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Bank of China Issued Report for 2016Q2 Economic and Financial Outlook


2016-05-03

On March 31, 2016, Bank of China issued its report for 2016Q2 Economic and Financial Outlook (hereinafter referred to as the “report”). In this report, there is an outlook for the global and China’s economic and financial situation and the world banking industry in Q2, based on the review of 2016Q1. Meanwhile, some hot issues are analyzed in the report.

Global Economic and Financial Outlook: In Q1, the global economy reported an extended downturn, and the commodity prices wavered and rebounded. Developed economies slowed their pace toward recovery and the Fed postponed its interest rate hike. The growth rate of emerging economies was decelerated, with Russia and Brazil trapped into recession. Q1 saw global financial market rollercoasters. In emerging markets, the exchange rate rallied following a general and in-depth depreciation, the stock market went through sharp fluctuations, commodity prices bottomed out and the financial stability was impaired. According to our prediction, in Q2 and the rest of the year, the global economy will remain sluggish, the financial markets will be exposed to non-decreasing risks, the Fed’s rate hike and the U.S. dollar appreciation will exert lasting influence upon the risk sentiment around the world.

China's Economic and Financial Outlook: In Q1, China stayed in a critical stage which could be characterized as the “long-short game”, with a mixed economic performance. Influenced by the factors including weak external demand, de-capacity of traditional industries and slowdown of consumption, the country was still confronted with great economic downward pressure, though the steadily rallying investment and narrowed PPI decline would facilitate economic stabilization. In Q1, China’s GDP is expected to grow by 6.6% approximately. Looking into Q2, a number of key projects outlined in the“13th Five-Year Plan”will be launched one by one, and accelerated advancement of Special Construction Fund and PPP Projects will contribute to the growth of investment. Industrial growth, owing to the intensified de-capacity this year, will hover around at a low rate, but industrial structure is likely to keep improving. The GDP growth is estimated to reach 6.7% or so, picking up slightly from Q1; hence it is very possible to fulfill the target anticipated by the government, i.e. 6.5%-7%, by the end of the year.

Global Banking Industry Outlook: In 2015Q4, the banking industry in Eurozone and Japan did not perform well due to slow economic growth, wide fluctuation of commodity price and introduction of negative interest rate policy; in comparison, the banking industry in the US and the UK posted healthy operation. In 2016Q1, China’s listed banks was faced with strong operation pressure, with growth of net profits estimated at 2% year on year and NPL ratio rising to 1.65%. They must adapt to the macro environment of supply-side reform and seize opportunities for robust growth.  The report also looks at such special subjects as inclusive finance development of China’s banking industry, FSB’s launching of TLAC policy and recent operating loss of large European banks, etc.

 

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