28 October 2016
Key business leaders and analysts share their views in the recent Credit Suisse Asia Investment Conference in Hong Kong. Photo: Credit Suisse
Key business leaders and analysts share their views in the recent Credit Suisse Asia Investment Conference in Hong Kong. Photo: Credit Suisse

Why it’s not all bad for the global economy

While the world’s medium to long-term economic outlook is uncertain, the short term looks reasonably stable.

China’s economy remains a key concern but there are few takers for a hard-landing scenario.

The country’s short-term prospects are neutral to positive.

China needs to shift to fiscal stimulus from monetary easing and to continue to reform its economy, shuttering “zombie” firms and reducing overcapacity in manufacturing and heavy industry.

These are the takeaways from the recent Credit Suisse Asia Investment Conference held in Hong Kong.

The attendees included three heads of state, 10 ministers and more than 50 government regulators.

There were policymakers, more than 300 corporate chiefs representing more than US$3 trillion of market capitalization and more than 2,000 investors representing more than US$18 trillion of assets under management.

The prognosis on geopolitics was not positive.

The Middle East is expected to remain in a “revolutionary violent cycle” and the European immigration issue is coming to the fore with the advent of summer. The debate over Brexit will continue till the end of June.

Sir John Sawers, former chief of MI6, the British Secret Intelligence Service, said the use of military force to speed the fall of troublesome dictators often creates even bigger problems.

“The big lesson of Iraq… was that order itself is a precious thing. However, revolting against the leader may be,” Sawers said.

“If you replace order… you end up with chaos and violence.”

Nicholas Burns, a professor at Harvard University who previously served as US undersecretary of state for political affairs, said the Middle East will “remain in a revolutionary violent cycle” for some years to come.

Expectations of a strong tightening of US interest rates are low.

Chicago Fed president Charles Evans stuck to the official line of a 50 basis-point increase in US rates in 2016 but qualified it with an analysis of inflation and employment figures which showed that inflation pressure may not be very strong and sustainable.

It was clear that the Fed would prefer to err on the conservative side by not being too aggressive in raising rates.

Gene Sperling, former director of the US National Economic Council and a former economic adviser to Presidents Clinton and Obama, was more emphatic.

“The US economy is improving but not enough to withstand monetary tightening beyond the Federal Reserve’s quarter-point rate hike last December,” he said.

Despite the uncertain economic outlook in the long term, there are some silver linings.

UN Secretary General Ban Ki Moon stressed the importance of the climate change resolution last year which limits temperature rises to less than two degrees celsius and calls for a review every five years.

Driverless electric cars will be widely available in the not too distant a future, resulting in possibly dramatic changes including a 90 percent reduction in car accidents, less air pollution from vehicles and fewer traffic jams.

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Co-Head of Global Markets, Asia Pacific at Credit Suisse

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