Newsletter By 2022-05-20
【Judgement and Predictions】 Under the backdrop of the COVID-19 pandemic, the Russia-Ukraine war, and de-globalization waves, most of the world's industrial and agricultural commodity supply chains could be systematically restructured. Changes in demand and supply flows will occur during this process, raising the cost of production and trade. The rapid increase in the cost of fertilizers, diesel, and other raw materials, as well as rising prices in energy usage and cross-regional long-distance transportation, are already having an impact on global food production. Worryingly, the current global food crisis could be just the beginning.
>>The European Central Bank (ECB) has found it impossible to avoid stimulating economic growth, because of the delayed recovery of the European economy following the COVID-19 pandemic. In addition, in response to the Russia-Ukraine conflict, differences within the EU have further divided Europe. As the ECB expects interest rates to rise, this signifies the beginning of a monetary tightening policy. Based on the current situation, such a policy would remain hard in eliminating high inflation. On the other hand, tightening policy will harm economic growth, causing the European economy to sink deeper into the quagmire of "stagflation".
>>When analyzing Vietnam many years ago,
ANBOUND's founder Chan Kung noted that the country's development potential deserves Chinese attention. This relatively young country with a population of more than 90 million will form a strong competitive relationship with China. When such significant progress continues, Vietnam will have its versions like Lenovo and Huawei. In a variety of industries and fields, more multinational corporations and business leaders will come out in Vietnam. When Vietnam's economy and industries move on, it will be able to create new geopolitical status and geo-economic space. Undoubtedly, Vietnam is heading in the direction of emerging markets with sustained and rapid growth in ASEAN, Asia-Pacific, Indo-Pacific, and other geographic areas.
>>China’s local fiscal revenue has fallen sharply in the first four months, reflecting both the challenges of this year's economic downturn and the potential risks to local economic activities and social governance. This confirms that economic stabilization will be a major area of concern in 2022. To maintain the stability, the utmost policy priority should be adjusting the pandemic-related measures scientifically, while the country cannot neglect its economy. The decline in fiscal revenue of some cities not only increases the pressure on local fiscal expenditures, but also affects the three bottom lines that local governments (guaranteeing basic livelihood, ensuring wages, and economic development) stress the most. The past experiences proved people's livelihoods and social stability, including civil service, would appear shaky at the grassroots level, in case that the three bottom lines are not met with.
>>ANBOUND’s economists discussed that the Federal Reserve's decision to raise interest rates is complicated consistently with the current round of inflation. This is a currency issue, and also involves supply chain disruption, global industrial restructuring, geopolitical fragmentation and conflicts, as well as the stagnation of globalization. The U.S. has already kicked off raising interest rates for the purpose to curb inflation. However, the slump in U.S. stocks reveals that excessive interest rate hikes could hit U.S. capital markets and its economic growth. The exchange rate appears to be more favorable to the U.S. than its interest rate tool. This will also put pressure on China’s yuan and could drive capitals out of the country.
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