World Economy

AFF Voices Concern Over Global Recovery

AFF Voices Concern Over Global RecoveryAFF Voices Concern Over Global Recovery

For seven years in a row, the Asian Financial Forum takes place in Hong Kong. Several speakers this year voiced their concern about the current global economic situation.

This year's Forum theme "Asia: Shaping the New Paradigm for Growth" captures Hong Kong's singular ability to bring East and West together in pursuit of business and investment opportunities, said Leung Chun-ying, Hong Kong special administrative region chief executive at Asian Financial Forum 2016 opening session, news outlets reported.

Leung said growth highlights in the region come from the bold moves spearheaded by China, such as the high-profile Belt and Road Initiative—which covers a third of the global GDP and 4.4 billion of the world population—and the much-anticipated Asian Infrastructure and Investment Bank which started operation over the weekend, marking a milestone in the reform of the global economic governance system.

The two initiatives will inject new energy into regional collaboration and provide an impetus for global economic recovery.

"Eighteen days into 2016, however, and some of you may well be wondering what opportunities we plan on connecting. Wondering, too, whether a new growth paradigm is possible under the clouds that continue to weigh on the global economic landscape, Lueng said.

But the year of the monkey began with a gloomy perspective as stock markets in the US and around the world ended the week with massive selloffs, he said.

China Slowdown

Fears of a slowdown in China and plunging oil and commodity prices will trigger a new financial crisis was the main concern among the participants.

Another sharp fall on Chinese markets, with the Shanghai Composite Index dropping 3.55%, followed by a 6% fall in oil prices to $29 a barrel, set off a wave of selling, he added.

The Chinese market is once again giving the world equities big swings, as economic data weakens and oil prices drop.

China's authorities' efforts to stabilize markets have had little effect as worries over China's economy are spreading to US and European markets in sync.

Many observers say they have a feeling of deja vu as sharp swings since the start of 2016 seem reminiscent of the summer’s crash. Last August, global stock markets mirrored Shanghai’s moves, but today the reversal of US monetary policy is adding concerns to the "new normal".


The concerns are valid. After all, it is generally expected that global economic growth in 2016 will remain modest, uneven at best. This is, apparently, the "new norm" in our post-global financial crisis world.

Uncertainties regarding the pace of normalization continue to blunt the global economy. The European Central Bank has further eased monetary policy, accentuating the divergence among major central banks. Elevated geopolitical tensions continue to trouble the global economy. And the jittery stock, currency and commodity markets so far in 2016 only add to the uncertainties.

HSBC Chief Executive Stuart Gulliver, meanwhile, said the price of oil is likely to settle between $25 and $40 in a year's time.

"Major producers are currently delivering 2-2.5 million bpd more than demand, so the question is how long they can continue to overproduce at that level." he said at the Forum.

While some analysts see an initial increase of 500,000 bpd or more in Iranian exports as easy to achieve, further production increases are considered as challenging.

Hong Kong Trade Development Council Chairman Vincent Lo said: Despite their slowing pace, China and Asia are expected to remain the global economic growth engine for a likely challenging 2016, with more growth momentum brought by the Belt and Road Initiative and the newly launched $100 billion Asian Infrastructure Investment Bank.

Amid the current geopolitical unrest, volatile financial markets, declining commodity prices and slowing growth in the Chinese mainland and Asia, it remains a challenge for the world to post a sustainable economic recovery, Lo said.

However, China and Asia still prove to be the more fast-growing and dynamic region compared with the West and can be well expected to continue to fuel global growth, Lo added.