Regional tendencies checklist for 2021, prophetic Hong Kong insights: true or myth?

The Hong Kong Globalization Center, a Chinese think tank headquartered in Hong Kong, has launched the “Top Ten Forecasts for 2021”, which predicts the trend of the situation in the coming new year from three dimensions: politics, economy, and society.

The Hong Kong Globalization Center was co-founded by the famous TV commentator Qiu Zhenhai and Hong Kong Baptist University in April 2019. 

The center predicts that the global economy will gradually recover in 2021, but Eastern and Western countries will show significant differences. Out of them the 6 major forecasts were as follows:

Prediction 1: Biden’s China policy will present the style of “professional diplomacy, precision strikes”, and Sino-US relations will enter a sensitive debugging period

The Hong Kong Center for Globalization predicts that China will face a more difficult diplomatic environment. In the past, the US government’s China policy has wandered between “engagement” and “containment”. The Biden administration will focus on China. In terms of “changing China”, that is, by “changing” China’s way of thinking and mode, with a view to achieving overall stability in US-China relations.

This approach will obviously have a structural conflict with China’s existing political values ​​and strategic orientation, but the intensity will be lower than the Sino-US conflict in the Trump era; in essence, Sino-US relations will show an overall downward trend in the next few decades. A short-term technical adjustment.

If this adjustment can be successful, Sino-US relations will still have a respite after 2025, otherwise it will bury hidden dangers for the cliff-like decline of Sino-US relations after 2025.

Prediction 2: In 2021, China will face an unprecedentedly sensitive and difficult international situation 

After Biden takes office, the United States will return to the position of global leader relatively quickly, and its appeal in the international community will be significantly different from that of the current Trump administration. The Hong Kong Globalization Center believes that the coordination capabilities of the Western world will be strengthened as a whole. In the ever-changing international situation, the fight between China, the United States, Europe and Japan will become more intense. However, with the improvement of the precision of the foreign policy of the new Biden administration, the willingness and possibility of Europe and Japan to substantially lean toward the United States in diplomatic actions will be greatly enhanced.

Although the China-EU Investment Agreement is expected to be signed, and China-Japan economic and trade relations will go further under the “Regional Comprehensive Economic Partnership Agreement” (RCEP) framework. However, due to the effective leadership of the United States, the strengthening of Western cooperation with China will become a trend and normal. The Globalization Center believes that the difficult situation of political forces such as ASEAN and Latin America being forced to choose sides will become more prominent.

Prediction 3: European and American debt risks are rising, global investment attention shifts to Asia

The Hong Kong Globalization Center predicts that the investment value of European and American countries will continue to decline, showing characteristics of low growth, low interest rates and high risks.

In a report released by the OECD in early December, the global economy will grow by 4.2% in 2021, driven by positive factors such as vaccination. However, the economic growth rates of the Eurozone and the US are likely to be only 3.6% and 3.2% respectively. The Hong Kong Center for Globalization pointed out that the budget deficit and debt scale of the United States in fiscal 2021 will continue to expand. It is estimated that by the middle of next year, government debt will reach 20.3 trillion US dollars, accounting for 98% of the country’s GDP, the highest since World War II. Record. The weak dollar trend may continue into the second half of next year. In the future, it will be difficult for the Fed to easily sell Treasury bonds to reduce the size of its balance sheet, resulting in artificially lower U.S. bond yields and forcing a considerable number of overseas investment institutions to withdraw from U.S. bonds.

As for Europe, before the epidemic hit, European countries were already in deep debt crisis, and their fiscal space was relatively limited. It is expected that the major central banks in Europe will not be able to stop quantitative easing in 2021, and inflation in the euro zone will rise further. Public data shows that European countries are the largest contributors to negative yield bonds. Among them, Sweden, Germany, Finland and the Netherlands account for 91%, 88%, 84% and 84% of negative yield bonds respectively.

Compared with the negative interest rate caused by the panic in the euro bond market, the yield of China’s 10-year treasury bond has returned to a stable level of more than 3% since July this year. The Hong Kong Center for Globalization believes that this shows that the macro economy is relatively stable and investment expectations are more stable.

Finally, the Hong Kong Center for Globalization mentioned a factor that after Bi came to power, it will become more predictable than the current deteriorating Sino-US relations. Although the trend of intensified competition between China and the United States will continue, Biden, who pursues multilateral diplomacy, will be able to relax Trump’s tariff policy on China, which will stimulate investors to maintain positive expectations for Chinese assets and other emerging markets in Asia.

Prediction 4: Global consumption growth will be limited in 2021, and regional differentiation will be severe

In 2021, the global debt will be high, and the high risks will be long-term. Continued quantitative easing has gradually weakened the economic stimulus, and developed countries expect to use consumption to promote economic development. However, the recovery of consumption in 2021 will be very slow, which is reflected in the impact of the epidemic on residents’ income and consumption willingness, and the trend of serious regional differentiation.

The Hong Kong Globalization Center quoted the Ipsos Global Consumer Confidence Index released in November 2020 and found that Saudi Arabia (60.7), Sweden (53.0) and the United States (52.2) have indexes above 50. In contrast, Russia (35.0), Poland (34.6), Argentina (33.7), South Africa (33.1), Spain (32.2) and Turkey (30.0) are below 35. Therefore, it is concluded that the consumption recovery in 2021 will start in developed countries first, thanks to policies such as direct fiscal transfer payments, while the supply side of developing countries is already lagging behind on the premise that the supply side is also impacted by the epidemic, and household income Declining, the prospects for consumption recovery are worrying.

In addition, the global income gap continues to widen during the monetary easing cycle. If the global income distribution pattern has not been significantly improved, the overall global consumption growth will be weak.

In 2021, the consumption power of low-income groups in developed countries will grow limited, and the marginal propensity to consume for high-income groups will be low. The epidemic has further widened the already prominent gap between rich and poor in developed countries. The gap between the rich and the poor has further widened, aggravating social conflicts in developed countries, and also suppressing the growth of social purchasing power in developed countries, that is, the recovery of consumption.

The Hong Kong Globalization Center concluded that the widening gap between the rich and the poor will also result in a sharp drop in global marginal consumer demand in 2021, an imbalance in the demand structure, and a serious consumption gap. Especially in developing countries, the out-of-control epidemic and the high threshold of vaccines further exacerbate poverty. Developing countries will generally show sluggish consumption, and the proportion of low-income groups will further expand.

But the situation in China is significantly better than other developing countries. Fitch, the international rating agency, recently released its latest report, raising its forecast for China’s economic growth in 2021. The US Consumer News and Business Channel (CNBC) reported on December 10, 2020 that the Chinese government has effectively controlled the COVID-19 epidemic, which has driven the domestic economic recovery, and its development momentum has greatly exceeded expectations of all walks of life. It is also expected to promote the improvement of the global economic environment.

Prediction 5: Traditional commodity trade encounters challenges, and the emerging economy driven by technology is thriving

The Hong Kong Globalization Center predicts that in 2021, global trade will show a weak recovery. From July to November 2020, world trade volume has increased month-on-month for five consecutive months, and the WTO also predicts that next year global trade volume will technically rebound by 7.2%.

However, with the rebound of the epidemic in the fourth quarter, consumption and exports in the United States and other countries have shown signs of slowing down recently. The International Labor Organization ILO report shows that in the first three quarters of 2020, global labor income fell by 10.7% year-on-year, and about 70 million to 100 million people may fall into extreme poverty. This shows that as the demand side deteriorates, traditional commodity trade will continue to encounter challenges in 2021.

On the other hand, the impact of the epidemic on global trade may evolve from a temporary adjustment to a comprehensive reshaping. Both the form of trade and the content of trade will continue to change. Formally, due to restrictions on the direct flow of people and goods, new methods such as cross-border e-commerce and market procurement trade will continue to develop.

The proportion of China’s e-commerce cross-border trade in total imports and exports in 2019 has rapidly increased from 12.2% in 2013 to 35.6% in 2019, and it may account for more than half of the country in 2021. In terms of trade structure, the proportion of trade in household products and consumer electronics products will continue to increase.

In addition, a new round of global technological revolution is brewing, the digital economy and the real economy are increasingly deeply integrated, and the digital economy and virtual economy are becoming new highlands for global trade.

At the same time, in the face of the complex and volatile international environment, the “14th Five-Year Plan” proposed by China’s decision-makers also proposes the implementation of a national security strategy, which will include safe development throughout the economy, industry, infrastructure, strategic resources, technology, finance, ecology, etc. every aspect. In the field of environmental protection, China proposes to peak carbon emissions by 2030 and strive to achieve carbon neutrality by 2060.

All in all, in 2021, the emerging economy driven by technology will thrive.

Social prospects: vaccine materials trigger new geostrategic conflicts.

Prediction 6: A new ecology will emerge in social management, and the way in which individuals interact with society will change for a long time.

Since China is the world’s major economy that has the fastest control of the epidemic, the superiority of China’s anti-epidemic model and the failure of the Western democratic model have become prominent topics of debate in the field of public opinion.

Political scholar Daniel Bell believes that a lesson from the “hundred-year history of humiliation” and civil wars before 1949 is that the country needs a strong, centralized and effective government to maintain social order. The latest manifestation of the legalist tradition is the large-scale top-down mobilization of state power to curb the spread of the virus. Of course, the local government in Wuhan should act sooner rather than stop the spread of information about new diseases.

Due to the long-term impact of the epidemic, government power has ushered in a wave of expansion around the world. At the same time, it is the squeeze faced by civil society and the continuous contraction of economic activities.

The Hong Kong Globalization Center predicts that in 2021, with the long-term continuation of the epidemic, people around the world will become accustomed to control measures such as lockouts, screenings, and movement restrictions that are released at any time; personal information collection behaviors such as trip codes and real-name systems will increase worldwide Promote and expand from the health field to other aspects of social life.

There are already examples of this in social governance. For example, the “Civilization Code” launched by Suzhou not long ago is to “learn from” the health code model to monitor and manage citizens. In addition, face recognition monitoring is becoming more and more popular, and people’s whereabouts are becoming more and more transparent and there is nowhere to hide.

The Hong Kong Globalization Center further concluded that technology-driven social management methods will be further refined, and the ability to perceive the social panorama will continue to improve. At the same time, the individual’s acceptance of collective power intervention will continue to deepen, and the way in which individuals interact with society will last forever.

From this point of view, the epidemic has changed society far beyond the virus itself, but has had a profound impact on social governance and other aspects.

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