China's economy to withstand novel coronavirus

The pneumonia epidemic caused by the novel coronavirus poses a severe threat to the Chinese public health. In this challenging time, countries and people across the globe have expressed their solidarity with the Chinese people, and some have extended their valuable support. Nevertheless, people with hidden concerns are also wondering, as a global economic powerhouse, will the world's second largest economy stand the test of the epidemic?

Short-term effect

In the short run, we need to be objective and realistic to judge, and not underestimate the impact of the epidemic on China's economy.

To respond to this ferocious epidemic, the Chinese government initiated such measures as lock-down of certain cities, restrictions on public transport, extension of the Lunar New Year holiday and 1st-level response mechanism. Since the outbreak in late January, the epidemic has produced substantial negative impact on China's consumption, particularly on transportation, tourism, hotels and restaurants, movies and entertainment sectors.

To make matters worse, the epidemic broke out when uncertainties and instability abound in the global economy. China itself is undergoing the transition from high-speed growth to high-quality growth, globalization is facing with unprecedented challenges and the China-US trade friction is just beginning to show signs of stabilization. As a consequence, the epidemic is definitely bringing more downward pressure on the economy.

Impact surmountable

The scope and depth of the impact directly depends on the progress and effectiveness of the epidemic prevention and control. Therefore, I believe we should find out first whether the epidemic is local, temporary and limited and then see whether the counter measures are effective. Also we need to factor in the fundamentals of the economy.

First, based on the assessment by experts, the epidemic is “local” in nature, basically confined to Hubei province, especially Wuhan, and moreover, China's prevention and control efforts are gradually paying off with the confirmed cases in places outside Hubei steadily declining. Starting from February 1, the number of cases cured has notably exceeded the number of fatalities, even in the severely afflicted province Hubei, which is an important sign that the epidemic is controllable and curable. Those Chinese experts also agreed that relevant data revealing a turning point of the epidemic just around the corner. While the Severe Acute Respiratory Syndrome (SARS) lasted for eight months in 2003, judging from the current situation, we now are confident that the novel coronavirus epidemic will not last as that long and the overall situation is turning for the better.

Second, despite the short-term negative impacts of the epidemic on China's consumption, China's booming digital economy still generates new points of growth, which will help offset China's economic losses sustained as a result of the epidemic. China's advanced digital technology has powered online shopping, food-ordering and entertainment.

Furthermore, China has a complete industrial chain and the fight against the epidemic has pulled the growth of China's manufacturing industry. It's worth noting that, medical supplies and supplies for people's daily necessities are provided with the resumed production inside China rather than with imports or foreign assistance.

Third, the Chinese government has an extremely powerful capability for macro adjustment and control with rich resources. The Chinese government has allocated, since the epidemic broke out in late January, a total of 47 billion yuan in its prevention and control efforts, and on this basis, it will further formulate a series of policy measures to stimulate its economy. When chairing the meeting of Standing Committee of the Political Bureau on February 3, President Xi Jinping made a requirement that while Hubei province should focus on the epidemic prevention and control, other regions should on one hand effectively counter the epidemic and on the other ensure this year's economic and social development objectives be met. The following measures are the key points of our efforts for the next stage:

--To closely monitor the economic performance with the focus on the impact of the epidemic on the economy and preparations should be made for any potential complexities and difficulties.

--On the precondition of effective epidemic control, spare no efforts to support the resumption of production by all types of enterprises. More financial support will be provided, more newly invested projects will be initiated and on-going projects will be implemented more actively.

--To optimize the investment structure. Priority will be given to allocating more budget appropriations of the central government for building emergency medical treatment and quarantine facilities in the heavily affected areas.

--To continue to focus on the last battle for poverty elimination. In line with the strategy of rural revitalization, the prevention and control of this epidemic will be used as an opportunity to intensify to improve the living environment and public health system in rural areas.

--To ensure the stabilization of consumption and new consumption potentials should be unleashed more rapidly to better meet the residents' demand for a healthy life.

Apart from all these, some local governments have also taken preferential measures to support the development of SMEs. We have reasons to believe that with the benefits of all these measures, China's economy will rapidly get rid of the impact of the epidemic and go back onto the normal path of growth.

A grander prospect

Although there are uncertainties in China's economic development even without the epidemic, generally speaking, the epidemic will not change the fundamentals, the strong resilience and the long-term positive trend of the Chinese economy. We have full capacity and confidence to win over the epidemic and to minimize its impact. Our confidence in China's economy is attributed to the following factors: China's complete industrial system with a rational industrial set-up, the Chinese government's strong macro adjustment capabilities with ample resources, and China's close interactions with the world economy, and etc.

First, China is already the second biggest economy in the world. In 2019, its GDP was close to 100 trillion yuan with per capita GDP standing above $10,000, thus making China a middle-income country. China has the most complete industrial system in the world with a solid industrial foundation and an even more rational industrial set-up, and this vast country's economy closely intertwines with the global economy. These fundamental conditions and achievements will not undergo big changes because of the epidemic. Many people compare the impact of novel coronavirus with SARS, however, the size of Chinese economy now is as nine times as big as that back in 2003 and China now has much stronger material foundation and emergency response capacity than that time.

Second, the current financial data including those on import and export already show that many positive factors remain in China's economic development and that the economy is more inherently resilient, serving as a long-term support for the stabilization of the economy and the steady operation of the financial market. These long-term positive factors will not be reversed by the epidemic. On February 3, the first day of trading in the Chinese stock market after the Lunar New Year, despite the 8 percent drop, there was still an inflow of 20 billion yuan of foreign capital into the Chinese stock market on that single day. This demonstrates from one aspect that the international investors are still holding a bullish view of China's securities market and the growth prospect of the Chinese economy.

Third, the epidemic will bring profound insight into the future development and upgrading of the Chinese economy. The attention paid to innovation, new economy and the health industry will become the new driving forces for China's economic growth in the future. The industries of medical care and life science will enjoy new development. With the rolling out of 5G, the new economy represented by e-commerce, particularly intelligent manufacturing, smart cities, smart public services and smart medical care will grow profoundly, thus uplifting China's position in the global industrial chain. It is also noteworthy that when the 14th Five-Year Plan is formulated, the current epidemic will be fully factored in and that many new stimulus measures will be taken in the next five years.

Fourth, when it comes to external factors, the timely conclusion of the phase one trade agreement between China and the US at the beginning of 2020 will stabilize the economic and trade ties between the world's two biggest economies and will improve China's external economic environment.

Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) recently commented, the IMF supports China's efforts to tackle the outbreak, and is confident that China's economy remains resilient. In a recent press briefing, IMF spokesperson Gerry Rice also noted that China is a large economy with the resources and the resolve to effectively meet the challenge of the outbreak. While echoing the sentiments of IMF, we are fully convinced that, under the strong leadership of the Communist Party of China, given the solid fundamentals of its economy and the ample policy tools, the Chinese government and people will overcome the difficulties before us, and will unleash even tremendous growth momentum for China's economy.

At present, certain country's behaviors toward the epidemic are obviously exaggerated, overreacted and even discriminatory, which not only depart from the World Health Organization (WHO) provisions on measures under Public Health Emergency of International Concern (PHEIC), but also are irresponsible and not in the interest of the general public across the world. Such practice will also disturb international economic exchanges, world trade and global market. China has contributed 34 percent of the global economic growth in the past decade and at the same time is the biggest trading partner of more than 130 countries. It is good news to all countries that China's economy will maintain a good growth momentum after emerging from the impact of the current epidemic and will power the growth of the global economy.

The author is Counsellor of the Permanent Mission of China to the United Nations in Vienna.