paradigm shift in global macro pattern brings new challenges to china's economy
when the covid-19 pandemic has severely hurt the global labor supply，the russia-ukraine conflict has rapidly reduced the supply of cheap energy for europe，and the average growth rate of total factor productivity (tfp) has declined. as a result，the global macro environment of "low inflation，low interest rate，and low volatility"，lasting for the past decades，has rapidly switch to a new one featured with "high inflation，high interest rate，and high volatility". major economies in europe and the us are faced with the dilemma of hiking the interest rates to fight inflation or reducing the rates to stabilize the financial market. meanwhile，the rising populism and conservatism would like to bring headwinds to the globalization. under such circumstances，china is facing new challenges to achieve high-quality growth，to deal with not only shrinking global demand，but also the risk of higher imported inflation，and these requires coordinated efforts of fiscal and monetary policies.
the global macro paradigm is facing a huge shift
recently，in order to alleviate the impact of soaring energy costs，the hm treasury of the uk announced a large-scale income tax cut plan，but did not specify the source of complementary financing. the market treated the action as that the future fiscal gap would rely on the issuance of government bonds. in the context of high inflation and rapidly rising interest rates，the market began to concern about the risk of fiscal stability due to the scale of government bond issuance. soon，their confidence in uk assets has collapsed. investors competed to sell off gilts to pay those collateral calls，and bond values fell even further，which in turn raised the risk of a full-blown market crash.
public pensions have been levered high to conduct the liability-driven investment strategy (ldl) strategies，greatly affected by the decreasing values of the collateral，which is always the government bonds. in order to meet the conditions for future payments，most pension plans use the ldi，and the allocation of assets is mainly bonds. in this type of portfolio，long-term asset allocation is extremely sensitive to the volatility of interest rates，and in the past 20 years，a large number of interest rate swaps (irs) that "pay floating interest rates and charge fixed interest rates" have been purchased. the recent surge in interest rates on government bonds has triggered a requirement to replenish margins，causing a massive liquidity run on uk pensions "tragic". when pensions were on the verge of bankruptcy，the bank of england announced an "unlimited" bond-buying plan，dramatically reversing most of the tax cuts and spending plans that prime minister liz truss announced less than a month ago，which temporarily quelled the turmoil. the further cause of the uk pension crisis is that the inflation risk has changed the volatility of risk-free assets，and the deeper reason is that the global macro paradigm is facing a change.
