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In 2011, there was a global economic slowdown. The international trade growth rate dropped, international financial markets were turbulent, and all kinds of uncertainty increased significantly. The main financial risks and banking risks in developed economies increased, impetus for economic growth was insufficient, and the European sovereign debt crisis deteriorated significantly. The growth of emerging economies generally slowed down. Some countries faced more serious inflation risk and short-term, large-scale capital influxes and outflows. China's economy was expected to continue moving in the direction of macro regulation and control. The overall operational situation was good, and inflationary pressure eased at the end of the year.
In 2012, the overall world economic situation is still severe and complicated. The economic recovery’s unsteadiness and uncertainty have risen. The European debt crisis is a major drag on the global economic recovery. In emerging economies, growth will generally slow down. Under the combined effect of external demand and domestic economic cycles, domestic economic growth will slow down. There will be a need to accelerate the transformation of economic growth, to restructure the economy, and to maintain stable and rapid economic development.
I. The Global Economic and Financial Situation in 2011
In 2011, global economic recovery slowed. The annual economic growth rate was 3.9%, but every economy was different. Developed economies and emerging economies increased by 1.6% and 6.2%, respectively. International financial market instability continued, global stock markets were down in general, and commodity prices fell from a peak.
(A) The Economic Situation of Major Economies
The U.S. employment and inflation situations improved slightly, but the budget deficit remained a serious problem. U.S. GDP grew by 1.7% in 2011, down 1.3 percentage points. The unemployment rate at the end of the year was 8.5%, the lowest level since 2009. Inflationary pressures eased. December’s CPI rose 3.0% after three consecutive months of decline. In 2011, the trade deficit was USD $558 billion, an increase of 11.6%. In fiscal year 2011, the federal budget deficit was USD $1.3 trillion or 8.7% of GDP, declining slightly compared with the previous year's 9.0%. However, this was still the third highest deficit ratio since 1945.
The euro zone’s economic recovery impetus weakened, and countries diverged more quickly. In 2011, GDP growth in the euro zone was 1.4%. Growth slowed and unemployment remained high, not going below December’s 10.4%. Inflation was 2% higher than the target for 13 consecutive months. December’s Composite CPI (HCIP) rose 2.7%. As for member countries, German GDP grew 1.7%, falling 0.5 percentage points compared with the previous year, but still significantly faster than the other euro zone countries. French GDP grew 1.7%, up 0.3 percentage points. The situation of heavily indebted countries such as Greece and Portugal continued to deteriorate, GDP declining 6.9% and 1.5%, respectively.
Japan's economy rebounded stronger than expected, but the trade and debt situations deteriorated. In 2011, in the wake of the earthquake and tsunami disaster, Japan adopted a series of stimulation policies to check the momentum of the rapid economic decline, and economic growth was up and down. Annual GDP growth was -0.7%. The year-end unemployment rate was 4.5%, down 0.4 percentage points. The consumer price index continued to remain low, with monthly core CPI falling 0.2%. Due to the appreciation of the yen, the earthquake, and the impact of the decline in external demand, the export situation deteriorated. The annual trade deficit was 2.5 trillion yen, and after a lapse of 31 years, Japan was once again a trade deficit country. The earthquake led to a substantial increase in spending, further increasing the burden of government debt. At the end of the third quarter of 2011, the debt balance reached a record high of 954 trillion yen, the balance of the debt to GDP ratio being 199%.
In emerging economies, growth slowed down, and policy control was more difficult. Due to multiple factors such as continued domestic policy tightening, cyclical decline, and a fall in external demand, economic growth in major emerging economies in 2011 generally slowed down. India's annual GDP growth rate was 7.2%, down 3.4 percentage points. December’s CPI dropped to 7.5%, the lowest in nearly two years, while inflationary pressures have abated. Brazil’s annual GDP increased by 2.7%, down 4.9 percentage points. In addition, economic growth in South Africa, Turkey, Indonesia, Vietnam and other emerging market countries slowed down significantly. Deteriorating economic growth prospects influenced the confidence of investors in the state assets of emerging markets. Additionally, euro zone banks made up their shortfall through the sale of these countries’ assets. Some emerging market countries experienced capital outflows, a trend of currency depreciation, and increasingly difficult macroeconomic policy decisions.
Special Case 1: Global Economic and Financial Policy in the G20 Framework
In 2008, with the outbreak of the international financial crisis, the Group of Twenty (G20) meeting of finance ministers and central bank governors upgraded to a summit, expanding the voice of developing countries. The G20 Summit has become an important global economic and financial governance platform for promoting employment and economic growth, preventing international financial crises, reforming the international monetary system, and promoting financial regulatory reform, and has played an important role in strengthening the multilateral trade system.
In November 2011, the G20 Leaders Summit in Cannes, France, highlighted the following areas of economic and financial policies. First, to promote employment and economic growth: to strive to promote the world economy to achieve strong, sustainable, and balanced growth, to encourage member countries to implement structural reforms to stabilize economic growth, to solve the problem of short-term economic vulnerability, and to strengthen the foundation of medium-term economic growth. Second, to prevent and cope with international financial crises: to support the International Monetary Fund (IMF) to further enhance the global financial safety net, to urge the concerned euro zone countries to earnestly implement the reform program, and to restore market confidence and maintain financial stability. Third, to reform the international monetary system: to implement the IMF quota reform program, to enhance the IMF's representativeness and enrich the available resources, and to improve the standards forming the Special Drawing Rights (SDR). Fourth, to vigorously promote financial regulatory reform: to rely on the Financial Stability Board (FSB) to supervise and reform the main financial supervision problems exposed by the international financial crisis, and to strengthen the systemic importance of financial institutions, shadow banking, OTC derivatives, and other aspects of the payment system. Fifth, to strengthen the multilateral trading system: to take effective measures to avoid trade protectionism, to support the World Trade Organization (WTO) in increasing trade relations and policy transparency, and to play a more active role in promoting the efficacy of the dispute resolution mechanism.
Under the concerted efforts of the G20 member countries, the current world economy has gradually come out of the international financial crisis; but threatened by the European debt crisis and other such risks, the global economy still faces great uncertainty. In the face of such a complex and volatile international economic and financial situation, the G20 should be based on equality and mutual trust, continue to strengthen dialogue and cooperation with relevant international organizations and non-member countries in order to coordinate international economic policies, and play a greater role in promoting international financial reform and maintaining global stability.
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