Short-Term Impact

China’s economy will remain strong despite the epidemic outbreak

- Pan Helin

As the outbreak of the novel corona-virus pneumonia is brought under control, China’s economic activity will recover to normal levels, notwithstanding the fact that it has been severely affected in the short run, especially after the World Health Organization (WHO) declared it a public health emergency of international concern on January 31.

In the meantime, against the current cyclical fluctuation and economic downturn, China should intensify countercyclical adjustments, and use a basket of macro-economic control tools in a timely manner to iron out economic cycles and ensure stable economic growth.

Based on current figures, the virus has a lower fatality rate than the severe acute respiratory syndrome (SARS) outbreak in 2003, but has a longer incubation period and stronger transmissibility. The good news is that the country’s medical resources are being concentrated in the epidemic affected area, and most patients are stable after getting prompt treatment.

The length of the current epidemic depends on whether the arrival of medical resources can outpace the transmission of the virus, whether virus variation will occur and when targeted treatment plans will be worked out. Experts estimate that the epidemic will likely last for some time.

However, the market doesn’t need to be excessively fearful as irrational behavior in the short run will only make the economic situation worse. What the market urgently needs are rational economic expectations and the reasonable allocation of resources.