Sardar Ameer Jehanzeb
CHINA is likely to take more aggressive steps to support the growth after its economy shrank by 6.8% in the first quarter of 2020, to counter the impact of the Coronavirus. After its first contraction, since quarterly records began in 1992, the official rate of unemployment in China has also fallen in the months of January and February. Many economists believe that real job losses are more in pipeline.
However, China had prioritized its domestic demands, encouraging consumers and increasing its public spending. They are also interested to issue special government bonds. It also urged the central bank to use tools, including interest rate cuts, and to support growth. Although economists were divided on how deep the contraction would be. Retail sales, a key part of consumer spending, had not recovered nearly as much as was hoped.
Scarred from the shutdown, with real fears over long-term unemployment and income, people are not spending money. And once the disposable income has collapsed, a huge problem for a V-shaped recovery is expected, but experts are looking at a U-shaped recovery where a prolonged period of stagnation after the downturn is followed by an eventual return to growth as global demand resumes.
Can China provide helicopter money? ”It all means that consumer confidence will take more time to heal. The decline in individual income, the rise of unemployment, the closure of many companies and self-employed businesses will all weigh on the total demand over a longer period of time. The economy can be quick to pause, but slow in getting back to normal.
Beijing is likely to abandon its economic growth targets and focus on people to keep their jobs. There are external challenges that it can do little about due to a temporary pause in the current restrictive trade requirements. With large parts of the world now in Coronavirus containment, the exporters are frozen out of their marketplaces. The experts are now expecting that Chinese exports will drop much even in the second quarter. This severe recession is likely to follow in the Eurozone and American economies.
Although stability is the foremost priority for China, they must ensure that there’s no rebound of this epidemic. Precautionary measures will be long-lasting and include mandatory Coronavirus testing for vulnerable people and voluntary tests. The collapse in external demand and the weak service sector recovery means Beijing must embark on a broad infrastructure and property stimulus. Labour-intensive construction is the only means to absorb the sharp spike in unemployed workers.
China’s effective handling of the COVID-19 crisis will provide not only its own stability but also give strength to the global economy amid economic disruption. However, international economists expect that China’s impact on global economy is unlikely to recover in short term. Yet it has the world’s most complete manufacture supporting and ecological system, huge financing capability; it has large number of high-grade workers, and growing scientific and technical ability. It has the basis for the global positioning for the future to come.
China has provided a large number of anti-epidemic material to international organizations and more than 100 countries. This shows the importance of China to the international community in times of crisis. China has already extended its regional cooperation to North East Asia and South East Asia, and further making effort to build cordial relations with Europe and US. The Belt and Road Initiative (BRI) is the true living example to provide its support internationally and CPEC particularly for Pakistan.
At present, the Chinese government has provided multiple batches of material assistance, dispatched medical experts to Pakistan and convened video conferences to share China’s experience in the prevention to control the treatment of COVID-19. It had extended full support to Pakistan against COVID-19, which our government has admired. The Pakistani side is willing to continue to cooperate closely with China and constantly deepen their all-weather strategic partnership of cooperation during the fight against the pandemic.
—The writer is a CEO, writer analytically on Chinese Economy, BRI & CPEC.
