As the COVID-19 pandemic continues taking its toll, it has also inflicted heavy losses on the global economy, affecting more than 200 countries and the lives of billions of people. Governments around the world have been making strategic plans to reopen their economies and reset new normal in the aftermath of the pandemic, whose impact, experts say, could last for generations.
In face of this global crisis, Professor Miaojie YU, Peking University Dean of National School of Development, weighed in on the future of China's economy at a Columbia Global Center | Beijing webinar on April 20. His talk, part of the Center's Coronavirus Thematic Series and held in partnership with Cambridge China Centre, was focused on produce, energy, international trade, employment, and fiscal policy.
Q1. To what extent does the COVID-19 pandemic affect China's economy?
YU: Statistics from the National Bureau of Statistics showed China’s GDP declined by 6.8% in the first quarter, the first time since 1978. But still, the results are better than expected, while the primary industry only slid by 3.2%. The secondary and tertiary industries dropped by 9.6% and 5.2% respectively, with online business and logistics industry mitigating the pandemic’s economic influence. I think China has now got through the darkest days, with the outbreak already under control and the economy back on track. According to the International Monetary Fund’s World Economic Outlook , China, after recalibration, is expected to increase its GDP by 1.2% in 2020. But, in my opinion, this is over-pessimistic and the annual increase should be around 3-4% as the government tries its best to stimulate the economy. In fact, the COVID-19 pandemic is more of a chance for China than a challenge, when considering it managed to become the world’s largest exporter during the recession in 2008. It’s possible for the country to succeed in times of adversity.
Q2. How will the pandemic influence the economic disparities between China and the US?
YU: The size of China’s economy is catching up with the US, though, there’s still a gap in per capita. We need to put this in perspective, China has been enjoying constant growth in GDP, but it’s not a threat to the US economy. This year, the US economy is about to decline by 5%, while China is likely to grow by 3%, meaning that the size of China’s economy will be 3/4 that of the US, and China will surpass the US by 2026-2027. But again, there’s still a long way ahead for China to go in terms of Real GDP per capita.
Q3. What is the outlook for Sino-US relations?
YU: Simply put, personally I would describe the relations as “limited cooperation, long-term competition, and mutual dependency”. It means the two countries would not be as friendly to each other as they were at the beginning of this century because China is now too big an economy for the US to ignore. However, the US industries are not willing to decouple their businesses from China’s market even though the US government would like to do that. As to how long the trade war could last, I would say ten years. The conflicts will peak in 2026 or 2027 when China’s economy surpasses the US, and before that, we will see all this back and forth between the two countries.
Q4. What is the risk for China's domestic economy?
YU: I can say that deflation will not happen in China, given that the outbreak is well under control. And I don’t anticipate stagnation right now. The problem this year is employment.
Q5. What will happen in China if the US, Japan, and South Korea high-end manufacturing businesses pull out of its market?
YU: There are reports saying the US, Japanese, and South Korean governments are encouraging and expecting a backflow of their oversea enterprises, while financially supporting the move. But in the long term, I don’t think it’s going to work, because, for businesses, the priorities are profits rather than national strategy or needs. The manufacturing industry, for example, will not be profitable in the high-cost US even if there’s no pandemic at all. As for Japan, it’s not impossible for the manufacturing industry to flow back, but again, Japan costs more than China to produce. Moreover, China has largely improved its investment and marketing environment last year. And very importantly, it is China’s well-developed industrial chains and clusters that are making foreign investors reluctant to leave, an advantage rarely seen in other countries.
Webinars on COVID-19
The webinar serves as the fourth one of Coronavirus thematic series program of Columbia Global Centers | Beijing.
Since the coronavirus outbreak, Columbia Global Centers | Beijing has been working closely with experts and scholars from Columbia University, Peking University, Chinese Academy of Sciences, and other institutions to help audience understand the virus and the mental health conditions of frontline medical staff and people affected by the virus outbreak, as well as to provide solutions and suggestions for improvement.
(From: Columbia Global Centers, April 20, 2020)