Huang Haizhou: For China, we need to seize the new opportunities brought by the development of AI.
China’s GDP growth of 5.2% in 2023 is hard-won. The growth target set this year is 5%. At the international level, due to the frequent interest rate hikes by the Federal Reserve and the bankruptcy of Silicon Valley Bank last year, the market is more worried about a "hard landing" of the U.S. economy. The starting point for the market's belief that the U.S. economy will be in recession is that historically, any increase in interest rates by the Federal Reserve for 18 consecutive months by more than 500 basis points will lead to an economic recession, without exception. But this time is an exception because the United States' response to the crisis in 2020 was unprecedented.
Before April 2020, the U.S. authorities did not take any response measures to the COVID-19 epidemic. Until March 2020, panic broke out in the U.S. stock market, and the stock market "circuited" four times. At that time, the market generally believed that the United States might experience a financial crisis similar to that of 2008. So in April 2020, the United States began to launch a series of fiscal stimulus and monetary easing policies to actively respond to the impact of the COVID-19 epidemic. In terms of fiscal stimulus, from April 2020 to April 2021, the U.S. government’s fiscal deficit reached a staggering US$6 trillion, close to 30% of GDP. Generally speaking, a country’s annual new fiscal deficit should not exceed that year’s GDP. 3% threshold. After the COVID-19 epidemic in 2020, the new fiscal deficit of most countries exceeded the 3% threshold, and the new fiscal deficit of the United States was once close to 30% of its GDP. From the perspective of monetary policy, M2 in the United States has also grown rapidly. After April 2020, M2 increased by more than 20%, reaching a peak of 25%, while under normal circumstances it is about 5%.
Because of the accumulation of these stimulus measures, although the United States is still strongly raising interest rates in 2023, and the accumulated interest rate increases exceed 500 basis points, the U.S. economy not only does not have a "hard landing", but its GDP grows by 2.5%, which is healthy for the United States. growth figures. At the same time, the U.S. policy to control inflation in 2023 has also achieved certain results, with inflation falling to 3.4%. Even as the Federal Reserve controls inflation, U.S. fiscal policy is still very loose. If calculated based on the ratio of deficit to GDP that year, it will be even looser than China's fiscal policy in 2023.
In addition, the market expects that the Federal Reserve may begin to cut interest rates in June 2024.
It can be seen that when the economy is hit, especially when there is obvious deflationary pressure, active fiscal policy and monetary policy can play an important role.
Seize opportunities for AI development
From an overall market perspective, the economic growth of major countries in the world may slow down in 2024, but there will not be a major global economic recession. For developed countries, macroeconomic policies play an important role in stabilizing their economic growth. For China, structural reforms are also very important. Technological progress, especially breakthrough technological progress, has a great impact on all countries. For China, it needs to seize the new opportunities brought about by the development of AI.
Since 2020, thanks to the active fiscal and monetary policies of the United States, the overall performance of the U.S. capital market has been brilliant. Although the U.S. economy is on a recessionary trend in 2020, the U.S. stock market is still in a bull market; in 2021, the U.S. stock market will remain in a bull market. Affected by interest rate hikes in 2022, both the U.S. stock market and bond market have undergone significant adjustments. Amid concerns about a U.S. economic recession in 2023, the overall performance of the U.S. stock market has been bright.
One obvious change in this U.S. bull market is that the market valuations of large technology companies have become higher. There are seven important trillion-dollar technology companies in the U.S. stock market, and the new highlights of these companies are all based on technological advancements in AI. The market generally believes that AI may bring about changes on the scale of a new industrial revolution. In the AI scenario, normal social changes will occur, with some jobs reduced and some jobs increased. But generally speaking, AI will have a significant impact on total factor productivity (TFP). The market predicts that AI will increase the contribution of U.S. TFP to GDP growth by 1.5 percentage points, which is quite an astonishing figure. In this case, the potential GDP growth rate of the United States may reach about 4%.
We need to pay more attention to the technological revolution and attach importance to supporting it from the aspects of investment and mechanisms. We should seize the opportunity and move forward.
Source: Sohu News
