World Economic Trends The 21 Autumn Report (Summary) Cabinet Office Chapter 1 Chinese Economic Slowdown and the World Economy The world economy recovered moderately in 21 with the support of a rebound in U.S. and European economies, while the moderate deceleration of Chinese economic growth and declines in resource prices pushed down emerging and other economies. China s real economic growth slowed down to around 7%. The share of exports bound for China has increased worldwide. Resource-rich countries have particularly become dependent on the Chinese economy (Fig. 1) and vulnerable to the impact of its slowdown (Fig. 2). The so-called Li Keqiang index (combining electricity consumption, the volume of railway cargo and the balance of medium to long-term loans) declined sharply. Even if the volume of railway transportation in the index is replaced with the volume of overall cargo transportation, the index posted a moderate fall (Fig. 3). China s large-scale economic stimulus package after the global financial crisis has resulted in excessive investment, production and indebtedness. Of overproducing industries, the steelmaking sector might be exporting excess output abroad (Fig. ). 1 2 3 33.7 オーストラリア Australia Taiwan 台湾 South Korea 韓国 Improvement 改善 16 Deterioration 悪化 Japan 日本 ブラジル Brazil 828 年 18.3 18. 26.2 2. Fig. 3 The Li Keqiang Index (estimate) 2 12 8 Fig. 1 Exports Dependence on China Using the volume of overall cargo 貨物輸送量全体を使用 transportation Using the volume of only railway 鉄道輸送のみを使用 transportation 6. 21 年. 1( (Month) 月 ) 211 12 13 1 1 ( (Year) ((Contribution 前年比寄与度 to year-on-year %) change, %) 3 2 1-1 -2-3 - Export 輸出額 value Provisional translation Fig. 2 Australia s Exports to China Others その他 Mineral 鉱物資源 resources Q3 ((Quarter) 期 ) 213 1 1 ((Year) Fig. China s Crude Steel Output and Export (Year-on-year ( 前年比 %) change, %) (Year-on-year ( 前年比 change, %)%) 2 16 Output 生産量 Export volume 1 (right 輸出数量 scale) ( 右目盛 ) 1 12 1 1 8 6 2-2 - - 9( (Month) 月 ) 211 12 13 1 1 ((Year) 1
The Chinese government has set production capacity reduction targets for overproducing industries. Given the current demand size and production capacity, these targets are insufficient (Tab. ). The Chinese government plans to eliminate excess production capacity with such measures as the consolidation of steelmakers. Outstanding private sector debt has expanded to a level similar to that in Japan during the asset-bubble period (Fig. 6). Loans for real estate development have partially become bad debts. As there are massive loans other than those provided through banks, it may be difficult to grasp the real situation. China needs to address the decline and aging of the population and avoid the so-called middle-income country trap (in which a country fails to change its development pattern and become a developed country after achieving middle-income country status). The share of working-age population peaked in 21. The overall population is expected to age rapidly. The draft 13th Five-year Plan (216 22) calls for repealing the one-child policy. Wage hikes are eroding labor-intensive industries competitiveness. Import sources of developed countries' light industry products are shifting from China to ASEAN (Association of Southeast Asian Nations) countries (Fig. 7). The total factor productivity's (TFP s) contribution to economic growth has declined (Fig. 8). Crude steel (1 million tons) (1) Production capacity (1) 生産能力 (2) (2) Actual 実際の production 生産量 volume (3) Desirable production (3)(2) capacity を適正 () Excess () 過剰生産能力な稼働率 (estimated) (8%) for an と production adequate capacity ( capacity 試算値 ) した場合の望ましい utilization rate ()=(1)-(3) (estimated) (8%) as indicated 生産能力 by (2)( actual 試算値 ) () = (1) - (3) production (3)=(2)/.8 volume (3) = (2) /.8 粗鋼 ( 億 t) 11.6 8.2 1.2 1. Aluminum (1, tons) Tab. Excess Production Capacity アルミニウム ( 万 t) 3, 2,38 3,7. 2. Note: The Chinese government s production capacity reduction targets include 2 million tons for ironmaking, 3 million tons for steel and 2, tons for electrolytic aluminum. 2 2 1 Fig. 6 Private Sector Debt as a Percentage of GDP Japan 日本 China 中国 192 171 U.S. アメリカ 16 1 198 8 9 9 2 1 1 ((Year) Fig. 7 Japan s Imports (textile products) 9 8 7 6 3 2 1 67.6 China 中国 ASEAN ASEAN 18. 2 1 1 ((Year) Fig. 8 Factor Analysis of Real Economic Growth Rate 16 ((Year-on-year 前年比 %) change, %) Real economic 実質経済成長率 growth rate 12 8 TFP Labor 労働 Capital 資本 - 198 9 9 1 13 (Year) ( 2
The Chinese government is promoting transition to an innovation-led economic growth model, leading to a substantial increase in input including investment in research and development. While output of innovation is also expanding (Fig. 9), the problem lies in the quality of such output (Fig. 1). A transition from an investment-led economy to a consumption-led one is in progress. Tourism and other services are growing rapidly in line with urbanization, and income growth (Fig. 11). The number of overseas travelers has increased sharply. Chinese tourists share of global tourism spending rose from 3.% in 27 to 13.2% in 21. Meanwhile, Japan-bound tourists share of overseas travelers dropped from.2% in 27 to 2.% in 213 (Fig. 11). Tertiary industries share of the Chinese economy is lower than in other developed countries and has the potential to substantially increase in the future (Fig. 12). Fig. 9 Number of Patent Applications ((1, 万件 ) applications) (1, applications) ( 万件 ) 1 9 China 中国 (right ( 右目盛 scale) ) Japan アメリカ U.S. 日本 ( 右目盛 ) 1 ( (right (right scale) 右目盛 scale) ) 6 Fig. 1 Patent Royalty Income (($1 億ドル million) ) ($1 ( 億ドル million) ) 1, アメリカ U.S. ( (right 右目盛 scale) ) Japan 日本 1, 3 Germany ドイツ 英国 U.K. 3 フランス France 2 2 6 8 1 12 13 ((Year) 2 1 U.K. 英国 フランス France 中国 China Germany ドイツ 2 6 7 8 9 1 11 12 13 1 ((Year) Fig. 11 Number of Chinese Overseas Travelers (Total ( 延べ人数 億人 number, 1 million ) people) (Year-on-year ( 前年比 シェア change, %) share, %) 1.2 伸び率 Growth Number of 海外旅行者数 3 overseas travelers Japan-bound (right scale) 訪日旅行者 ( 右目盛 ) tourists share of 1. のシェア 2 overseas travelers ( 右目盛 (right scale) ).8 2.6 1. 1.2. 2 6 7 8 9 1 11 12 13 1 ((Year) Fig. 12 Tertiary Industries Share (Share of working population, %) ( 就業人口比 %) 9 8 7 6 China 中国 アメリカ U.S. 英国 U.K. ドイツ Germany フランス France 日本 Japan 3 3 6 7 8 9 (Share( of 名目 nominal GDP 比 GDP, %) %) 3
Chapter 2 U.S. Monetary Policy Normalization and Emerging Economies The U.S. economy has been recovering for more than six years as labor market improvements have led to private consumption growth (Fig. 1). Wages are rising sharply in manpower-short specialized services, as well as retail and other industries where minimum wage hikes are spreading (Fig. 2). Although private fixed investment recovery had been described as insufficient compared with corporate profits growth, it has posted a recovery trend with a time lag behind corporate earnings (Fig. 3). In addition, investment is shifting from traditional investment such as structures to intellectual property investment (including that in research and development, and software) (Fig. ). 2-2 - -6-8 -1, Fig. 1 Employment Fig. 2 Wage Trend by Industry (Change from previous Nonfarm payroll (change month, ( 前月差 千人 1, people) ) from 非農業部門雇用者数 previous month) ( 前月差 ) 6 Labor force 労働参加率 participation rate ((right 右目盛 scale) ) 11 28 9 1 11 12 13 1 1 ( Source: 備考 ) アメリカ労働省より作成 U.S. Department of Labor (Comparing the averages for Aug-Oct in 21 and in 21) (Year-on-year change, %) 68 ( 前年同期比 %). レジャー 接客 Leisure and services Construction 建設 66 3. Specialized 専門サービスservices 6 2. Information 情報サービス services Retail 小売 Finance 金融 Wholesale 卸売 62 1. Education and 教育 医療 healthcare Manufacturing 製造 Logistics 物流 Mining 鉱業 6. ((Month) 月 ) ((Year) -1. 1 2 3 ((Hourly 時給 ドル pay, $) ) Fig. 3 Private Fixed Investment (Nonresidential) and Corporate Earnings Trends Fig. Breakdown of Private Fixed Investment (Nonresidential) (($1 兆ドル 年率 trillion, annualized) ) (($1 兆ドル 年率 trillion, annualized) ) 2. 1.2 Investment 機械 機器投資 in equipment Private 民間設備投資 fixed investment 2. 1. Investment in intellectual.8 知的財産投資 property products 1..6 1.. Corporate 企業収益 profits..2 Q3( (Quarter) 期 ) (Year) 212 3 6 7 8 9 1 11 12 13 1 1 ( Investment 構築物投資 in structures Q3( (Quarter) 期 ) 212 3 6 7 8 9 1 11 12 13 1 1( (Year)
In response to the robust domestic economy, the Federal Reserve is expected to start raising interest rates by the end of this year. The market focus is shifting to the future monetary policy normalization process including the pace of rate hikes. In the past tightening phases, business confidence indexes turned downward within one year after the first rate hike, but in some cases the indexes turned upward again without falling into a recession (Fig. ). International organizations have expressed concerns over the impact of U.S. monetary policy normalization on financial and capital markets in emerging countries. Some emerging countries have insufficient foreign exchange reserves, indicating emerging countries have various risk tolerance levels. Many of them have tight fiscal and monetary policy constraints (Tab. 6). Unlike past financial crisis situations, many emerging countries have shifted to a floating foreign exchange rate system. In addition, international arrangements and frameworks have been enhanced to prevent or mitigate the contagion of financial crises. Fig. Interest Rate Hikes and Business Confidence Tab. 6 Risk Tolerance of emerging countries (ISM indexes) (D.I.) (D.I.) 6 [Recession] 後退 後退 [Recession] [Recession] 後退 6 局面 局面 局面 ISM non-manufacturing ISM 非製造業 index 景況指数 ISM manufacturing ISM 製造業 index 景況指数 3 利上げ [Interest [Interest 利上げ [Interest 利上げ 3 rate 局面 hike] rate 局面 hike] rate 局面 hike] 199 91 92 93 9 9 96 97 98 992 1 2 3 6 7 8 9 1 11 12 13 1 1 (Year) ( 外貨準備の短期債務 Ratio of foreign exchange 財政収支の Fiscal balance GDP as a CPI とインフレ and inflation reserves to outstanding percentage of GDP target 残高に対する倍率 short-term debt 比率 ターゲット 28 年 21 年 27 年 21 年 CPI CPI 上昇率 hike ターゲッ Target (latest) range ( 直近 ) ト範囲 ブラジル Brazil.3 6.3 2.7 6.2 9.9 2.~6. インド India.6 3.. 7.. 2~6 インドネシア Indonesia 2. 2.3.9 2.1.9 3~ South 南アフリカ Africa 1.2 1.3 1.2 3.8.7 3~6 トルコ Turkey 1.3.8 2. 1. 8.1 3~7 Malaysia マレーシア 2.3(13 213 1.3 2.6 3.6 2. Russia ロシア.8. 6. 1.2 1.. Chapter 3 European Economy Is Recovering Moderately The Euro economy sees a moderate economic recovery oriented by household consumption due to low oil prices and a weak euro s exchange rate (Fig. 1). But private sector investment recovery is lagging (Fig. 2). The Euro economy aims to invest 31 billion euros in three years under the European Investment Plan, including the creation of a public-private investment initiative. Greece has avoided default for the immediate future as an additional bailout program has been agreed on. However, it faces the difficult challenge of achieving both fiscal consolidation and economic growth. Fig. 1 Real Economic Growth Fig. 2 Private Investment ((Annualized 前期比年率 quarterly %) change,%) 6 Real 実質経済成長率 economic growth Government consumption 政府消費 Private 個人消費 consumption 1 12 (22 (1 for 年 =1) 22) Spain スペイン France フランス Germany ドイツユーロ圏 Euro area 2-2 - Exports 輸出 Imports 輸入 Fixed 固定投資 investment Others その他 Q3 ((Quarter) 期 ) 212 13 1 1 ( (Year) 1 8 英国 U.K. イタリア Italy 6 22 3 6 7 8 9 1 11 12 13 1 ((Year)
Chapter Future Outlook of Global Economy and Risks Main scenario: The global economy will continue its moderate recovery due to a recovery in the U.S. economy and a moderate recovery in the Euro area. Major risks and their impacts (1) Impact of the U.S. monetary policy normalization In the normalization process, international financial markets could fluctuate wildly through massive capital outflow from emerging countries, affecting the real economy. (2) Future course of emerging economies including China The Chinese economy could fail to achieve a transition to a stable growth path and decelerates considerably. Resource prices could remain weak. Emerging and resourcerich economies could thus decelerate further. (3) Geopolitical risks Economic impacts caused by terrorism and the refugee influx associated with political instability in the Middle East could spread further. Both the Russian and Ukrainian economies could deteriorate further as economic sanctions on Russia over the Minsk Agreement continue. 6