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Bank of China Issued Report for 2015 Economic and Financial Outlook

On December 2nd 2014，Bank of China issued its report for 2015 Economic and Financial Outlook (hereafter referred to as the report).In the report, there is an outlook for the world and China’s economic and financial situation and the world banking industry, based on the review of 2014. Meanwhile, some specific issues are analyzed in the report.

Global Economic and Financial Outlook: The report identifies the fact that the global economic recovery has been imbalanced since 2014. For the reason that the demographic dividend has been diminishing and there has been no indication regarding sufficient technological innovation, the endogenous driving force for global economic growth has been insufficient. The global economy had been estimated to grow at about 2.2% in 2014. In 2015, short-term factors impeding world economic recovery may be alleviated or disappear, and the global economic growth rate is expected to accelerate to about 3.0%. However, the world will be exposed to potential risks such as policy differentiation and geopolitics. To be specific, the US will see stronger economic recovery, Europe will face more difficulties, Japan is expected to be trapped by poor economic growth, Asian EMs will continue to grow at a speed exceeding the others, Africa will maintain the momentum of development and Latin America is expected to be flat. It is also expected that the Federal Reserve will kick start the interest rate increase in the latter half of 2015, while the euro area and Japan will adopt more easing policies. Policy differentiation will exert new effects on global capital flows.

China's Economic and Financial Outlook: According to the report, China’s economy continued to slow in 2014 due to downward pressure from a deceleration in growth, painful economic restructuring and the hangover of previous stimulus policies. China’s GDP was expected to grow at around 7.4% in 2014 on an annualized basis, significantly lower than the annual average of 9.9% since the country launched its reform and opening-up policy in 1978. Overall, the Chinese economy remains within a reasonable range, accompanied by some positive changes in trends. The tertiary industry, principally the service sector, is growing swiftly and has a bigger proportion of the economy. Emerging industries like E-commerce and mobile Internet are developing fast. Employment and energy conservation indicators have beaten expectations. In 2015, China's economy will grow steadily backed by a stable and upbeat external environment, further release of reform dividends and emerging engines of growth, yet still showing a downward trend due to growth engine switch, industrial capacity cuts, property market adjustment and elevated debt ratios. In 2015, China’s GDP is expected to grow at about 7.2% and CPI to increase by approximately 2.4% on an annualized basis, still showing a combination of slow growth and low inflation.

Global Banking Industry Outlook: According to the report, the global economy entered a period of adjustment in 2014, leading to differentiated performances of the banking industry. The banking industry in the US and the UK saw an upturn, while that in Japan and the Euro Zone remained sluggish and facing challenges. Against the backdrop of the “New Normal” economy in China, the assets and liabilities and net profit growth of China’s banking industry slowed down, and credit risk pressure increased but was controllable on the whole. In 2015, the global banking industry is anticipated to face large and challenging operating pressure, and difficulties and differentiated performances will become the key words.