China’s Economy under COVID-19: Short-Term Shocks and Long-Term Changes

Zhiyi Liu,Biliang Hu

doi:10.4236/me.2020.114068

Abstract

Under the impact of the epidemic and policy responses, China’s economy in 2020 is expected to maintain a “low rebound and overall soundness”. However, as a major public health event, the long-term impact of COVID-19 on China’s economy should not be ignored. On the basis of confirming preventive savings at the micro level, this paper uses the macro neoclassical economic growth model to point out that COVID-19 epidemic may promote China’s savings rate to increase the potential output level in the medium and long term. However, given the continued downturn in the global economy, a rebound in China’s savings rate may exacerbate the global economic imbalance. Therefore, the Chinese government needs to make a good plan to strengthen international cooperation while actively encouraging consumption to stimulate domestic demand.

Highlights

The outbreak of Corona Virus Disease 2019 (COVID-19) in late 2019 and early 2020 is very serious
Because COVID-19 is highly contagious and is spreading globally, its impact on China’s economy and even global economy has become the focus of attention
When the epidemic was endemic in the country, the World Health Organization (WHO) announced that COVID-19 was included in the Public Health Emergency of International Concern (PHEIC)1, and many countries have restricted China’s logistics flow

Summary

Introduction

The outbreak of Corona Virus Disease 2019 (COVID-19) in late 2019 and early 2020 is very serious. Under the impact of the COVID-19 epidemic, China’s economy has suffered a “shutdown” due to large-scale isolation. L. Hu arranging special funds to ensure the prevention and control of the epidemic, in order to stabilize the economy, employment and financial market expectations, the Chinese government has comprehensively used various policies such as fiscal, monetary, industrial, and employment policies. Applying preventive savings motivation at the micro level and neo-classical economic growth models at the macro level, this paper points out that COVID-19 epidemic may promote China’s savings rate, thereby increasing medium and long-term potential output. The Chinese government is expected to actively encourage domestic consumption while strengthening international cooperation to promote the long-term stability of the global economy

Short-Term Epidemic Shock and Policy Response

Mid-and Long-Term Impact of the Epidemic on China’s Economy

China’s Savings Rate May Rebound with Preventive Motivation

Rising Savings Propensity Could Lead to Rising Potential Output in China

Findings

Conclusions and Policy Recommendations