China can meet growth targets despite coronavirus, economist says

Demand will recover quickly from the outbreak, so China can still meet long term growth targets, senior economist says.

China virus
Supermarkets have been among the few businesses to do well during the virus outbreak as Chinese residents stock up on essentials and stay home [File: Third party via Reuters]

China will be able to achieve its long-term goal of doubling gross domestic product (GDP) and incomes this year despite the impact from a coronavirus outbreak, an influential economist at a top government think-tank said on Wednesday.

The virus outbreak will only have a one-off impact on the economy and demand will recover quickly, Cai Fang, the vice head of the Chinese Academy of Social Sciences (CASS), said in an article in the People’s Daily, the newspaper of the Chinese Communist Party.

“Although the temporary impact caused by the epidemic will slightly reduce the growth rate and other development indicators, it will not delay the fulfilment of the goal of building a moderately prosperous society,” Cai said.

This year is crucial for the ruling Communist Party to fulfil its goal of doubling gross domestic product (GDP) and incomes in the decade to 2020.

A growth rate of about 5.7 percent this year will be enough for achieving the goal of doubling GDP and incomes, Cai said.

Other economists with government-linked think-tanks in China have estimated that the outbreak could cost as much as 1 percent of growth in 2020, making it fall to 5 percent or lower.

Some analysts believe growth could decelerate even more sharply, knocking 2 percentage points or more off the 6 percent expansion rate posted in the last quarter, but they say business and consumer activity could rebound sharply if the outbreak peaks soon, much like the pattern during the SARS epidemic in 2003.

The government should use policy measures in a timely and flexible way and adopt “unconventional policy tools”, to support the economy, Cai said without elaborating.

The government has undertaken some stimulus measures, including injecting liquidity into the banking system and providing loans and fiscal support for some firms. More steps are expected.

The epidemic has delayed the return of migrant workers to cities and affected the resumption of firms’ operations, which could lead to unemployment and lower incomes, Cai said.

Regions that have not been hit hard by the epidemic should allow migrant workers to return to cities and let firms resume operations on the condition the outbreak is controlled, he said.

Source: Reuters