Can China’s Economy Withstand the Epidemic?

By staff reporter MA LI

THE World Health Organization （WHO） an- nounced that the novel coronavirus outbreak in Wuhan was a Public Health Emergency of International Concern on January 30 in Geneva， Switzerland. At the same time， WHO Director-General Tedros Adhanom Ghebreyesus lavishly praised Chinas epidemic prevention and control measures and stressed that the WHO was not in favor of imposing travel or trade restrictions on China.

After the announcement， the economic impact of the epidemic on China and even the world become the focus of international attention.

Limited Long-Term Impact on Chinas Economy

Many experts and observers from international institutions believe that although the impact of the virus is inevitable， the long-term impact on Chinas economy will be limited.

Zhang Bin， an expert with the Institute of World Economics and Politics of the Chinese Academy of Social Sciences， believes that the impact will be seen mainly in the first quarter. It is expected that economic movement will cool down in the short term， and that the service sector and industrial investment will be affected. In particular， the consumption of non-durable consumer goods will be significantly affected， such as the box office and tourism. However， consumption of many durable goods will compensate for this drop when the epidemic comes to an end. “This short-term virus outbreak has temporarily increased the fluctuation of the economy， but in the long run， it will not have a great impact on Chinas economy，” said Zhang.

Huang Tianlei， a research analyst at the U.S.-based Peterson Institute for International Economics， holds a similar view. He said the outbreak may have a temporary impact on Chinas economy， but its impact throughout the year should not be overstated.

According to Kenneth Rogoff， an economist with the Harvard University， based on similar cases in the past， the most likely scenario is that the virusimpact will prove temporary and be well contained.“We can hope for that，” he said.

As the Spring Festival in China is a peak consumption season， the emergence of the epidemic had certain impact on travel， consumption， and other sectors， bringing uncertainty to the economy. Gerry Rice， spokesman of the International Monetary Fund， also made a statement on the matter. He believes that some adverse effects of the epidemic on Chinas economy will be only temporary. After the epidemic is alleviated， relevant economic activities will resume. “The economy can be restored，”said Rice， adding that Chinas economy is large and that China has resources and determination to effectively cope with challenges.

What Should China Do？

In response to the epidemic outbreak， the Chinese government has taken aggressive measures to contain the spread and treat infected patients. How should it cope with the ensuing economic impact？

“Its best not to overreact in economic policy，”said Michael Spence， a Nobel Laureate in economics and a professor at New York University. He suggested that the government should first try to control the spread of the virus， while taking care of the infected and vulnerable population. In addition， the social security system should play a role in helping people financially. This is not only good for the people， but also for the economy as a whole， said Spence.

The current policy should be based on rescue and ensure social stability. So says Lu Ting， chief China economist at Nomura Holdings. “After the outbreak， the economy is bound to recover， so there is no need for excessive panic at present， and excessive stimulus should be avoided when the economy recovers，” said Lu.

China should also take more effective measures to stabilize expectations and boost confidence in the future. Zhang Yansheng， chief researcher of the China Center for International Economic Exchanges believes the country should continue to improve the transparency and effectiveness of epidemic prevention and control， address as early as possible the weak links in epidemic prevention and control， such as mask supplies， disinfection， ventilation and prevention， and restore the efficiency of national logistics， business operation， capital flow， and mobility of information and talents as soon as possible. It is very important to stabilize peoples expectations， including the confidence and expectations of global investors， said Zhang.

Most experts agree that the government must help enterprises facing difficulties during the epidemic to make a soft landing. Cao Heping， a professor at the School of Economics of Peking University， is one of these experts who believe there is a need to establish a policy-supported reinsurance system to help suffering businesses in the real economy. In addition， training programs should be rolled out to help laid-off workers， Cao said. China has rolled out measures to cushion the blow. The central authorities including the Peoples Bank of China， the Ministry of Finance， and China Banking and Insurance Regulatory Commission have recently pledged financial support to the real economy and businesses with promising prospects but suffering temporary losses during the virus outbreak.

As is noted by Li Yuan， a professor at the East Asia Institute of University of Duisburg-Essen in Germany， the epidemic will not change the fundamental stable prospect of Chinas economic development.

“We can fully maintain confidence in the resilience of Chinas economy，” Li said. By responding to the epidemic， the Chinese government at all levels will also significantly increase investment in public health products， which will also benefit the longterm and healthy development of the economy.”