Chinese economy resilient enough to counter virus shock

BEIJING, Feb. 2 (Xinhua) -- The invisible novel coronavirus has spread to all the provincial-level regions in China. The unexpected epidemic will testify the country's resilience in the face of this rare crisis.


File photo: VCG

But the epidemic will eventually come to an end, just like the winter will fade away. The negative implications of the virus on the Chinese economy will be short-lived, and the economic fundamentals are solid enough to withstand its blow.
Doomsayers take this chance to hype again the China-collapse theory. But seasoned observers disagree.

The International Monetary Fund (IMF) is closely monitoring China's coronavirus outbreak, but it has not yet quantified the potential economic impact on China. It expected that much of these effects could be temporary and be reversed once the virus retreats.
Economists generally agree that the Chinese economy may hit a brake in the first quarter, as the coronavirus outbreak puts commerce, tourism and parts of industrial manufacturing on hold.
Wei Shangjin, a former chief economist at the Asian Development Bank, projected that the impact in the first quarter of 2020 will be big, perhaps lowering growth by 1 percentage point on an annualized basis.
But it will be substantially offset by above-the-trend growth in the rest of the year if the epidemic can be contained soon, according to Wei. The impact on global GDP growth will be even smaller.
Some analysts parallel the coronavirus outbreak with the 2003 SARS crisis, airing fears that the economic blow this time will be much bigger than that by SARS.
Although the SARS resulted in a sharp decline in China's GDP growth in the second quarter of 2003, the negative impact was largely offset by higher growth in the following two quarters, and the annual growth rate was about 10 percent, outperforming major economies in the world.
It is also important to know that the Chinese economy is not what it was 17 years ago. It is bigger, healthier and more balanced in structure.
Although the virus keeps people out of shops, restaurants, theaters and travel hubs, reduction in offline sales will likely be offset to some extent by an increase in online purchases.
Today, more than half of China's economic output comes from the service sector, which is also the largest source of employment. China is in an age of Internet commerce. The epidemic halts massive mobilization of people, but it can not stop food delivery men shuttling between households, nor can it stop young people surfing on Internet entertainment hubs, or tourists rescheduling vacations after the epidemic is brought under control.
The background colour of the Chinese economy is changing from agricultural and second industry to service and new economy. So China is embedded with stronger immunity and resilience to offset external headwinds such as trade frictions, and internal setbacks such as coronavirus outbreak.
As certain as spring will arrive, fresh and virus-free air will come along sooner or later. Before that happens, it is imperative for China to continue applying stringent quarantine measures to contain the virus spread, to avoid any eternal bruises left on its economic operations, and to prevent negative ramifications from spilling over to other economies and wreaking havoc on the global financial market.
China also has a full toolkit to iron out potential fluctuations. Policymakers have room for both monetary and fiscal expansion. In the country's banking sector, the reserve ratio is relatively high, and the central bank could use open market operations to release sufficient liquidity into the market, and keep interest rates at a stable level.
While China is doing what it can to limit the ultimate impact of the current crisis to itself and shield the global economy from further shocks and the global community enhances joint preparedness to combat the virus, a U.S. federal official recently made self-centered, unprofessional and unethical remarks, claiming that the virus could help bring jobs back to the United States. The remarks only served to taint the U.S. image as a major global player.
An outbreak of a disease like this could not be the basis for multinational companies to make serious and long-term investment decisions in China. In fact, China is still a big market for the United States. If the Chinese economy slows drastically, the U.S. economy will also suffer.
Time will prove that naysayers on China will be wrong again. China will emerge even stronger after coming through the crisis, due to its effective central leadership, solid economic fundamentals, improved technologies, and the steadfast practice of the principle of always putting the people's interests in the first place.