High levels of corporate and sovereign debt in the aftermath of the 2008 financial crisis raise questions about how governments and corporations can respond to such slowdowns.
Economic experts predict 6% growth in China for 2019, which is still relatively strong.
Fang noted that declines in overheated sectors, such as real estate and infrastructure, could provide useful correctives for the market.
Benefit in disguise
“The trade war has come as a benefit in disguise,” countered Jin Keyu, Professor of Economics, London School of Economics and Political Science.
Jin argued that the dispute has provided external pressure on China to make needed reforms and open its economy.
Implementing reforms to make credit more available to Chinese households could help unleash the “latent dynamism of the private sector,” Jin explained.
Greater consumption from Chinese households could, in turn, offset declining consumer demand in other nations – one potential bright spot for the global economy.
The US has high levels of government debt
Another source of risk involves high levels of government debt in the United States.
“We have a real problem in terms of the quantity of debt we have to sell to the world over the next several years,” said Ray Dalio, Chairman of Bridgewater Associates.
Fang predicted that the political dispute would not affect the Chinese government’s interest in buying US debt.
“I don’t think China will in any way significantly reduce its investment into the US bond market,” he noted.
Central banks response
“I think monetary policy normalization is not an issue for this cycle. It’s an issue for the next cycle,” Weber noted.
Convening under the theme, Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution, participants are focusing on new models for building sustainable and inclusive societies in a plurilateral world.
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