The sudden new crown pneumonia epidemic has more impact and impact on China than SARS in 2003, and will have an impact on the Chinese economy and the world economy.

The magnitude of the impact depends on the length of time it takes to fight the epidemic and achieve victory. The fundamentals of China's long-term economic improvement have not changed, but if the epidemic can be quickly resolved, we can still win the whole year and win the future.

It is a high probability event that the outbreak of the epidemic has led to a downturn in China’s economy, but the fundamentals of China’s long-term economic upturn have not changed

Under the influence of the epidemic, China's economy will be hit hard in the first quarter, and the economic downturn is a high probability event.

However, the basic elements to maintain the steady development of China's economy have not changed. The resilience, resilience and space for economic development still exist, and will not change due to the sudden epidemic. The extent to which the economy is affected throughout the year depends on the timing of the epidemic control.

In general, the shorter the time the epidemic is brought under control, the greater our initiative. Strive for a stop loss in the first quarter, the greater the initiative to return to normal in the second, third, and fourth quarters.

If the epidemic cannot be controlled, or if the epidemic reaches an inflection point, then relax your vigilance, or ignore detailed prevention and control. Once the epidemic rebounds and repeats, it will have a greater impact on the economy this year.

The epidemic has the greatest impact on the tertiary industry, but there will be substitution of industries and service supply methods

The tertiary industry is the most severely affected industry, among which industries involving "eating, swimming, watching, transporting, and learning" are most affected.

The catering industry has been a large market with more than four trillion yuan in recent years.

The average quarter is more than one trillion yuan. In the first quarter, eating out and gatherings are not allowed for at least 1/2 of the first quarter. The catering industry has at least 500 billion yuan in economic losses in the first quarter.

Industries such as tourism, movies, hotels, and film and television have been hit hard, and exhibitions, transportation, education and training will all be greatly affected.

 
However, there will also be some new growth points in the tertiary industry, including online retail, online medical care, online games, and logistics and express delivery will show explosive growth.

Although the tertiary industry is most seriously affected, some of these industries are substitutable. In particular, changes in service methods and purchase methods will make some industries' service supply methods substitutable.

This time the epidemic has changed the way people buy and consume. Some new industries may emerge, such as cutting machines, edge banding machines, side hole machines, and some industries will buck the trend, such as the explosive growth of the express delivery industry.

The express logistics industry has basically resumed normal operations after a short holiday during the Spring Festival, and greater consumer demand will grow faster after the epidemic is over.

Therefore, even if the epidemic is suppressed in the medium term, the tertiary industry will not decline too much, because people's consumer demand is generally balanced.

During the SARS period in 2003, China’s tertiary industry accounted for 42% and reached 54% in 2019, an increase of 12 percentage points; the contribution of consumer spending to GDP rose to 57.9%. The growth of consumer demand and the tertiary industry throughout the year, including the growth of total retail sales of consumer goods, will not be greatly reduced, and the total demand of the tertiary industry will also not be greatly reduced, but the mode of supply will change.

The epidemic will affect import and export trade, but the trend of continuous growth remains unchanged

In terms of import and export, the overall upward trend will not change. According to data from the General Administration of Customs, the total value of China's foreign trade imports and exports in 2019 reached 31.54 trillion yuan, an increase of 3.4%, showing a trend of increasing quarter by quarter.

The total value of imports and exports in the first quarter was 7.03 trillion yuan; the second quarter was 7.68 trillion yuan; the third quarter was 8.26 trillion yuan; and the fourth quarter was 8.59 trillion yuan.

The epidemic has caused most export companies to suspend production after the Spring Festival for an extended period of time, and import and export trade will also drop significantly.

However, provinces such as Guangdong, Zhejiang, Jiangsu, Shanghai, Shandong and other provinces with large export volumes are generally not affected by the epidemic, so they will not affect China's export scale on a large scale. In terms of imports of Guangdong edge banding machines, on the basis of the growth in recent years, there will be a substantial increase.

The epidemic will reduce the output value of the manufacturing industry, but the overall advantage of Haomei machinery manufacturing industry is still

The production value of the manufacturing industry in the first quarter will be greatly affected, because years ago, the development of the epidemic was not anticipated when the manufacturing factories were on holiday. Therefore, except for most medical supplies and people's daily necessities, the manufacturing industry will be affected to some extent. Although medical supplies have grown substantially, they account for a relatively small share of the output value of the manufacturing industry.

Therefore, new growth can only occur after the manufacturing industry resumes production on a large scale, and ultimately depends on whether the epidemic is under control.

I think the manufacturing output value may drop by more than 30% in the first quarter, but if the epidemic is quickly controlled, the manufacturing industry will generally improve. Because the overall advantage of China's manufacturing industry has not disappeared, the manufacturing system is the most complete in the world, and the industrial chain, supply chain, service chain, and value chain are the most complete. Most of the manufacturing industry clusters are still in China. Accelerating the transformation and upgrading of the manufacturing industry has become a common practice and a general trend of high-quality and sustainable development of the manufacturing industry.

Although US Secretary of Commerce Ross preached that the Chinese epidemic would bring jobs and manufacturing back to the United States, this is not only his wishful thinking, but it is also impossible to achieve in the short term. The transfer of industrial chain, supply chain, and service chain is costly, and the transfer will not be so fast. The entire service supporting capabilities formed around the industrial chain, as well as the upstream and downstream relationships, are after decades of cross-border market seeking for supply and demand, and the market mechanism is exerted. The formation of the role is difficult to achieve overnight according to the wishes of the politicians.

Therefore, if the epidemic is quickly brought under control, investors will not be so stupid to move manufacturing out of China regardless of cost. It is not ruled out that some companies are relocating to the United States under pressure from the United States, or that some companies are relocating to neighboring countries driven by rising manufacturing costs in China since 2008, but these have nothing to do with the epidemic and will not change China. The integrated advantage of manufacturing.

China’s manufacturing industry will definitely drop sharply in the first quarter, but it is now gradually resuming production. Once the epidemic is brought under control, it will make up for the loss in the first quarter and show extraordinary growth. The annual growth rate is slightly lower than last year, but there will be no major growth. The amplitude is down.

New policies successively introduced will provide greater support and help enterprises to tide over difficulties

The Party Central Committee with Comrade Xi Jinping at the core attaches great importance to and takes strong measures, and is leading the Chinese people to win this unique battle. Governments at all levels have successively introduced various policies and measures to restore economic growth and support enterprises. The central ministries and commissions and local governments have adopted various measures to speed up the resumption of production on the premise of ensuring that the epidemic is overcome, and to ensure the normal life of the people.

For example, Suzhou, Beijing and other places have recently introduced policies and measures to support small and medium-sized enterprises in overcoming difficulties. They are concrete and operable measures to support small and medium-sized enterprises, including financial support, maintaining the stability of the workforce, and reducing the burden on enterprises.

It is expected that this year the government will continue to intensify a series of measures such as tax cuts and fee reductions and targeted interest rate cuts to help companies tide over difficulties in all aspects.

In summary, we must be fully prepared for the loss of China's economic growth. We must not be too optimistic, but we do not need to be too pessimistic.

China has shifted from a stage of rapid growth to a stage of high-quality development. The main focus is no longer on the growth rate, but on the quality of development. At present, the speed of economic growth cannot be regarded as important. First of all, the safety and health of the people must be guaranteed. There is no need to panic in the economic downturn. If the panic and the panic of the economic downturn will become a panic state in society, even if the epidemic is over, it will be difficult to inspire confidence and fighting spirit.

Nowadays, private enterprises are not only “half of the country”. Private enterprises account for 50%, 60%, 70%, 80%, and 90% of China’s taxation, GDP, innovation, employment, and total number of enterprises. This is already China’s economic development. reality.

Stabilizing private enterprises and small and medium-sized enterprises will actually stabilize China's economic development and employment growth. Therefore, we must do everything possible to help private enterprises and small and medium-sized enterprises overcome difficulties.

Increase financial support and credit support to reduce financing costs. For example, consider interest-free loans for enterprises to resume production. In particular, enterprises should be able to stabilize the team and military spirit and gradually resume production. After the epidemic, if the enterprise is not able to provide When employees pay wages, they should be allowed to borrow money to pay wages.

Of course, we must also support the development of state-owned economy and state-owned enterprises, and we must play an important role in special times.

(Author: Chen Wenling, Chief Economist, China International Economic Exchange Center)

Source: Beijing Daily Theory Weekly