Chen wenling: China’s economy will endure epidemic challenges
By GLOBAL TIMES Date: Feb 05 2020
The Chinese economy has encountered a temporary but severe blow due to the sudden outbreak of the coronavirus, which will potentially drag down the GDP growth in the first quarter to around 5 percent. As the world’s second-largest economy is trying every means to fight against the virus and laid the groundwork in a bid to anticipate economic rebound, the outside world needs to post faith in the economy’s ability to rebound.
The faith is reinforced by China’s effective control and powerful fight against the virus. More importantly, China's economic structure optimization has already manifested interim progress. Its steady growth and quality development trend will not reverse due to the temporary hardships. After the epidemic is controlled, a strong rebound is bound to follow.
The tertiary sector, especially tourism, transport, catering, and retail, bears the brunt this time. Given that the sector currently occupies more than half of the overall economy, and as the Spring Festival holiday normally means a consumption peak, the unprecedented preventive measures adopted this year incurred a heavy loss. If the virus outbreak didn’t happen, the economy was expected to see a 6 percent growth in the first quarter. Based on the current course of actions, if the epidemic is controlled by late February, the growth will remain above 5 percent.
But this temporary slowdown should not elicit a mood of panic. It has been widely agreed that China's economy has made progress in shifting from high-speed growth to quality development. In this context, it’s even more important to rationally look into the decline, in terms of data, under the influence of the epidemic. It’s neither necessary nor objective to lose confidence in the future of China's economic development.
To observe the economic functions throughout the year, it requires a dynamic approach. As long as the epidemic is contained in time, there should be no serious obstacles to the economy throughout the year, because there are no major inherent problems.
First, the agricultural sector will not be much affected because of seasonal reasons. Second, although the manufacturing sector is affected by the suspension of production, plants will not move out of China, as some countries hyped, because the transfer of the industrial chain needs time and incurs high cost.
Although foreign trade is currently affected to some extent, the key export provinces such as Guangdong, Jiangsu, and Zhejiang have not been severely affected by the epidemic, besides the virus doesn’t transmit through goods.
According to the current situation, the epidemic is expected to be controlled before the end of February, and the consumption will resume normalcy, and even rebound. It is expected that the yearly growth will witness a stable figure between 5-6 percent.
Indeed, due to the delay in production resumption, the tightness of the funding chain, and the pressure on both sides of supply and demand, private enterprises, small and medium-sized enterprises (SMEs), migrant workers, and flexible pay groups will be affected in the short term.
At present, China needs to have a good policy reserve, and some policies must be released in advance to support SMEs to pass through the predicament. This year's tax and fee cuts should be further strengthened based on the original, especially for SMEs that have ceased operations due to the epidemic. In addition to supporting the real economy through the manufacturing sector, support to the service industry should be given top priority.
The epidemic is expected to cause drastic impacts on China’s economy and the global economy than SARS did 17 years ago. China’s economy plays a greater role and is highly intertwined with the global economy today. In this context, the scope and depth of the epidemic impacts are likely to expand.
Since the outbreak of the epidemic, countries like the US and Italy have declared a public health emergency. Many countries have suspended flights to the Chinese mainland. Understandably, the outside world is cautious about epidemic prevention and control, but countries do not need to adhere to unwarranted panic, let alone take extreme discriminatory measures. All the badmouthing and other immoral and malicious moves will be disproven in time, like it happened 17 years ago because China’s economy will pull through the difficulty.