he BOC Research Institute has released its Economic and Financial Outlook for Q2 2024 (the “Report”) in Beijing. This Report reviews global and Chinese economic and financial operations in Q1 2024 and offers projections for Q2 2024, including trends in the global banking industry.
Globally, the Report highlights a weakening growth momentum in Q1 2024. In developed economies, consumption growth slowed, investment was sluggish, and government spending became tighter. However, manufacturing recovered from earlier weaknesses, services performed well, and global trade saw a slow recovery. Inflation declined worldwide due to improved supply and reduced demand. Major economies tightened fiscal policies and reached a turning point in monetary policies. Foreign exchange markets fluctuated more, financing rates remained high, and stock prices continued to rise. For Q2 2024, the global economy is expected to experience a slight decline in growth, with shrinking demand posing a significant challenge. Nevertheless, global production is likely to continue its steady recovery, and inflationary pressures are expected to ease further. Liquidity supply will remain stable, stock investment directions will gradually shift, and commodity prices will be relatively stable. The Report also provides special analyses on Japan’s recent industrial chain policy adjustments and their impact on China, as well as the structural vulnerabilities and potential risks in the US money market funds.
Regarding China, the Report notes a strong start to the economy in Q1 2024. International trade picked up, driven by recovering market demand, leading to a quick rebound in China’s export growth. Domestically, improved economic policies bolstered internal growth momentum, with service consumption and manufacturing investment providing significant support. Preliminary estimates indicate that GDP grew by approximately 4.8% year-on-year in Q1 2024. For Q2 2024, China’s economic climate index is expected to improve slightly. Consumption will continue to be the cornerstone of economic growth, with further potential in service consumption expected to be unlocked. Industrial transformation and upgrades will become stronger trends, fostering new quality productive forces. Export recovery is likely to continue due to boosted foreign demand and a lower base from the previous year. GDP growth in Q2 is estimated at around 5.1%, up by 0.3 percentage points from the previous quarter.
In terms of the global banking sector, the Report notes that in 2023, the global banking industry showed a desire for expansion due to high interest margins, resulting in improved net profits and relatively stable asset quality and capital positions. However, the outlook for the first half of 2024 is more uncertain, leading to a challenging operating environment and slower expansion for banks. Net interest income growth will slow, sharply reducing profitability. Risks associated with small and medium-sized banks in Europe and the US will gain market attention, increasing the risk of asset deterioration. Conversely, the recovery of China’s economy will provide a better operating environment for its banking sector, with the financial industry expected to operate soundly overall. The banking sector in China will increase support for high-quality economic development, expand operations solidly, enhance profitability, and continuously improve asset quality, contributing to China’s goal of becoming a financial powerhouse.
Additionally, the BOC Research Institute released the Economic and Financial Outlook for the Yangtze River Delta Region. The Report highlights significant progress in the region’s integrated development over the past five years, with room for improvement in international competitiveness, regional integration, industrial collaboration, and megacity governance. In 2024, the economic growth of the Yangtze River Delta is expected to surpass the national average, focusing on developing new quality productive forces, improving systems and mechanisms, fostering higher-level cooperation and openness, strengthening ecological protection and governance, and enhancing safe development capacity. Commercial banks are expected to scale up operations in the region by increasing resource input and innovation, maintaining high asset quality despite declining asset returns, and diverging in performance. Moving forward, they will focus on reform and innovation, aiming for integrated and high-quality development in key areas such as technology finance, green finance, inclusive finance, pension finance, digital finance, and cross-border finance.
