Aleeze Azhar.

Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

Topic: ‘COVID-19 Impact on China and how did China Rebound’

1. Examine COVID-19’s impact on China’s economy.

The outbreak of pandemic Covid-19 all over the world has disturbed the political, social,
economic, religious and financial structures of the whole world. World’s topmost economies
such as the US, China, UK, Germany, France, Italy, Japan have been badly hit by the
pandemic. China's economy shrank for the first time since at least 1992 in the first quarter, as
the coronavirus outbreak paralyzed production and spending, raising pressure on authorities to
do more to stop mounting job losses.

As the first country to be engulfed in the COVID-19 pandemic, China is several weeks
ahead of many other countries on the “curve” of the virus progression. The government response
ramped up quickly after January 23, and restrictions became more and more onerous through
February and most of March. Access to residential compounds was banned to people not
registered as living within them. Restaurants closed for around 2.5 months, only recently re-
opening. Much domestic travel required quarantine upon arrival at destination for 14 days, and a
similar policy was introduced for international travel once the pandemic was confirmed as a
global problem. Right now, even foreigners with valid visas and working permits are not allowed
back into China. The concern now is focused on Chinese nationals returning to China from
Europe and America. The draconian measures the government is implementing to take such
people directly from airports to quarantine facilities shows how seriously the government is
taking these potential “imported” coronavirus cases.

Economic impact

Meanwhile, confidence in the government response seems high. Nevertheless,

businesspeople realize that many types of business are being seriously hit. Food and beverage,
retail, real estate, and travel are the four biggest losers. A lot of people in these sectors have lost
their jobs completely. Migrant workers in the construction sector are hugely impacted. Many of
Aleeze Azhar.
Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

these jobs do not show up in official government figures, so while there has been a significant
uptick in the unemployment rate, it is likely that the real figure is much higher. A lot of lower-
earning individuals will be suffering for a prolonged period of time.

• The following table shows how China’s activity slowed considerably as COVID-19
spread.
• Economic Indicator • Year-over-year change(Jan-Feb 2020)

• -24.5%
• Investment in fixed Assets
• -20.5%
• Retail sales
• -15.9%
• Value of Exports
• -13.5%
• Industrial Production
• -13.0%
• Services production

However, the overall impact of COVID-19 on the economy is higher than that of the
severe acute respiratory syndrome (SARS) outbreak in 2003. The impact of COVID-19 on
China's economy will mainly be concentrated in 1Q, with a slight impact on 2Q, and a limited
impact on economic growth for the whole year, says Kitty Fok, managing director, IDC China.
She adds, "After the end of the outbreak, China's macro environment will trigger five major
changes: the modernization of the government, the decentralization of urban clusters and central
cities, the acceleration of digital health system, the accelerated rise of contactless business and
services, and the acceleration of the global supply chain strategy of China . These five changes
will also bring huge ICT market business opportunities, and ICTs vendor should pay more
attention to them."
Aleeze Azhar.
Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

2. How China may rebound or foreshadow this impact caused on economy by COVID-
19.

Amid COVID-19 impact, China's gross domestic product (GDP) in the first quarter
shrank 6.8 percent year on year, according to data released Friday by China's National Bureau of
Statistics. China's economy showed signs of significant improvement in April from its COVID-
19 lockdown as the coronavirus pandemic ebbs in the country, with industrial output growing in
the positive territory, according to data provided by the National Bureau of Statistics (NBS) on
Friday.

Industrial output bounced back into positive territory in April as an overwhelming

majority of factories across China started operating again amid nationwide efforts to resume
production, with the total value added of major industrial firms climbing by 3.9 percent year on
year. Consumption remained the overriding growth engine fueling the China’s economy, with
retail sales, being a major indicator of consumption growth, edging down 7.5 percent in April
compared to the same period last year and narrower from a 15.8 percent tumble in March,
boosted by local voucher issuance programs that have helped release pent-up demand, NBS data
showed.

Online retail sales played an important role in stabilizing market supplies, protecting
people's livelihood, and helping employment in service industry during the coronavirus outbreak.
It also played a vital role in narrowing the decline in the service output," Bai Ming, deputy
director of the international market research institute of the Chinese Academy of International
Trade and Economic Cooperation told CGTN.

However, On Monday, the National Bureau of Statistics reported that producer prices fell
sharply in April, indicating that the vast Chinese manufacturing sector is facing a lack of
demand. “The post lockdown recovery in China has turned out to be slower than most people
expected,” Qu Hongbin, the chief China economist at H.S.B.C., told Bloomberg television.
Aleeze Azhar.
Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

Part of China’s economic problem is an external one. As other countries have introduced
lockdowns, the demand for Chinese exports has fallen sharply. But that is not the only issue. Qu
pointed out that domestic spending, particularly retail sales, are still running well below pre-
crisis levels. He attributed this lag to the “emotional headwinds, fear and nervousness that the
virus has created, and which have yet to dissipate. Other sectors are facing similar challenges. A
new report from McKinsey, the international consulting group, says that internal travel over the
recent May Day holiday weekend was roughly half of last year’s level. “Travelers are still
cautious,” the report said. “They prefer to stay close to home choosing, for example, to drive or
take trains to regional destinations.

Moreover, as factories and shops reopen, China seems to be over the initial supply side
shock caused by the lockdown. However, the country now faces a double-headed demand shock:
• Domestic demand is slow to gain traction due to psychological scars, bankruptcies, and job
losses. In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to
“restrain” their spending habits after the virus.
• Overseas demand is suffering as more countries face outbreaks. Many stores are closing up
shop and/or cancelling orders, leading to an oversupply of goods.
With a fast recovery seeming highly unlikely, many economists expect China’s GDP to shrink in
the first quarter of 202-the country’s first decline since 1976.
Aleeze Azhar.
Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

3. Analysis by IMF on the recovery of China’s Economy.

• After taking a hit in the first quarter due to the COVID-19 outbreak, China's economy is
expected to see a recovery in the second quarter, an International Monetary Fund (IMF)
official has said.
• News of the widespread re-opening of firms and the return of employees to work give us
hope that we will see a recovery in Q2," Kenneth Kang, deputy director of Asia and
Pacific Department at the IMF, told Xinhua in a recent written interview.
• Amid COVID-19 impact, China's gross domestic product (GDP) in the first quarter
shrank 6.8 percent year on year, according to data released Friday by China's National
Bureau of Statistics.
• China is one of the few major economies that could see economic expansion this year,
according to the IMF's recently released World Economic Outlook report, which
projected global economy to decline by 3 percent in 2020.
• Advanced economies are on track to contract by 6.1 percent, while emerging market and
developing economies, which typically have growth levels well above advanced
economies, will shrink by 1 percent, according to the report.
• China's domestic activity is expected to rebound and continue to recover in the second
half of this year as the containment measures are withdrawn and policy support gains
strength, Kang said. The IMF official noted that Chinese policymakers have reacted
strongly to the outbreak. "They have taken targeted action to contain the virus, mitigate
its impact on the economy, and support the recovery. This has been the right approach,"
Kang said.
• "In addition to supporting the medical response, fiscal measures should build on efforts to
rebalance the economy and foster long-term sustainable growth," he said.
• The IMF official also suggested China continue contributing to global solutions to fight
the outbreak by increasing its production capacity of critical medical equipment and
supporting international efforts to provide debt relief for low-income countries.
Aleeze Azhar.
Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

• He noted that several Asian countries, including China, have supported the IMF through
its Catastrophe Containment and Relief Trust, which provides immediate debt relief to
low-income countries affected by the crisis. The IMF official said countries should avoid
trade restrictions on medical and health products to ensure that they go to where they are
most needed, noting that countries with limited health care capacity and resources will
need international aid to prepare for the pandemic.
• "The health emergency is a powerful reminder of the need for policy coordination and
solidarity in an interconnected world," Kang said.
• The IMF projected that global trade will decline by about 11 percent this year, but
rebound strongly by about 8.5 percent next year "in line with a recovery of the global
economy," he noted, calling for strong multilateral cooperation to complement national
policy efforts.
• "Countries should cooperate to reduce tariff and nontariff barriers that impede cross-
border trade and investment and to strengthen global supply chains as the recovery takes
hold.
Aleeze Azhar.
Wadiah Akbar.
Logic & Critical Thinking 2.
Assignment: ‘COVID-19 Impact on China and how did China Rebound’

References.
• Ross, J. (2020, March 26). COVID-19 Crash: How China's Economy May Offer a
Glimpse of the Future. Retrieved from https://www.visualcapitalist.com/covid-19-
economic-impact/
• Interview: IMF official expects China's economy to rebound in Q2 from COVID-19.
(n.d.). Retrieved from http://www.xinhuanet.com/english/2020-04/18/c_138986608.htm
• Cassidy, J., Kaufman, F., & Chotiner, I. (n.d.). China's Slow Economic Rebound from the
Coronavirus Points to an Extended U.S. Slump. Retrieved from
https://www.newyorker.com/news/our-columnists/chinas-slow-economic-rebound-from-
the-coronavirus-points-to-an-extended-us-slump
• Campbell, C. (2020, April 21). Impact of Coronavirus on China's Economy Only Just
Beginning. Retrieved from https://time.com/5824599/china-coronavirus-covid19-
economy/
• The Social and Economic Impact of COVID-19 on China. (2020, April 15). Retrieved
from https://www.china-briefing.com/news/social-economic-impact-covid-19-china-
recovery-potential/
• Ross, J. (n.d.). COVID-19 crash: How China's economy may offer a glimpse of the
future. Retrieved from https://www.weforum.org/agenda/2020/03/covid19-economy-
china-health-coronavirus-economics-global/