While the novel coronavirus poses a great challenge to China, all sorts of conspiracy theories and “doomed Chinese economy” theories have come back. Among them, the most eye-catching one is an article named “China is the real sick man of Asia” by Walter Russell Mead published by The Wall Street Journal.
The article touted the hypothetical collapse of the Chinese economy with very offensive terms. The article, which throws all kinds of spooky situations together, is ridiculous.
The epidemic will likely reach its peak before February 15 and will start to die down. When we look back, we will know the worst time is over. Those who are advocating the collapse of the Chinese economy will be easily defeated by hard facts. Once the virus is quelled, its limited impact on the economy will soon be repaired.
Even the most pessimistic view is that Chinese GDP will remain at a 5.6-5.8 percent growth rate this year. In this sense, China’s economy still shows robust growth.
The outbreak will not last forever; the virus can be completely contained by mid-May.
Also, the coronavirus outbreak in China may be no more dangerous than flu in the US if we look at the mortality rate. As of the end of Wednesday, the total confirmed cases nationwide were 28,018 with a death toll of 563. The mortality is only around 2 percent, one-fifth of that of SARS.
Moreover, the epidemic is largely a regional, short-term event. About 70 percent of the more than 28,000 confirmed cases across the country are in Central China’s Hubei Province, where Wuhan is located. The rest of the provinces and cities only account for 30 percent of the cases. The number of deaths in Hubei account for 97 percent of the total, meaning that the confirmed cases and deaths are mainly concentrated in the province. East China’s Zhejiang Province has the highest number of confirmed cases outside Hubei, at less than 1,000 as of Wednesday. Despite the large migrant population, Beijing and Shanghai only reported one death each. Even with all the hype by some Western media, the truth is the truth. The measures now being taken to cut off the source of infection will contain the epidemic in mid to late February.
In terms of economic impact, the baseline scenario is that China’s GDP growth will be maintained at 5.2 percent in the first quarter and 5.8 percent for the whole year. Under the optimistic scenario, GDP will grow 5.5 percent in the first quarter and 6 percent in 2020. In a bearish scenario, it will be 4.8 percent in the first quarter and 5.5 percent for the whole year.
The entire Chinese economy is still on a steady and upward trend. Consumption and services are among the sectors that are suffering the most. While consumption of tourism, food, entertainment, catering and daily necessities has been greatly affected, if the development of the epidemic stabilizes by the end of February, people will get back to normal life and consumption and services will also return to normal. The impact will last at most in the first quarter, or even in January and February.
As for industries, autos, telecommunication electronics and biomedicine are the major industries in Wuhan. But the industrial chain in Wuhan is different from that in South China’s Guangdong Province or East China’s Jiangsu Province. Industries in Wuhan usually focus on the low-end in the international division of labor. The city’s advantage lies in its thoroughfare to nine provinces, enabling the connectivity of commerce, logistics, capital flow, information flow and talent. So once the epidemic is contained, authorities should make every effort to ensure the circulation of logistics, trade, capital, information and talent for the normalization of its politics, economy and life.
In terms of trade, Wuhan is an important city in central China. It mostly engaged in services trade like tourism. China has a $100 billion deficit in services trade. The epidemic may turn some of the services trade toward domestic consumption.
There are two changes to foreign investment in China. The first is the change from cost-driven investment to market-driven investment. How could market-driven investors leave such a large market like China? The second is that 70 percent of foreign investment has transferred from the manufacturing sector to the services sector, including financial services, insurance services, R&D services, technical services, consulting services, and talent services. The market for these businesses is in China. Once the outbreak is contained, foreign investment in China will definitely reach a new high. From this perspective, we should keep calm, as the impact will be short-lived and limited.
Moreover, China could use this epidemic to turn bad things into good ones by improving its social and public governance ability and enhancing hygiene levels for individuals, families and society. China’s system is the continuation of a 5,000-year civilization, and only time can tell whether it’s good or not, not the Western media.
If China was a sick man of East Asia, the man has already stood up, rich and strong. The virus will not knock it down.
The author is chief research fellow with the China Center for International Economic Exchanges. bizopinion@globaltimes.com.cn
Photo:Xinhua
