With the outbreak of COVID-19 and the rising number of active case and death toll throughout the world, life has stagnated everywhere. To contain the spread of the virus, major cities around the world is under lockdown and the population has been confined in their homes.
This lethal and unforeseeable virus has successfully affected the global economy and the economy of the world’s second largest economy, China. As the death toll and infection count grows every second, further dent in China’s economy is easily predictable.
PROS OF CORONA Outbreak ON CHINESE ECONOMY
- ADVANTAGE OF HAVING CONTRACTED THE DISEASE FIRST
Because China was the first country to have contracted the disease and face its blow, it’s going to be the first country to recover from this fatal condition, make the country functional again and get back to normalcy. This leaves China with enough time to take over future industries.
- DRACONIAN MEASURE TO GET EVERYTHING UNDER CONTROL
China’s system of governance helped combat the uncertain situation in an effective way. President Xi Jinping’s didn’t require any approval from any other sector and citizens fell inline to perform their duty accordingly just making the death toll a lot lesser than expected. A greater death toll would have caused a greater dent in the Chinese economy.
- BOUNCE BACK IN CHINA FUELLED BY GLOBAL OUTBREAK
Offices and factories are gradually becoming functional and people are getting back to work in China while the other big economies in the world are shutting down. It gives China an added advantage to get back in the game even before its competitors can think of getting back to normalcy.
- AN EFFORT TO REPLACE ITS COMPETITOR
China might use the decline and weakening of the Western economy to its benefit and make an effort to replace its competitors in the global market by bulk producing goods in its factories and inundate the market while the life in the West comes to a standstill.
- INTENTION TO BE A HAVEN FOR FOREIGN CAPITAL
After its bounce back, the country intends to take hold of and increase its market share in crucial industries, reach out for more foreign investment, flood the market by overproducing goods and thus making itself fit to be a haven for foreign capital.
- PSYCHOLOGICAL BALANCE OF POWER
As America, China’s biggest competitor, performs underwhelmingly when faced with the very many crises of the corona virus outbreak, China is already offering help to the various Western countries hit by this pandemic. This changes the psychological balance of power.
- TRYING TO GAIN BACK CONSUMER CONFIDENCE
China ramping up the production of medical supplies can be seen as kind gesture on its part, without which the countries later hit by the virus would suffer even more. This can also be interpreted as one of the ways that China might be using to gain back consumer confidence.
- POSSIBLE REMOVAL OF TARIFFS
The Trump government had imposed tariffs on Chinese products to stop China’s economic “aggression”. Now, lawmakers in Washington who were always doubtful about Trump’s policies are helping China undo tariffs on steel and aluminium. If the removal of tariffs happens, then it will help China gain market share.
- MINIMIZED JOB LOSSES
Chinese government had authority to sanction capital as and when required as the resources are owned by state. In the job market, uncertainty was minimal and the sectors performed their job accordingly to make sure that the financial demands are met.
- HELP FROM THE GOVERNMENT
The government is expected to issue tax relief and funds for various sectors. China’s central bank announced measures aimed at lowering borrowing cost and easing financial strain on affected industries. These measures should recover China’s economy before other countries.
CONS OF CORONA VIRUS ON CHINESE ECONOMY
- STRUGGLE WITH ALREADY WEAKENING GDP
COVID-19 hit China at a time when it was already struggling with its worst economic growth in last 3 decades. Wuhan, the epicentre of the outbreak was predicted to have a regional growth of 7.8 percent whereas now the expectation has dropped down to a much lower percentage.
- TIMING OF THE OUTBREAK
The week long Chinese Lunar New Year holiday got extended because of the virus outbreak. The already closed business were not allowed to commence business as the government discouraged mass gathering in the fear of further contraction within the community.
- CLOSED RESTAURANTS AND STORES
Restaurants, shops, businesses and factories in a large number of province and regions were ordered not to resume work. These industries altogether account for 80 percent of China’s GDP and 90 percent of its exports. The closing down of these is expected to take a toll on economy.
- TOURISM INDUSTRY
Numerous airlines started cancelling flights to and from China as the government imposed travel restrictions at the onset of the medical emergency. Tourism industry went down the gutter as the Chinese stayed home and the foreigners avoided China, both in fear.
- BOX OFFICE
The films scheduled for release over the Chinese Lunar Year weekend announced that they were going to pull their screenings. Chinese box office revenues plummeted to less than 4 million dollar which is shocking when compared to 1.5-billion-dollar last year over the same period.
- FALL OF WORLD-WIDE TRADE
Apart from the severe disruption to the consumer landscape, fallout from the virus has also disrupted world-wide trade and supply chains in the process. Lesser demands in China has also resulted to the fall of oil prices because of it being the world’s largest importer of oil.
- BIG COMPANIES FACING LOSSES
Massive operations in China by automobile makers like Nissan, Honda and American companies like Apple and Nike have faced a huge blow. Apple stores are closed along with the factories where parts for Apple products are made. Retail and services are hit so badly that China’s growth will slow down or even contract.
China stands at an advantage because the outbreak happened in China first. China has been successful in implementing apt measures to recover from this depression. Hopefully, with time we’ll see the end of this pandemic and the recovery of global as well as Chinese economy.