly serious. The IMF warned that the rise of trade protectionism will eventually drag down the development of the world economy. On the one hand, some developed countries have not got rid of the traditional way of relying on financial and investment expansion to deal with the crisis, which leads to the difficulty in connecting the conversion of old and new kinetic energy, the decline of growth momentum, the sluggish market demand and the accumulation of financial risks; On the other hand, the benefits of economic globalization have not benefited all participants in this process, and people in some countries, especially developing countries, have been excluded from the benefits brought by economic globalization, which has also promoted the prevalence of isolationism and anti-globalization thoughts. In particular, it is necessary to be alert to the protectionist policies promised by Trump during his election campaign. Once fully or partially implemented, it will have an adverse impact on the outside world, and may lead to the intensive introduction of protectionist policies on a global scale, thus further reducing the growth rate of the world economy.

　　Aspect: Promote policy coordination, lead the process of globalization, and vigorously promote innovation and inclusive development.

　　In 2017, the road to recovery of the world economy is still uneven. As the potential of the traditional economic system and development model tends to fade, the problem of unbalanced development is far from being solved, and the defects of the existing economic governance mechanism and structure are gradually emerging. A series of problems need to be solved, such as weak growth, high debt, sluggish trade and investment, and high financial leverage. To promote world economic growth in 2017, we need to pay attention to three aspects.

　　First of all, countries need to consolidate the achievements made in macroeconomic policy communication and coordination this year, and form a joint effort of policies and actions to maintain international market stability and promote global economic growth. Major developed economies should strive to consolidate and expand the recovery momentum, while emerging market countries and developing countries should strive to overcome downside risks and pressures and maintain and resume growth. In this process, all parties should pay special attention to strengthening the communication and coordination of each other’s policies to prevent negative spillover effects.

　　Second, we need to unswervingly lead the process of economic globalization. History shows that there is no way out for protectionism. Economic globalization has entered a stage adjustment period, with skeptics and waverers. It should be noted that economic globalization conforms to the requirements of the development of productive forces and the interests of all parties, which is the general trend. We should not stop because of temporary difficulties, but pay attention to the integration with our respective development practices in the process of participating in economic globalization, pay attention to solving the problems of fairness and justice, and lead economic globalization to a more inclusive and inclusive direction. At the same time, we should also promote the implementation of the "Hangzhou Consensus" as soon as possible, actively promote inclusive and coordinated development, and let the fruits of economic globalization benefit more people.

　　In addition, we must constantly promote scientific and technological innovation and institutional innovation to enhance the long-term growth potential of the world economy. The driving force for the long-term development of the world economy comes from innovation. The vitality and creativity released by the reform of system and mechanism, and the new industries and products created by scientific and technological progress are the foundation for the world economy to get out of the predicament and realize recovery after major crises.