Zhang Yansheng: China’s Economy Will Experience A Fast Recovery After The Pandemic

The WHO listed the pandemic situation in Wuhan as a Public Health Emergency of International Concern(PHEIC) and as a result, many people have become very worried and anxious.

Regarding the impact of the pandemic on China’s economy, six Chinese economists expressed their viewpoints.

Zhang Yansheng, principal researcher of China Center for International Economic Exchange:

From the second half of 2020, China’s economy will start to recover.

WHO has announced PHEIC five times in the past, including the Ebola virus in Africa in 2019, the Zika virus in 2016, the Ebola virus in West Africa in 2014, the wild poliovirus, the 2009 H1N1 influenza in Mexico and the United States. The novel coronavirus outbreak in Wuhan is the sixth.

Compared with the previous five PHEIC, China’s economy may recover faster after the pandemic.

As of 11 am this morning, there are 9720 confirmed cases nationwide and 5806 of them are in Hubei, accounting for 59.7%. Yesterday alone, there were 1,220 new cases, indicating that Hubei is still in a breakout stage. After Zhong Nanshan confirmed that the coronavirus can be spread via human transmission, a lot of countermeasures have been taken.

We can see that the spread of the pandemic is very scattered. In addition to Hubei, 13 provinces have more than 100 confirmed cases. The number of confirmed cases in Zhejiang is 537, less than 1/10 of that in Hubei.

The prevention and control of the pandemic in Wuhan in the early stage may not be so satisfactory, but there is no need to panic. If we stay calm and take countermeasures accordingly, the pandemic and its impact on the economy are controllable.

He Weiwen, senior researcher at the Chongyang Institute for Financial Studies, Renmin University of China:

The WHO’s decision will have an impact on the Chinese economy. However, as a specialized agency under the United Nations, the WHO only expresses its professional opinion, and the final measures to be taken will be determined by each country. Some countries may restrict travel and flight but trade and investment will not be completely stopped because of the coronavirus.

From the previous PHEIC announced by the World Health Organization, we can see that this decision is dynamic and revocable, and a re-evaluation will be made after 3 months. If we can do a great job in pandemic prevention, then we will have a chance to remove the PHEIC.

Yu Yongding, Academician of the Chinese Academy of Social Sciences:

During the SARS period in 2003, everyone thought that the economic performance would be hit really hard but the result was much better than expected. Of course, the current situation is very different from that in 2003. At that time, the external environment was better.

Liu Ge, commentator of the CCTV Financial Channel:

Compared with 2003, the impact of the coronavirus on the economy will be more serious because of the changed size and structure of China’s economy. At that time, China was a relatively new member of the WTO, and its service industry accounted for a relatively small proportion of the total economy, while the manufacturing industry accounted for a larger proportion. The manufacturing industry could recover from the pandemic quickly by working overtime but it is not so easy for the service industry.

The over-reaction of our society will increase the impact of the pandemic on the economy and the impact depends on the duration of the pandemic.

Chen Fengying, researcher of the China Institutes of Contemporary International Relations:

In 2003, the Chinese economy was climbing up, which is why it could recover quickly in the third and fourth quarter when the SARS was over. Currently, the Chinese economy is transforming from the high-speed growth period to a medium-high period, and thus any external shock like the coronavirus will make the economy very vulnerable.  

However, the Chinese economy will not collapse because its strength is much stronger than in 2003. As long as we are all united and everyone does their job right, we should be able to resume transportation, logistics and consumption soon.

Professor Cao Heping, School of Economics, Peking University:

The longer the pandemic lasts, the greater the damage to the economy. If the pandemic can be controlled in the next 20 days, the short-term damage to the national economy will be less than 0.4%, and the long-term impact will be amortized to the next 300 days.

The main problem now is that we are overreacted, just like we were in the SARS period, people hoarded a large number of foods.

Unemployment and bankruptcy are happening and must be resolved as soon as possible.

From a macro perspective, neither unemployment nor bankruptcy will become a “wave”. The concept of the digital economy did not exist in 2003. In the past 10 years, however, the employment flexibility of the digital economy has become much higher than that of the traditional manufacturing economy. Ten years ago, every 1% increase in China’s economy could create 900,000 jobs, but now this figure has increased to1.3-1.5 million. During the house quarantine period, the digital economy and the sharing economy supply materials for everyone and the express delivery service has driven the growth of the online economy and created more jobs than the manufacturing economy.

Some traditional manufacturing and stores may become bankrupt due to the long-term structural adjustment and the sudden pandemic outbreak. For example, the lockdown of large cities has given shopping malls a hard time. The problem of excessive capacity will be harder to solve due to the problem with transportation and declining automobile sales. Many stores may also face the danger of bankruptcy and lead to unemployment.

Chen Fengying, researcher at the China Institutes of Contemporary International Relations:

The challenge will appear in the first half of the year: factories in the South of China will not be able to recruit enough workers because of the lockdown. In the north, work resumption may not be possible because there is no market. People have already hoarded vegetables, fruits, rice noodles and other necessities, thus, other consumption will be postponed. The outcome is that small and micro enterprises will suffer.

What should we do in this situation?

Yu Yongding, academician of the Chinese Academy of Social Sciences:

We should come up with policies to reduce production costs so that we can support the supply side.

Chen Fengying, researcher at the China Institutes of Contemporary International Relations:

We must restore consumption first, once it returns to normal we can start to stimulate consumption.

We should launch tax cuts and fee reductions for enterprises. If the profitability of enterprises increases, wages will increase accordingly. Meanwhile, we also need to ensure that the government has enough tax revenue.

The closure of some factories does not necessarily mean that the workers will become unemployed for a long time. They can be re-employed locally, which will help to stimulate the local economy. Local governments should help returned migrant workers to become self-employed so as to strengthen the regional economy.

We should also pay attention to international cooperation. The world needs Chinese goods and China also needs the international market.

The most important thing is to keep calm and carry on.

Professor Cao Heping, School of Economics, Peking University:

For enterprises facing difficulties during the pandemic, the government must help them to survive. For example, the government can help enterprises to negotiate with landlords to reduce rental.

In response to the damage caused by the pandemic to the real economy, a reinsurance system should be established. Relief should be given to affected enterprises and job training should be provided to unemployed workers.