The United States harvests the world, China and India may save the world economy, and South Korea pays the price
The United States has signaled that it will cut interest rates at least three times next year, and it seems that a new round of global economic adjustment is brewing. In 2024, the economic rise of China and India is expected to become the engine of global development. South Korea is currently in deficit with China, and Yoon Suk-yeol may pay the price for blindly opposing China. Rarely, Biden's criticism of Trump's China policy suggests that there may be some changes in the war. U.S. Treasury Secretary Janet Yellen plans to make a second public visit to China to promote U.S.-China cooperation in the field of financial markets. The U.S. hinted at a rate cut, seemingly in preparation for a global economic adjustment.
In 2023, with the exception of China and India, the economic growth rate of the world's top 10 economies will be generally sluggish, which has attracted widespread attention. Recently, the Federal Reserve announced that it was considering cutting interest rates, and this news came into focus.
With just over the interest rate hike cycle and now rumours of a new round of interest rate cuts next year, the Fed seems to be unabashedly manipulating the dollar tide and has far-reaching global implications.
As of December 14, Fed Chair Jerome Powell revealed in an interview that discussions are brewing about a possible end to historic monetary tightening, and that the Fed plans to implement at least three rate cuts in 2024 to reduce borrowing costs after successfully controlling inflation.
For a long time, interest rate hikes and cuts have been the main tools for the United States to adjust inflation and stimulate economic vitality. When the issuance of dollars increases excessively, the Fed adopts a policy of raising interest rates, and banks raise their benchmark interest rates to increase borrowing costs and reduce the dollar in the market, thereby curbing inflation and driving job growth.
However, the interest rate hike policy has also been accompanied by a series of headwinds, such as a large influx of funds into the United States, which has led to the appreciation of the dollar, which has affected American exports. In addition, the willingness of the American people to spend may also decline, adversely affecting the economic development. According to statistics, as of the first three quarters of 2023, the year-on-year GDP growth in the United States was only 25%, which is largely constrained by the policy of raising interest rates.
Considering that 2024 is the first year of the United States, in order to present a more positive economic growth report card, Biden will have to weigh the pros and cons of cutting interest rates. Interest rate cuts can help stimulate borrowing activity by individuals and businesses, which in turn will increase the desire of society as a whole to spend, thereby driving economic growth.
However, frequent interest rate cuts inevitably lead to a depreciation of the dollar, which increases the competitiveness of American goods in the international market and makes it more expensive for other countries to buy American goods. In this case, a large amount of hot money will quickly flow out of the United States and into emerging market countries and regions. As a result, asset bubbles may form in these countries' ** and bond markets, and their currencies will appreciate, leading to a decrease in their export competitiveness and the risk of fiscal deficits.
When this situation accumulates to a certain point, the Fed may take the opposite step and raise interest rates again. This will lead to an increase in the value of the dollar and higher interest rates, making it more expensive for other countries to import, which will lead to a lot of hot money flowing back into the United States.
With this means of raising and lowering interest rates, the United States actually plays a leading role in global capital flows, forming the so-called "dollar tide". This strategy allows the United States to effectively control inflation, stimulate its own economy, and harvest the assets of other countries at the right time.
The Economist's latest analysis suggests that as the dollar continues to appreciate, debtor countries will fall into deeper economic distress. At the same time, there are more signs that Trump will re-enter the White House in 2024, and it is expected that he may adopt a policy of large-scale tax cuts and escalation of the war, further exacerbating the uncertainty of the global economy and making a soft landing less likely.
What is worrying at present is that the Palestinian-Israeli conflict in the Middle East has not subsided for a long time. Israel has even said that there will be no ceasefire until Hamas is completely defeated, which could lead to months of conflict in Gaza, pushing up international oil prices and triggering a global inflation crisis.
At the same time, the United States may achieve economic growth through measures such as interest rate cuts, but this could cause serious damage to the economies of other countries. At present, the United States seems to have adopted a self-interested strategy, viewing the global economy as a catalyst for its own development.
Looking ahead, the outlook for the global economy looks bleak, but China and India may be the economic bright spots and hopes.
In this situation, the global economic trend in 2024 will be mainly influenced by China and India, as China and India will become important engines of global economic growth, with a huge consumer market of 1.4 billion people.
China and India, two markets with great potential, will continue to play a key role in the global economy. As of the first three quarters of 2023, India achieved 7The annual GDP growth of 1% shows strong economic vitality. At present, India's total economy is close to the level of China in 2007, indicating that India's 7% economic growth rate is expected to continue.
India has made rapid progress in low-end manufacturing and contract industry, attracting multinational companies such as Apple, Samsung, Wal-Mart and others to invest in factories. In addition, if the Russia-Ukraine conflict continues, India also has the opportunity to make a significant fortune through ** trading.
In 2024, India will continue to give full play to its demographic dividend and achieve impressive economic growth. However, at present, India is still constrained by factors such as an incomplete industrial system and relatively low levels of education, which makes it difficult for India to fully unleash its economic potential.
It is worth noting that China is even able to achieve a GDP growth rate of 14% when its total economy is close to India's, compared to India's current growth rate of only twice as much.
This year, China still achieved 5.5 percent in the first three quarters despite a generally negative view of its economic performance in the West2% GDP growth. Considering that China's economy is about five times larger than India's, this growth rate is impressive among the world's major economies.
Of course, the rhetoric of China's economic collapse has been sung in the West for 20 years, and their pessimism about the Chinese economy has now become commonplace. However, in the first three quarters of 2023, the GDP growth of the United Kingdom, France and other countries was below 2%, and Germany even experienced negative growth. The economic situation across Europe is dire, and the US is poised to continue to drive growth in 2024, making the outlook for Europe bleak next year.
Although China may face the impact of unfavorable factors such as global weakness next year, at the ** economic work conference on December 12, China has determined the economic policy of "promoting high-quality development, highlighting key points, and grasping the key" to ensure the solid development of economic work.
China's advantage lies in its ability to lead the construction of a modern industrial system through scientific and technological innovation, strengthen domestic demand, and cultivate and expand new consumption. Although the United States has been increasing its efforts to decouple from China, it has proved that the United States is still very dependent on China. Even if the United States chooses to purchase some low-end goods from other countries, it still cannot get rid of its dependence on China's ** chain, and there are even cases where the United States orders goods from Mexico and other countries, which are actually produced by Chinese overseas factories.
The ** deficit with China has also cost South Korea a certain price.
It is difficult for the United States to achieve decoupling from China, and even the so-called ** war has failed to change the huge Sino-US ** deficit. Regrettably, even America's allies have paid a heavy price for blindly following the United States' China policy.
Recently, a number of South Koreas quoted South Korea's public sources as saying that South Korea's ** deficit with China will reach 18 billion US dollars in 2023, which is the first time since the establishment of diplomatic relations between China and South Korea that it has re-emerged in 31 years.
In the past, China has always been one of the pillars of South Korea's economy, and China has always been the largest surplus country in South Korea. However, since Yoon Hee-yeol came to power, the situation has changed rapidly. Because South Korea's new ** abandoned Moon Jae-in's pragmatic foreign policy, turned to rapprochement with Japan, and fully turned to the United States. Yoon Suk-yeol not only provoked China on the Taiwan Strait issue, but also joined the U.S. semiconductor alliance to restrict high-end semiconductor exports to China, leading to a deterioration in relations between China and South Korea.
This inevitably affects South Korea's attitude towards China**. This year, South Korea's exports to China are $114 billion, and imports from China are $132 billion. In contrast, in 2018, South Korea's exports to China reached $162.1 billion, and China contributed 80% of South Korea's total surplus that year, making it South Korea's most important foreign exchange.
However, after Yoon Suk-yeol came to power, South Korea's semiconductor exports to China fell sharply, and South Korea's cosmetics and automobiles market share in China also rapidly declined. In the past, China needed to import many intermediate materials from South Korea for processing and exporting to the world, but now China has been able to become self-sufficient in most raw materials, reducing the import demand for South Korea.
Taking petrochemical products as an example, China's self-sufficiency rate was only 60% in 2019, but now it has exceeded 90%, which directly led to a 21% year-on-year decrease in South Korea's petrochemical raw material exports.
While South Korea's exports to China are declining, its import demand for China has increased significantly, especially in the development of the battery industry, South Korea needs to import a large number of key raw materials from China. However, one of the most important reasons for South Korea's ** deficit with China is Yoon Suk-yeol's foreign policy.
Recently, South Korea's "East Asia" published an article entitled "Sino-US competition escalates, South Korea is crumbling in the economic storm", pointing out that in order to be consistent with the United States' containment measures against China, South Korea's semiconductor, raw materials and parts companies are facing a difficult economic environment. At a time when the strategic competition between China and the United States is intensifying, the United States has begun to exert pressure in the field of semiconductors, while the South Korean semiconductor industry is facing pressure to stand in line. Yoon Suk-yeol insisted on following the United States despite Moon's suggestion to "maintain friendly relations with China", resulting in the development of South Korea's semiconductor industry being constrained by the will of the United States.
What worries South Korea even more is that China has not given in to South Korea's refusal to submit to its semiconductors. On the contrary, China has stepped up its R&D efforts in the field of semiconductors, filling the gap left by South Korea's semiconductors. Therefore, even if South Korea wants to resume semiconductor exports to China in the future, these markets may not be able to regain them.
As China's industrial chain becomes more and more perfect, various high-end industries gradually overcome technical difficulties, and South Korea's exports to China are likely to be further reduced. The current $18 billion deficit with China is just the tip of the iceberg, and China has even begun to compete with South Korea in the global market, indicating that South Korea may face a severe winter.
The war took a huge toll on South Korea, and the United States suffered because of the war. Trump's economic laymanship on the ** issue led him to launch a ** war with the concept that "the United States buys more Chinese goods and sells less to China, it loses". However, this ** war cost the United States dearly. In 2016, the U.S. deficit with China reached $544 billion, which increased to $691 billion in 2019.
* The deficit has increased instead of falling, and the United States has also suffered huge losses in jobs, and the blind tax hike on Chinese goods has caused the United States to face inflation problems. In the face of these unavoidable realities, even the United States, which has always been tough, has to admit that the war has cost the United States a lot.
On December 14, U.S. Treasury Secretary Janet Yellen said in a speech that she would make a second visit to China next year to accelerate U.S.-China cooperation in the field of financial markets.
In her speech, Yellen made a rare critique of the Trump-era policy toward China, arguing that it has made the United States more vulnerable and isolated in the fierce global economic competition.
In fact, since Biden took office, he has been considering lifting punitive tariffs on China. Two schools of thought have formed within the White House, one of which is represented by Treasury Secretary Yellen and Commerce Secretary Raimondo, who advocate the removal of punitive tariffs on Chinese goods in order to boost US job growth and improve economic conditions. The other faction, led by Dai Qi, the representative of the United States, insisted on continuing the war, believing that the imposition of punitive tariffs on China was an effective response to China by the United States, and opposed the United States' "disarming and surrendering".
According to Biden's actual performance recently, Yellen and Raimondo have visited China one after another, and during Biden's reception of the Chinese leader in San Francisco, Tai Qi made relatively few appearances. This shows that Biden may be considering slowing down his stance on the war. Of course, ** needs to subtly find a way out for yourself to avoid the outside world interpreting it as "surrender". Yellen came out to criticize the ** war triggered by Trump, and to a certain extent, it may also be to create a basis for Biden to "get rid of the political baggage" brought by the ** war.