How will the epidemic affect China economy

This article is an excerpt from a report provided by the Shanghai Institutes for International Studies: China's Fight Against New Coronaviruses: Progress and Impact
With the development of the epidemic, there are three representative views on the negative impact of the pneumonia epidemic on the Chinese economy released by domestic and foreign institutions and media: the first is the impact theory, which believes that the pneumonia epidemic is decelerating to the Chinese economy The impact is huge, there may be a sharp decline in growth rate and drag the global economy; the second is controllability theory. In view of the impact of SARS on the economic shock in 2003, it is believed that the overall impact of the pneumonia epidemic on China ’s economy is controllable. The quarterly economic growth will not slow down the economic performance of the whole year. The third is the theory of uncertainty. It is believed that the impact of the pneumonia epidemic on the economy is difficult to predict. It depends on the spread and control of the epidemic. Historical experience is not enough to verify today's economy. After all, China's economy today is about 9 times the size of 2003. The total GDP in 2003 was 11.7 trillion, and in 2019 it was 99 trillion.
It is difficult to predict the economic impact of the epidemic from historical experience. Since the new millennium, China has experienced several impacts of epidemic infectious diseases and accidents, three of which have widespread epidemic outbreaks including SARS in 2003, H1N1 influenza A in 2009, and H7N9 bird flu in 2013, of which In 2003, the SARS epidemic had a relatively large impact, and its short-term impact on the economy was also greatest. Due to the regional characteristics of the 2008 Wenchuan earthquake and the global financial crisis that broke out in the United States in 2009, following subsequent stimulus policies and international cooperation under the G20 leadership, the Chinese government has responded well to the impact of crises and unexpected events. Maintain steady economic growth. However, the impact of the pneumonia outbreak at the beginning of 2020 is very different from the previous ones, and it is prominent in two aspects: on the one hand, the environment is different, and internally, the Chinese economy is undergoing a shift from high-speed growth to high-quality During the transition period of development, it faces three major battles: prevention of systemic financial risks, pollution prevention and poverty alleviation. From an external perspective, globalization is facing unprecedented challenges. The cloud of Sino-US trade friction has just eased. China is also facing the impact of the epidemic. The internal and external economic environment has undergone substantial changes. On the other hand, the magnitude of the impact is different. The outbreak spread even more. Wuhan adopted the entire city isolation and the first-level response from more than 30 provinces and cities nationwide. This is the first time since the founding of the People ’s Republic of China. The impact on the economy is nationwide. It is fully demonstrated that employment, local government debt, and the stability of the renminbi have all faced tests.
The direct impact of the epidemic on the Chinese economy is mainly in three areas: first, in the service sector, especially in the tourism, catering, cultural and entertainment industries in the consumer sector, and in the logistics industry. Among them, the impact on SMEs is relatively obvious. Secondly, it is the manufacturing industry. Due to the uncertainty of the resumption time, mobile phones, automobiles, electronics and other industries will be greatly affected, and it will also affect the global industrial chain. Wuhan, the epicenter of the epidemic, is also a manufacturing-intensive area. The impact is difficult to predict. . Thirdly, in the field of trade, due to the panic caused by the epidemic, coupled with geopolitical and other factors, the measures of relevant countries to reduce or close aviation, ports, and borders will have a negative impact on China's foreign trade, thereby dragging down the Chinese economy.

The resilience of the Chinese economy cannot be underestimated. The impact of the epidemic on the economy is not entirely negative, and the Chinese economy is still relatively resilient. In the short term, the epidemic is not negative for all companies, such as direct benefits for e-commerce, online games and entertainment companies. At the same time, the Chinese government's financial security capabilities are obvious to all. As far as epidemic control is concerned, as of January 29, 2020, China's fiscal authorities at all levels have issued a total of 27.3 billion yuan in subsidies for epidemic prevention and control to ensure funding for epidemic prevention and control. According to the progress of the epidemic, China will also adopt corresponding policy measures to respond. In the medium term, the uncertainty of Sino-U.S. Trade frictions has been greatly eased with the conclusion of the first phase of the agreement. Although the United States has questioned China's ability to comply with the epidemic, it is precisely because of the epidemic that the intensity of China's procurement of agricultural products is not expected Decreasing and even increasing purchases of other products such as medical and health equipment and instruments. The epidemic coincided with the key points in the formulation of the 14th Five-Year Plan, and the economic development plan for the next 5 years is worth looking forward to. In the long run, as the world's second largest economy, China's huge potential in new economic areas such as consumption power, urbanization, 5G and artificial intelligence will not disappear due to the epidemic.