China’s Purchasing Managers’ Index, an indicator of industrial vitality, increased sharply by 16.3 percentage points from its historical low in February, hitting 52 percent in March, the National Bureau of Statistics said on Tuesday, indicating the world’s second-largest economy is starting to recover from the impacts of the novel coronavirus pandemic.
The quick and dramatic rebound of the index, which registered 50.2 percent in December, 50 percent in January, and 35.7 percent in February, suggests not only have China’s pandemic control measures been effective, but also the fundamentals of the economy have not been shaken.
Although it is too early to conclude that the immediate shock waves have ended, since even if effectively tamed in China, the pandemic is still raging elsewhere, the pickup of the economy indicates that the tailored government support policies are serving their purpose.
This should consolidate confidence that the Chinese economy, with its capacity and resilience, can weather any residual shocks.
Yet as the demand from overseas markets has plummeted, except for essential medical supplies, it is crucial that the country introduces more proactive financial and monetary policies to stimulate domestic demand, create jobs and support enterprises, particularly small and medium-sized businesses.
If the external situation continues to worsen and the world becomes mired in a protracted war against the virus, the country will have to be prepared for long-term difficulties, including paralysis of the global supply chains.
That means policies should be preemptive to underpin the economic momentum.
During his inspection tour of Zhejiang province from Sunday to Wednesday, President Xi Jinping stressed the importance of “precision” in implementing the pandemic-control and industrial promotion measures.
Therefore, this should no longer be regarded as a special period, but as part of China’s charted restructuring of the economy and upgrading of industries.
While policymakers must accurately judge changes in the pandemic situation and their potential effects at home and abroad, the appropriate actions in response should largely be made by local governments based on the structure of the local economy.
To some extent, the pandemic has prompted the central authority to not only extend to local governments, particularly at city and prefecture levels, financial aid and policy support, but also more autonomy to explore the paths best suited to their particular situations.
This calls for more cooperation among them. Their pandemic-control efforts were largely restricted to their own jurisdictions, but they now need to coordinate to promote the smooth flow of production factors and finished goods.
To cut the transmission of the virus, they had to fight the enemy in separate foxholes. But to revive the economy requires them to fight together in the same trench.