China worries Asian financial executives

HONG KONG—Asian financial executives have turned pessimistic about the global economy in 2016.

A survey of participants to the Asian Financial Forum 2016 showed that 43.7 percent were pessimistic, up from 23.5 percent in a similar survey in January last year. The number of optimistic fell to 15.8 percent this year from 29.8 percent in 2015. Two in five participants voted neutral when asked about their view on the global economic outlook for 2016.

Over the next five years, however, 45.7 percent of the participants were optimistic in their outlook for the Asian economy, with only 22.7 percent expressing pessimism.

The participants consider the possible hard-landing of the Chinese economy, the world’s second largest, as the biggest global economic risk this year. This was followed by geopolitical tension (21.8 percent), collapse of energy and commodity prices (20.4 percent), uncertainty in the pace of US interest rate normalization (17.9 percent) and deflation in the European Union and Japan (3.6 percent).

Asked which factor was most likely to impact Asia’s development, 44.8 percent of the participants said it would be the slower growth trajectory of the Chinese economy. This was followed by regional cooperative projects such as China’s “Belt and Road Initiative” and the Trans-Pacific Partnership (TPP). Exchange rate volatility in Asian currencies (12.2 percent) and further financial market reforms in Asia (7.3 percent) were also cited.

The Asian Financial Forum, now on its ninth year, is an annual undertaking of the Hong Kong Special Administrative Region (SAR) government and the Hong Kong Trade Development Council (HKTDC). With the theme “Asia: Shaping the New Paradigm for Growth,” AFF 2016 gathers government, finance and business leaders from around the world to network and exchange insights on international financial and business trends.

Last year, participants were less confident about global economic prospects than they were at the 2014 AFF, with only 30 percent optimistic about the global economy in 2015 compared to 40 percent in 2014, while 24 percent indicated pessimistic expectations for 2015, from 11 percent in 2014.

More than half of the audience (52 percent) felt that banking reforms had stifled credit as well as economic growth, and that European governments should defer austerity programs. A few days later, the European Central Bank’s announced stimulus policies.

Regarding the biggest risk for global growth last year, participants were evenly split between volatility created by diverging monetary policies among major central banks (23 percent), increase in geopolitical tensions (23 percent), collapse of energy and commodity prices (20 percent), hard-landing of the Chinese economy (18 percent), as well as stagnation or deflation in the European Union and Japan (17 percent).