The year 2020 came with the unexpected outbreak of the coronavirus, which disrupted daily life and business in China: production postponed, staff under quarantine for some time, consumption blown for now, etc. How much the ongoing coronavirus may impact China's economy? Professor Bert Hofman, former World Bank Country Director for China, an insightful China-watcher for years, shares his perspective on this.

Professor Hofman holds that the coronavirus has an impact on China's economy, and the impact will depend on how long the fight against the coronavirus is going to take and how deep it's going to go. For now, the coronavirus's impact has already been going on for a while and there's a risk that it goes into the second quarter and if one looks at the potential impact, it may actually be bigger than SARS.

"SARS had a very sharp decline in the second quarter of 2003", Professor Hofman recalls, "but then there was a very sharp rebound of the economy".

However, this time, he notes that things maybe a little different because firstly the numbers of infections are far bigger than during the SARS; secondly, the economy has shifted more towards service industries, and it's hard to rebound in this field. And thirdly, when the SARS broke out, the Chinese economy was booming and roaring ahead; but that's not the case now.

But, China's Ministry of Finance and People's Bank of China (PBOC) issued relief policies and measures early in February aiming to help address the current difficulties faced by companies and market, such as PBOC's investment of 1.7 trillion Chinese yuan in liquidity in two days to maintain sufficient liquidity of the banking system, MOF's modifying company's actual loan interest rate. How effective will these measures be?

Professor Hofman thinks that these policies are very important because under the assumption, there will be a fairly sharp decline and then a bounce back. It's key to protect the companies and the jobs which are needed in a normal ongoing economy but are facing a difficult time right now.

Hofman points out that the measures taken by the Ministry of Finance and PBOC help both companies and jobs. The People's Bank has provided liquidity to banks and allowed banks to extend loans or probably be better not call in loans or wait a bit longer with loans.

More measures to minimize the coronavirus' impact on China's economy are on the way. According to a new press conference held on February 24, during which Cong Liang, secretary-general of the National Development and Reform Commission, Liu Guoqiang and Chen Yulu, both deputy governor of the PBOC, who presented information and took questions from the press introduced the ongoing financial supporting measures and reassured China's confidence in defeating the coronavirus and maintaining stable economic growth.

Closer to China with R.L.Kuhn (CTC) tells China's rich, complex story via intimate discussions with China's thought leaders and decision makers. CTC covers China's governance, government, politics, economics, society, diplomacy, defense, science and culture. CTC asks tough questions, seeks truth about China. 

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