Davos Strong moment: Commitment to the reform

Abstract Davos, Switzerland, just arrived at 2 pm local time on January 21, at 9:00 pm Beijing time, one hour from the opening of the world-famous Davos Economic Forum. This is small enough to have only two main streets, only 11,000 people in the eastern town of Switzerland...
Davos, Switzerland, just arrived at 2 pm local time on January 21, this time is 9:00 pm Beijing time, one hour away from the opening of the world-famous Davos Economic Forum. This small to only two main streets, only 11,000 people in the eastern part of Switzerland once again entered its annual "martial law" moment.

On the occasion of the global focus on Davos, as the focus of attention, Chinese Premier Li Keqiang, who attended the Davos Economic Forum for the first time in five years, sneaked into the famous viewing spot of Davos - Shats Al On the top of the mountain, at the corner of the wooden viewing platform built on the top of the mountain, Li Keqiang looked far and wide, and after a moment of sitting alone, hurried to the Davos Convention Center at the foot of the mountain, where he will be the only special guest of the opening ceremony. Speech.

In the face of the snow in the Alps and the blue sky in Davos, the global media are speculating what Li Keqiang is thinking. The answer is hidden in his speech: "I climbed to the top of the hill near Davos and overlooked Davos. It is indeed a beautiful, peaceful and peaceful town; but the world we are in now Not calm, not even peace."

A world that is not calm is Li Keqiang's annotation for the “global new situation” in 2015, and how to resolve this “unsettlement” may be the whole answer that global investors want.

"Macro policy is important, but structural reform is imperative." Li Keqiang said in his speech. Angela Bober, Asia policy analyst at Rongding Consulting, based in New York, said: "The Chinese premier, through his speech, conveyed to the world that the Chinese government is determined to drive economic growth with reforms. This will be China's global The best promise of the economic outlook."

Uneasy entrepreneurs

Spring River plumbing duck prophet. Just before Li Keqiang gave the word "unsatisfactory" in 2015, entrepreneurs who "swim" in the economic tide all the time have already felt the change of "water temperature".

100 of the 1,500 entrepreneurs participating in the Davos Economic Forum are members of the Global Billionaires Club. Although they are the world's top "1%", they are not in this world-famous resort. Feeling relaxed and happy, a kind of sympathetic uneasiness came back. In their view, Russia-Ukraine relations, low oil prices, volatile currency markets, economic deflation and even terrorism will all become important factors in the world's instability.

“I am thinking about investing in Picasso's paintings because I don't think other investments are safer. Oil prices will likely fall to around $45 per barrel in early 2016. Such an expectation will disrupt the global economy.” At the Davos Forum, 72-year-old Indian billionaire Adi-Gaudreji said at a private discussion, "Although we saw beautiful scenery in Davos, we need to face it. It’s a more ugly reality – the health of the world economy is worse than it was a year ago.”

Even the seemingly calm and serene Swiss Davos, the central bank announced the abandonment of the Swiss franc's move to the lower limit of the euro three days ago, and the market was frightened. The terrorist attacks that took place in Paris, France earlier this month have further deepened this sense of horror.

"We are just worried about it, and we keep wondering where unexpected shocks will occur," said Anne Richards, chief investment officer at Aberdeen Asset Management.

Entrepreneurs who arrived in Voss were busy exchanging their uneasiness with each other, while entrepreneurs who did not come to Voss chose to panic alone. As the “emerging forces” of the previous Davos Economic Forum – most of the billionaires in Russia missed the forum. The decline in oil prices has caused their wealth to shrink sharply, and political isolation has made them reluctant to attend public occasions.

“In the mountain hut in the Alps, I invite some business friends to exchange red wine and exchange predictions about the economy. This is almost the most important part of my New Year’s holiday in the past 5 years, and this year I chose to be at my own home. Look at what they say on TV." A man named Sergey Viminco, who is engaged in metallurgy and steel industry.

The uneasiness that hangs over Davos seems to represent the mood of most of the world's business elites. On January 20th, PwC released a report on the confidence of 1,300 CEOs around the world. According to a report, the number of people who believe that the global economy will improve in 2015 is only 37%, far lower than last year's 44%. Among the many reasons that have led to a decline in global business confidence, China's economic growth has become the heaviest "heart disease" of global entrepreneurs.

Chinese confidence

Heart disease is also a cure. Faced with the world's concerns about China's economic growth, the Chinese government has been trying to provide a good medicine for it. Confidence is undoubtedly the best medicine to soothe panic. The Davos Forum provides an ideal platform for the Chinese government to express its confidence in the new normal.

I don’t know if it’s a coincidence or a deliberate attempt. Every trip by the Chinese Prime Minister to Davos will become a “blow-off” for China’s imminent change. The fact that the Prime Minister was the "leader" also made this Davos delegation the highest-profile in five years.

Such a high-profile travel will inevitably carry a different signal.

In his speech on January 21, Li Keqiang first issued a "strong signal" - "The Chinese economy will not appear 'hard landing'. The Chinese economy has entered a new normal stage, and the new situation has increased the need to implement structural reforms. The adjustment of the Chinese economy reflects the trend of the world economy."

In order to further clarify his confidence in the new normal of China's economy, Li Keqiang visually compares China's current economic situation to skiing, and the good grasp of the three elements of the skiing process – speed, balance and courage – constitutes China has conveyed to the world three dimensions of full confidence in its new economic normal.

In terms of speed, China will no longer pursue the rapid growth of the past and instead seek a sustainable medium- and high-speed growth. On the balance, China will grasp the relationship between stable growth and structural adjustment. In terms of courage, China is committed to sticking to the reforms.

Li Keqiang said: "The Chinese economy must withstand the downward pressure and must achieve 'double high and high'. It must say 'no' to the traditional thinking. It is applauded for the innovation system and is determined to promote structural reform."

“Before leaving China to go to Davos, China has just released its worst GDP growth data for the past 24 years. With such a poor transcript to Davos, it just confirms the Chinese government’s Self-confidence in the new normal of the economy." Chen Fengying, director of the Institute of World Economics of the China Institute of Contemporary International Relations, said: "The Chinese government has enough confidence to tolerate further slowdown in economic growth, thus realizing that it will drive economic growth with reform. Instead of renewing the promise of growth in the form of credit-backed investment, the growth structure of the Chinese economy will be adjusted to a benign track of dependence on domestic demand."

Zhao Xijun, deputy dean of the School of Finance and Finance of Renmin University of China, believes that the Chinese government’s confidence in the new normal is precisely the determination to adhere to reforms. “China’s old growth model is nearing elimination, and at the same time, a new China’s economic growth. The model will be more dependent on innovation, services and domestic consumption. This shift will redefine China's economic ties with the world. China will change from a world factory to a capital 'export' market."

As another important tool to ensure the smooth running of China's new normal, Li Keqiang stressed that China will continue to maintain its strategic positioning, implement a proactive fiscal policy and a prudent monetary policy. “It will not engage in flooding, but will pay more attention to pre-adjustment. Fine-tuning, better implementation of directional regulation to ensure that the economy operates in a reasonable range.

“Now, Chinese leaders are trying to delay and reduce the market’s psychological expectations for loose monetary policy; but the core of the problem is that if the pace of private consumption expansion is not enough to offset the impact of the investment decline, economic indicators will further weaken in the coming months. The Chinese government will still have to take action at that time," said Liu Ligang, chief economist of ANZ Greater China.

On January 22nd, Li Keqiang’s speech in Davos did not fall, and the European Central Bank took over the Fed’s printing press. In the European Central Bank's 18-month bond purchase program, it will inject about 1.08 trillion euros of liquidity into the market. The Chinese government has already conveyed the determination of reform and confidence in the new normal to the world through the Davos platform. The next task will be how to achieve it in 2015, which is “not calm”.

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