How Will China’s Economy Fare This Year?

Lockdowns, travel restrictions, shops and movie theaters closed, business operations delayed, and migrant workers stranded in their hometowns. These are part of the economic fallout as China curbs the COVID-19 outbreak.So with all of these issues how will China’s economy fare this year? Some experts and scholars have also stated that even if China’s economy rebounds, it cannot meet the goals set previously, which could spill over to affect the global market.

These views, however, maybe too pessimistic. It’s undeniable that China’s economy is indeed under downward pressure, but assuming and hoping there will only be a short-lived impact of the novel coronavirus, this setback should not severely alter Chinese economy’s long-term outlook.

On the plus side many Chinese companies are already getting back to business. Two economically developed provinces, Zhejiang and Guangdong, have taken the lead is.

Zhejiang has created “Index of Enterprise Resumption Rate,” “Five-colored Map of the Epidemic Situation” and “Five-colored Map of Resumption Rate” to comprehensively analyze the epidemic and track the rate at which businesses are resuming work. So far, over 50% of Zhejiang’s larger industrial enterprises and 20% of its service enterprises have resumed operations. And based upon industrial power consumption, more than 60% of enterprises in Guangdong have resumed work. This is an important first step on the road to recovery.

In terms of foreign capital, many provinces and cities have redoubled efforts to attract foreign investment while implementing the new “Foreign Investment Law” and its regulations. In January this year, China attracted nearly 87.6 billion yuan in foreign investment, a year-on-year increase of 4%. A total of 3,485 foreign-invested enterprises were newly established. Let’s see if the optimism can continue past the outbreak.

On the consumption side, the coronavirus has severely affected catering, entertainment, tourism and other industries in China, the expectation is that this impact will be transient, rather than permanent. Once the epidemic is over, the pent-up consumption potential should be unleashed.

Taking all these factors into consideration, it’s reasonable to believe that China’s GDP growth will slow in the first quarter of 2020, but its long-term economic outlook is still promising.

China’s economy is more resilient than it was in 2003 during the SARS outbreak, though the economic challenges created by COVID-19 will be felt for a while to come.  As the world’s second largest economy, the ripple effect of changes in China’s economic performance will be felt across the globe as a drop in their consumption and interruptions in the global supply chain will spread the pain around. Ultimately, most economists believe the damage will be short lived and China ‘s economy will fare pretty well this year. That will be good news for many other countries as well.