(Yicai Global) Feb. 21 -- Policies that US President Donald Trump promised to apply after taking office have had a major impact on the global economy and affected the economic landscape, a Chinese economist told Yicai Global.
Inflation, interest rates, investment, trade, capital flows and oil prices were all low in the global economy until Trump was sworn in, said Zhu Min, president of the National Institute of Financial Research at Tsinghua University, two days ago. Zhu once served as deputy governor of China's central bank and vice president of the International Monetary Fund.
He noted that a turning point in global economic policy and politics is on the horizon. Monetary policies in major developed countries are continuing to diverge, he said, adding that at the same time the value of the dollar was climbing, other currencies were falling in value. Zhu believes that exchange rate volatility will be a key factor this year and maybe even in the coming years.
Previous discussions were about how long zero interest rates can be maintained, but this has switched to talk of how high rates will rise, he added.
China's government will switch to focus on fiscal policy, rather than monetary, to stimulate the economy. The decline of income distribution and rise of populism will also trigger a turn in the global political environment, Zhu said.
Zhu feels Trump's economic policies were designed to enlarge demand space through fiscal stimulus; attract capital inflows and increase investment through monetary policy; improve labor productivity through corporate tax, regulatory law and other structural reforms; make space for US exports by staging trade wars; and stimulate economic growth through fiscal means.
He added that these practices may be effective, but nobody yet knows the specific details on how they will be implemented. The combination of the policies is difficult to coordinate and the government may encounter a lot of resistance, Zhu said.