Storybaaz Storybaaz

Effects On China Economy Due to Covid-19

The Covid-19 had spread all over the world in no time and affected many lives. It not only threatened the health of people but the business and economy as well. Both the under-developing and the developed countries equally suffered due to Covid-19. Among the most affected countries economically, China is among the top of the list countries. Many people are curious to know how deeply the Chinese economy as well as the worldwide economy has disturbed over the past several months. Therefore, we are presenting here the in-depth presentation of the worst effects of Covid-19 on the Chinese as well as the worldwide economy.

Coronavirus Effects On the Economy:

The coronavirus effects on the economy are also breathtaking. Almost all countries have stopped International trade due to the risk of Coronavirus. It means every country is facing a critical economic situation due to Coronavirus spread. Most of the large firms of worst-affected countries are closed or partially working. The employees of some companies are working from home so they could be saved from the pandemic.

The travel sector is the worst hit by the ongoing pandemic. The airline companies are facing their worst nightmare ever in recent years. More than 150 countries have imposed restrictions on International flights. Tourists are avoiding traveling to countries worst hit by the pandemic due to the danger of the coronavirus. On the other hand, the businessmen have canceled their business tours.

The story of stock markets is also not good. Stock markets are showing abysmal performance since the spread of the pandemic in the world starting from China. The investors are particularly shy to invest a large amount anticipating the worst effects on the economy is not over yet. The shares of all big firms are going down. The business world is fighting with the recession cycle. Literally, this recession period is the worst in recent history.

China facing uncertain situation due to the Covid-19 pandemic

The economy of almost all countries including China facing uncertain situation due to the Covid-19 pandemic: (Picture credit: Unsplash.com)

More than 50 countries have decreased the rate of interest. The state banks are ordered to decrease the interest on all types of loans. As a result, the revenue of countries is decreasing. The GDP of developed and developing countries is showing continuous downfall. According to the IMF report on the economic impact on Coronavirus says that the recession of 2020 is severe than that of the Great Financial Crisis that came in 2007-08

All the factories including SMEs (small and medium enterprises) have stopped production. The wholesalers and retailers are also facing a downfall of business due to restrictions imposed by the governments to stop the Coronavirus. The retailers are guided not to fully open the business until the conditions are under control.

Effects of Covid-19 On China’s Economy:

The economic performance of China for the first quarter of the year was hard hit by Covid-19. It was an unpredicted disease faced by the people of China. The panic was clearly visible among the ranks of the Chinese Government. The efforts by the government to manage the economic balance are still unclear. The government mainly put attention to control the spread of Covid-19 and along with it tried to maintain the economy which was not possible at that time.

As we know, China is the biggest exporter of goods in the world. As Covid-19 has spread almost all over the world, the demand and consumption of almost all types of products have decreased. As a result, the consumption of Chinese products has also decreased. This has negatively affected the manufacturing sector of the Chinese economy.

The tourism sector of China is particularly devastated where the lowest number of tourists are expected to visit this year. It is expected that some RMB 500 billion loss is expected this year alone in the tourism sector. The following chart represents the recent year performance of the tourism sector during the Spring Festival. Till the year 2019, the growth was upward but this year it is expected to show negative growth.

China National Tourism Administration

Source: China National Tourism Administration

The Chinese government now is striving hard to improve the position of the economy to the level it was before the pandemic. Some important reforms and strong policies will be needed to achieve this target. However, the best thing for China is, it has already controlled the pandemic and economic recovery is observed in recent months.


China Passenger Boarding in The Spring Festival

The Graph Shows Nationwide Passenger Boarding in The Spring Festival in Recent Years. The year 2020 recorded negative growth compared to the last 5 years.

Source: Ministry of Transport

Slow-Pace Business and Production:

China’s Lunar New Year's official holidays ended on February 10. The business and production were reopened. But the chances of encountering Covid-19 were still high due to which the pace of production and business transaction was slow. The people had cut down unnecessary consumptions and stayed indoors. As a result, the graph of demand for almost all the necessary and luxury products faced a declining curve. The production was disturbed due to less demand and supply to the market.

There were some other factors for less production besides less demand on the part of consumers. The number of workers decreased due to poor transportation and governmental restrictions. The fear of getting sick was another reason for fewer available workers.

A Difficult Balancing Act to Return to Normal:

The basic focus was to reach the emergency supply during a pandemic. The government also tried to manage the economic indicators necessary to stabilize the economy. Some of the reforms made by the Chinese government to stabilize the economy are given below:

  • Financial authorities announced support for business finance for firms.
  • Authorities promised to provide easy and smooth transport to workers.
  • Tax-relaxation is included in tax policies.
  • Land-use policies are also relaxed.
  • The costs of utilities such as water, electricity, gas, etc., are decreased.
  • Firms are given exemption of insurance premiums.

Besides these efforts, local governments supported the firms to buy masks for workers and provided transport to bring back far-living workers. They provided subsidize on factory rents. These efforts are enough but cannot make a quick improvement in the economy. The economy is expected to improve with these efforts but it’s a time taking process.

The Government Is Avoiding Major Stimulus:

The government in China wants to strengthen the economy in a quick manner, but, they also have to remember its consequences. If the government removes all the restrictions to stir up the economy, the chances of coronavirus spread again at this point are very high. The government is very cautious about opening up the imports completely, as imports from severely hit countries can contain the virus in it as reported in some cases.

Chinese economy vs Government Policies

Stability in the Chinese economy will greatly depend on the Government Policies (Picture credit: Unsplash.com)

The local governments are also actively working for the uplift of the economy. They have relaxed various economic policies. The policies are based on the fiscal power and extent of Covid-19 spread. These factors are different for all local governments in China. As a result, the policies of all local governments are different from each other. But all policies have the same objective of uplifting the economy.

The Steady Economy in 2020:

The Chinese seem to successfully steady up the economy even in severe conditions. They have almost controlled the Covid-19 and also claiming to have about 2-3% annual growth this year. They wanted to double up this figure by the end of the year but seems very hard right now. According to Chinese government claims, they are going to post better economic results compared to their neighboring countries. And, they are right in their claims too, as stats show, China is the only major economy which is expected to post positive economic growth this fiscal year. The majority of businesses have started proper working by this April, even in Wuhan which is considered as the origin of Covid-19. We can imagine from this scenario that China is pretty much serious about its economy.

Infrastructure Priorities:

The government announced some important reforms in investment. It is decided to invest more in 5G information technologies to improve the application of the internet, bigger data, and AI. China is facing disruption of the global supply chain which is a big challenge right now.

by China  promoting Artificial Technology

Investing in 5-G technology by China is a major step towards promoting Artificial Technology (Picture credit: Unsplash.com)

In April, new reforms were announced in the production sector such as labor, land, capital, technology, and data. These basic reforms will cause more reforms in land management, household registration, the financial system, etc.

In A Nutshell:

China, in the beginning, was the most affected country by Covid-19, however, with strict measures, they have successfully controlled the situation. While the economies of many countries are showing a downward trend, China made serious efforts to maintain the economy. They best dealt the Covid-19 in a very short time and reopened the business in February. It was a risky decision but China did it and achieved success due to the best policies and cooperation between the government and people. Though the growth of the economy will not be as high, still, the Chinese economy is expected to post a better growth rate than neighboring countries this fiscal year. 

Related Articles