F REIGN TRADE - 中国国际贸易促进委员会

Regional Trade & InvestmentEUROPEGreece Starts theDominos ?By Li MingzhuDiscussion about Greece’s secession from the Eurozoneis officially put on the table. Several economistscommented that if Greece secedes from theEurozone, other countries in the same boat mayfollow suit, in which case stability of the EU will become impossible,global financial markets will be affected remarkably,and emerging markets like China also can’t be spared.Greece’s secession from the Eurozone willtrigger a chain reactionTing Lu, the chief economist in Greater China of Bankof America Merrill Lynch believes that Greece’s secessionfrom the Eurozone is a possible, but there is no exact timetablefor it. Once Greece decides to secede from the Eurozone,it may be confronted with financialchaos and loss of investor confidence.Meanwhile, Greece’s secession will causea chain reaction in the Eurozone, furtherdeteriorating the debt crisis.Pu Yonghao, the chief investmentstrategist in the Asia Pacific region ofUBS Wealth Management predicts thatin the next 12 months the probability ofGreece’s secession from the Eurozone isabout 20%~30%, and that Greece will still be very likely tosecede in the next two or three years.Haibin Zhu, the chief China economist in JP Morganalleges that there is a probability of over 50% that Greek willsecede from the Eurozone, and that Spain may be the next.Greece’s secession from the Eurozone will provide momentumfor its economic growth in the short term, as the internalcompetitiveness will be gradually built up with the devaluationof its national currency. However, after the secession ofGreek, other countries may follow suit, which can be a disasterfor the Eurozone.China’s exports may be affected adverselyZhu Haibin, the chief China economist in JP Morganreveals to Securities Times that according to internal researchdata, China’s exports to the Eurozone will decline by 7% witha decrease of 1% in European economic aggregate. Negativegrowth of European economy will have an extremely adverseimpact on China’s exports.Ting Lu points out that once the debt crisis in Europeexacerbates again and affects China’s exports adversely,China’s economic growth this year will be further hindered.China’s economy may continue to decline in thesecond quarter, and the quarterly Gross Domestic Product(GDP) will witness a year-on-year decrease from 8.1% to7.6%.Pu Yonghao also holds that Europe is a major exporterof China, and once happens, the negative growth in China’sexports to Europe will directly affect China’s economy; interms of capital supply, as Eurobank has been providingcredit supply to the Asia-Pacific region and Hong Kong, thecredit funds will be withdrawn to Europe along with thede-leveraging of the Eurobank; if the debt crisis in Europecontinues to deteriorate, it will encumber the development ofthe global financial markets and ultimately affect the stockmarket of the Asia-Pacific region.Emerging markets may become new engines foreconomic developmentSpeaking of the future global economic situation, PuYonghao claims that the scenario of global economic growthis crystal-clear: Europe suffers a negative growth, and theEuropean economy falls into a recession; the economic situationin the United States is relatively optimistic with an increasingrate of 2%~2.5%, but the fiscal contraction followingthis year’s presidential election will bring about uncertaintiesto next year’s economy; growth in emerging markets will befavored, but it’s not wise to intensively stimulate the economybecause internal inflation pressures inChina, wage increase pressure for instance,are still tremendous.Jian Chang, Asia economist in Barclaysbelieves: the global economy willbottom out in the next few months, andwill slowly recover in the second halfyear; the U.S. economy will be all righton the whole with its decreasing unemploymentrate, and gradually growingconsumption and real estate markets; the Eurozone will beconfronted with greater risks and its economy is bound to decline;as for the Asia-Pacific region, his prediction on China’seconomic growth is still 8%~8.1%, and he is optimistic aboutthe emerging markets. It is predicted that China's exportgrowth rate this year will be 10%, which is based on a 2% increasein exports to the United States and a negative growthof 0.4% to the Eurozone; in case of slower growth than predicted,China’s export growth rate may be single-digit.American economists of Merrill Lynch indicate thatthe U.S. economy is recovering, but the pace is still very slow.The United States will be confronted with fiscal retrenchmentresulting from expiration of tax cuts policy, which will haveadverse impacts on the U.S. economy, thus this year the U.S.economy will increase in the first place and then decrease;the global economic growth engines are still China and otheremerging markets, yet the emerging markets are not likely tobe spared in case of severe recession in developed economies.(Author: from Securities Times)56