Via China Daily

Employees work on a production line of an automaker in Qingzhou, Shandong province. [Photo by Wang Jilin/for China Daily]

Economy will ride out coronavirus pressure, experts say as business activities resume

The Chinese economy is expected to ride out the pressure brought by the novel coronavirus outbreak and maintain strong economic growth by global standards this year, economists said on Thursday.

They commented after economic activities began to regain vitality despite the ongoing epidemic, with normal production gradually resuming and market expectations brightening.

China’s A-share market rebounded for the third trading session in a row on Thursday, with the key Shanghai Composite Index rising 1.72 percent to close at 2,866.51. The market tumbled on Monday as investors factored in concerns over the spreading epidemic.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, said the stock market has stabilized on the financial authorities’ supportive measures and is set to continue the recovery.

“The improved market confidence will constitute a boon for the real economy to sail through any difficulties caused by the epidemic,” Li said, adding that the economy will gradually return to the normal track as businesses gradually reopen nationwide.

On Thursday, the General Office of the Ministry of Commerce released a notice that pledged to support nationwide commercial enterprises, such as wholesale markets, supermarkets and convenience stores, to resume business as soon as possible and fully meet residents’ needs for necessities.

“Putting control measures against the epidemic into place is crucial to reopening commercial businesses,” the notice said, directing commerce authorities at different levels to guide enterprises’ work in epidemic control and prevention.

This followed stepped-up efforts of provinces and cities to organize work resumption after the Lunar New Year holiday was extended due to the epidemic.

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East China’s Shandong province announced on Tuesday that full production will be resumed by the end of February, while North China’s Shanxi province encouraged State-owned enterprises to first resume operations and make flexible and remote work arrangements to prevent workplace contagion.

More regions, except for those severely affected by the epidemic, are expected to resume full production in the near future while taking stringent measures to combat the virus in the workplace, said Yang Weiyong, an associate professor of economics at the University of International Business and Economics in Beijing.

“Both the real economy and financial markets are getting used to the disruptions caused by the outbreak,” Yang said.

Cheng Shi, chief economist at ICBC International, said the pneumonia epidemic may peak by the end of February and blow over by the end of May, so its negative economic impacts will be concentrated in the first quarter of the year and will abate in the second.

With policy efforts to minimize the impacts, China’s quarterly GDP growth may drop in the first quarter and rebound in the second and third quarters, Cheng said.

“Whole-year economic growth is likely to land at no lower than 5.6 percent, maintaining its comparative stability in a disorderly global economy,” Cheng said.

A steady performance of China’s economy at the start of the year also added to analysts’ confidence in whole-year economic results.

The Caixin China Composite Purchasing Managers’ Index – one of the most closely watched barometers of economic conditions – stood at 51.9 in January, indicating that the economy has maintained the recovery that began in the fourth quarter, media group Caixin said on Wednesday.

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A PMI reading above 50 indicates expansion, while one below that mark indicates contraction.

Yet economists said more policy support is still needed to stabilize the economy and prevent small and medium-sized enterprises from liquidity difficulties and even bankruptcies amid the epidemic.

“China’s economic recovery was not strong enough due to limited improvement in demand, and some companies didn’t replenish inventories,” said Zhong Zhengsheng, chairman and chief economist at CEBM Group, a Caixin subsidiary.

“As the current pneumonia epidemic is putting pressure on the economy, policymakers need to make efforts to ensure no major disruptions to improving business confidence,” he said.

The Standing Committee of the Political Bureau of the Communist Party of China Central Committee held a meeting on Monday to make arrangements to stabilize the economy and offset the impact of the outbreak. The country’s top leadership agreed that economic conditions should be closely monitored and financial support should be strengthened.

The People’s Bank of China, the central bank, injected 500 billion yuan ($71.7 billion) into the financial system on Tuesday, following its injection of 1.2 trillion yuan via purchasing securities from financial institutions in a so-called reverse repo the previous day.

Analysts said Monday’s move has helped to boost market confidence and marked the central bank’s largest single-day liquidity injection in history through such an open market operation.

Liu Yukun contributed to this story.