【KC's Column】 There is a clear structural imbalance. The growth rate of private investment in the first nine months was only 2.0% year-on-year, while state-owned enterprises (SOEs) in the same period saw an investment growth of 10.6%. In addition, among the listed companies, the operating income and net profit of SOEs in the first three quarters of this year increased by 9% and 5% year-on-year respectively. While the private sector in China is not being discriminated against in policy documents, in reality, state-owned enterprises (SOEs) are increasingly advancing at the expense of private firms. Compared to the past, the current situation is quite different. Due to the sharp rise of state-led economic power, the restrictions and constraints on the private sector have become more and more obvious. There was a saying in the past: “
guo jin min tui”, which literally translates as “the state enterprises advance, the private sectors retreat”. If this trend continues to grow, it will actually intrude on the development of society, affecting not just private enterprises, but overall consumption and economic fundamentals. When the private sector that provides the largest number of jobs in the country begins to shrink in the market, the development space too relying on SOEs, the economy will stay at the risk of being eroded. Private firms and SOEs should complement each other, and China’s economy cannot be sustained by SOEs alone, argued
ANBOUND’s founder Kung Chan.
>> He Jun, Director of Macro-Economy Research Center and Senior Researcher at ANBOUND, noted that for China, strengthening cooperation with Saudi Arabia and establishing a more stable and in-depth bilateral relationship has many impacts. The first is a stable energy supply cooperation relationship. If China could maintain a long-term and stable energy cooperation relationship with Saudi Arabia and Russia, it would be of great significance. Secondly, China could participate in Saudi Arabia’s construction of the local market. Thirdly, in certain non-economic fields, China might reach cooperation with Saudi Arabia. Fourthly, as the shuffling of international relations against globalization, China is expected to establish a multi-dimensional cooperative relationship with Saudi Arabia in diverse fields. Finally, Saudi Arabia is also approaching to the non-dollar oil trade in recent years. Increasing RMB settlement may be a crucial part of bilateral cooperation.
>> As the Federal Reserve continuously hikes the interest rates, the Hong Kong dollar exchange rate is under higher pressure. Hong Kong currently adopts the linked exchange rate mechanism that there is not much pressure to maintain the stability of its currency exchange rate. Yet, the long-term misalignment with its economic foundation and monetary system will not be conducive to the city's economic stability and the consolidation of its status as an international financial hub. From the perspective of Hong Kong's economic and financial stability and long-term development, it is necessary to consider a relatively flexible monetary system and exchange rate mechanism, in the opinion of
Wei Hongxu, economist at ANBOUND.
>>Researchers at ANBOUND discussed major and rapid changes in the world unseen in a century, the far-reaching impact of the COVID-19 pandemic, the weak recovery of the global economy, the high level of inflation, the major developed economies adjusting their macro policies significantly. The international markets possibly further fluctuating, which will disrupt the world’s aggregate balance between supply and demand. China's economy has been facing triple pressures of shrinking demand, supply shocks, and weakening expectations. In addition, risk factors have risen. The country’s population aging accelerated. Its traditional advantages, such as labor and land, have weakened, whereas resource and environmental constraints have been tightened. Those factors undercut its capabilities of technological innovation, the overall factor productivity would been fettered. It is urgent for both supply and demand sides to expand effective demand.
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