The Chinese Academy of Social Sciences (CASS) released two yellow books on Dec. 20 in Beijing, one of which focuses on international politics and security and the other on the world economy.
The two reports were compiled by the Institute of World Economics and Politics at CASS and published by the Social Sciences Academic Press under CASS.
Reviewing the international political and security situation, the related yellow book notes that conflict and confrontation in hot spots have intensified in 2016, leading to tumultuous regional scenarios. Multiple forces like major-country politics, religious conflict and terrorism have intertwined to complicate the international situation.
According to the report, major-country relations entered a “new normal” in 2016. The China-Russia relationship has reached a higher level, the different stances of China and the United States in East Asia is affecting bilateral ties, and the United States and Russia face escalating geopolitical tension.
The report predicts that US foreign policy will steer the China-US conflict to the trade sphere in the early stage of the new government, US-Russia relations will improve to a certain extent, but their strategic competitive situation in Europe and the Middle East will hardly change.
Regarding the governance of international cyberspace, the yellow book says the global course of cyberspace governance will gradually enter deep waters, as conflict between states and between states and societies will become more complicated and varied, posing increasing difficulties to moving forward.
The report on the world economy points out the further slowdown in world economic and employment growth in 2016. Despite a rebound, prices of staple commodities are still in the mid-low range. A slight rise has been seen in global prices, and the pressure of deflation has begun to ease. International trade is more sluggish, characterized by slowing direct investment activities. Global debt levels keep increasing and the international financial market is confronted with continued volatility.
According to the report, the US economy is likely to add uncertainties to the world economy, as Donald Trump has established himself as the presidentelect and the country is entering an interest-rate rise cycle.
After Trump assumes office, major adjustments will be made in the nation’s foreign and domestic economic policy. If the protectionist policies that Trump promised in the election campaign are implemented, whether entirely or partly, countries around the world will probably follow suit, thus further lowering the world economic growth rate, says the report.
In addition, changing expectations for US interest rate hikes will also disrupt the international financial market from time to time. According to the world economy yellow book, developed economies’ loose monetary policies have provided a great deal of cheap capital for the international financial market, yet massive crossborder capital flows will easily cause shake-ups of some foreign exchange markets.
With the soaring of the dollar index, currencies of other countries, particularly emerging nations, will depreciate significantly. This scenario will recur with the fluctuations of the US economy and changes in expectations for interest rate rises, therefore bringing about a turbulent global financial market, the report predicts.
The yellow book states that the world economy will still face many great challenges in the future. The decreasing global potential growth rate, ever more fragile financial market and increasingly imbalanced income and wealth distribution will restrain the robust, sustainable and inclusive development of the world economy. Meanwhile, such issues as geopolitical risks, refugee crises and terrorism continue to destabilize the world economy.
The report forecasts that world GDP will grow by 3.0 percent in 2017 on a purchasing-power-parity basis and by 2.4 percent at market exchange rates. In 2017, prices of staple commodities will remain at the mid-low level, yet increase a little bit.
Given OPEC’s agreement to trim oil supply, Russia has also promised to cut output, so crude oil prices are expected to bounce back in 2017, exceeding $60 a barrel, says the report.