China – coronavirus – world economics

Фото: агентство Синьхуа

By the end of December of the last year, European authorities declared about the explosion of pneumonia of an unknown genesis in a densely populated city Wuhan, Hubei province. Agent of the disease was a corona virus of a new type 2019-nCoV.

On the 14th of February, the Chinese Government allocated 8 billion Yuan (about 1,15 mln. US dollars) that became the second installment of subsidies issued in frame of the national struggle with explosion of a corona virus of a new type.

Prior to it, on the 29th of January, 2020, the Chinese Government issued 27,3 billion Yuan (about 4 bln. US dollars) to provide all levels of control of the epidemics. The Government promised to apply additional measures if necessary.

Chinese government is working closely with the World Health Organization (WHO) on every step of the epidemic, exemplified by President Xi’s meeting with WHO Director-General Tedros Adhanom Ghebreyesus on January 28. After it, the Director-General declared the 2019-nCov epidemic as a “public health emergency of international concern (PHEIC).

China’s mainstream media like People’s Daily and Xinhua News Agency reported the news instantly, indicating that the Chinese government has nothing to hide from the public and that the Chinese people are fully confident in conquering the epidemic.

Heads of many states, in their letters of support sent to China, highly assessed the preventive measures implemented by China and expressed readiness to render a support and assistance.

Head of UNDP Achim Steiner, in his interview given to the Xinhua Agency stated that “UN supports efforts of China in its struggle with the epidemics. We live in one international community, and should consolidate our efforts, to support China and to strengthen our collaboration for suppressing of further spreading of the virus”.

The UN is intended to present to the Chinese government medical resources on the amount of 500 000 US dollars to help medical workers participating in the war with the epidemic.

In its turn, during the press-conference conducted for Georgian media outlets, the Ambassador of the PRC in Georgia Li Yan expressed his belief in victory over the epidemic. She stated: “Since the moment of appearing of the epidemic, China immediately informed the WHO about the epidemic and shared technical information. Spreading of the epidemic in China and abroad was inhibited. This information considers that the epidemic can be prevented, controlled and treated.

Tedros Adhanom Ghebreyesus stated that currently there is no necessity to make efforts for prevention of international trips and trade. Particularly, the WHO is against initiation of restrictions for China in the field of tourism, trade and other fields. However, some states ignored recommendations of WHO and have implemented very strict restrictive measures.

We consider that this causes a damage to prophylactics of the epidemics and struggling with it, and besides exaggerates the panic and has an impact on the world economics and free trade. We hope that other countries will keep calm, be rational and unbiased in assessing of the epidemic’s impact, respect authorized recommendations of the WHO and avoid unnecessary bans. The epidemics has already made a negative impact on cargo shipping, tourism and import-export operations between China and Georgia, and it may affect the speed of current large-scaled projects in the field of the transport infrastructure.

China will continue its close collaboration and links with the international community, including Georgia to eradicate the epidemic as soon as possible. We will again call the Georgian side to review newly-implemented temporary restrictive measures to minimize damage which can be caused by the epidemic in cooperation between China and Georgia in different fields.

China constantly informs the Georgian side about a positive progress and a complex of measures made by China for prevention and struggling with the epidemic. The Georgian nation expresses its support to China”.

China is the key trading partner of Georgia, and Georgia, in its turn, is the first country in the region which has concluded a Free Trade Treaty with China. According to the Professor, Director of the Analysis and Forecasting Center, Vakhtang Charaia, it means that it is attractive for this country.

China promptly built hospitals for patients infected with corona virus. It means that it is the country able to deal with similar problems. Georgia may become attractive for China in using the Georgian trading corridor for delivery of Chinese goods to the states with a high purchasable ability (first of all in EU countries), as Georgia has concluded a Free Trade Treaty with the EU and China. And, if Chinese companies have a desire, they will be able to move a definite segment of production to Georgia”, – says Vakhtang Charaia.

Last year, tourists from China were included in top-10 countries according to funds spent by them in Georgia.

Direct flights between our countries are temporarily suspended. And, even when a number of Chinese tourists was not large and amounted to 48 071 people in 2019, tourists from China were included into the top-10 according to the funds spent in Georgia. On average, expenses of one tourist in Georgia amounted to 2 253 Gel, that in total exceeded 100 mln Gel last year.

A number of Chinese tourists in Georgia has increased in the last 5 years on a regular basis. Our expectations from this country are rather optimistic. We hope that the Corona virus will be eradicated soon and the Georgian tourism will restore its losses easily”, – says Charaia.

It is noteworthy that nowadays, the EU does not consider an issue on banning of Chinese tourists to enter the Schengen zone. Ministers of Health Care of EU states agreed to strengthen preparedness and coordination to prevent spreading of the Coronavirus of a new type in Europe at the special meeting in Brussels.

European Commissionaire for equality in EU Elena Dalli expressed support to China in her speech made in the European Parliament. She stated that the EU closely cooperates with China in its battle with the epidemic and the support to China means the support of the whole world.

According to the Chinese media outlets, impact of the epidemic will be fully considered in developing of the program of the 14th five-year plan of China (2021-2025). It is expected that additional measures will be implemented for stimulation of economics for the next five years.

In the long-term prospect, China, being the second largest economics in the world, will not lose its huge potential in the field of consumption, urbanization, 5G, artificial intellect and other new economic fields due to the epidemic”, – writes the newspaper “Jenmin Jibao”.

As it is mentioned in the report “Coronavirus Battle in China: Process and Prospect”, published by the Shanghai Institute for International Studies (SIIS):

It is widely prognosed that China’s economic growth will be down by 1 to 1.5 percentage point. Some even doubt if China’s economy can achieve a 5-percent growth in 2020.

To be more specific, the 2019-nCov epidemic poses direct harm on three main sectors of China’s economy: (1) the service sector, especially such consumer industries as tourism, catering, entertainment and logistics (in particular for small- and medium-sized enterprises); (2) the manufacturing sector, typically in mobile phone, automobile and electronic industries, due to indefinite time for return to operation, which may to some extent disrupt the global industrial chains; as a manufacturing center in China, Coronavirus Battle in China: Process and Prospect | 10 Wuhan city is under heavy economic blow; and (3) the trade sector, owing to potential cuts or even shutdown of airlines, sea routes and borders by some countries as a result of the prevailing panic or geopolitical considerations.

Despite this, sustainability of the Chinese economics shouldn’t be misjudged. Even in the short-termed prospect the epidemic has not any negative impact on economics but is favorable for the fields like electronic commerce, online games and entertainment.

It is noteworthy that economic outcomes of the pneumonia SARS did not stop acceleration of the Chinese economics in 2003. It was the time, when China managed to reach the 10% economic rise, taking into account that GDP amounted to 11.7 trillion Yuan (11.7 trillion RMB) that is about 9 times less than the current indicator – 99 trillion RMB (Yuan).

Even in face of the rampant global financial crisis in 2009, China was able to maintain a steady growth of economy with a strong stimulus package and collective international efforts led by the Group of Twenty (G20).

It is worth noting, however, that the potential impact of the 2019-nCov epidemic can be different from all the previous epidemics and other incidents. For one thing, it occurs when China’s economy, in the midst of a transition from high-speed growth to high quality development, faces three daunting tasks domestically, i.e., guarding against systemic financial risks, control of pollution, and poverty eradication; externally, with globalization under unprecedented challenges and China-U.S. trade frictions only starting to ease, China’s economy will be further hit if the country is labeled as an “epidemic area”.

Now we have a favorable situation of the USA for expanding of export of its goods on the Chinese market.

Prior to explosion of the epidemic, the USA signed an agreement on expanding of deliveries of American goods on the Chinese market in the amount exceeding 200 bln dollars, first of all, including agricultural products and China ceded ground. In this case, in relation to Americans, we can use the following proverb: “There is no joy, without alloy” – says the Expert in Economic Issues, Professor Soso Archvadze, in his analysis of an economic situation in China.

In the recent situation the Chinese companies have difficulties with competition on the global market. Current reality narrows possibilities of the Chinese export, by increasing the volumes of import in this state. From the global point of view, decreasing a demand on Chinese goods will force other users to focus on the goods of the countries where a cost of work force is much higher that will affect the final cost of goods.

Daily losses of volumes of underproduction of GDP in China make up about 5 bln. USD as many plants and factories are stopped, regions with a population of 35-40 mln people are closed for quarantine.

All this affects production, tourism, transport and almost the whole economics – that is how the so-called “principle of domino” works. And, if this situation will continue for a while, we will get the “narrowing” of the Chinese economics. China covers the fifth part of the whole world economics and in case of decreasing of its rate even by one percent, the world GDP will be decreased by 0,2%.

In addition, while decreasing product, a demand of China on energy resources will be decreased as well that has already an impact on oil prices.

If in China there is a talk about the decrease of the economic growth by 1-1.5%, the volume of the world economics will be decreased by 0.2-0.3%. It makes up 100-120 trln USD GDP, and the world losses will amount to 300 -450 billion USD”, – says Soso Archvadze.

On January 20, President Xi Jinping and Premier Li Keqiang instructed governments at all levels to pay highest attention to the development of the epidemic. The National Health Commission and local authorities were ordered to activate all-round emergency response mechanisms. On January 25, Premier Li was appointed to a chair of a newly established central leading small group on battling the 2019-nCov epidemic and visited Wuhan two days later to inspect the latest progress and boost public morale. Rapid mobilization at the top level catapulted the whole nation into instant reaction. At present, more than 52 batches of medical staff of 6,097 professionals are working in Wuhan and other places in Hubei. Medical supplies including face masks, protective suits, and medicines arrive in epidemic areas.

The Ministry of Industry and Information Technology has urged medical suppliers across China to restore to their full productive capacity to ensure sustained provision of all necessary items. The Ministry of Finance has allocated 1 billion RMB in emergency funds for Wuhan and Hubei. Vegetables, food, and other life necessities have been sent from other places to Wuhan for the nine million residents there.

Enterprises and the general public also contribute to the combat against the epidemic. Financial and material donations from Chinese enterprises have been growing since the onset of the deadly virus. Charities and Red Cross agencies in Hubei received up to 4. 26 billion RMB and 5.29 million pieces of materials in donation by the end of January. Corporate giants like Alibaba and Fosun International Limited have made overseas purchases to supply urgently needed medical equipment to Wuhan.

For example, Tencent has set up eleven platforms providing online services such as information disclosure and medical advice.

One platform offers online medical clinical services aimed to reduce feverish patients’ exposure to virus in hospital. Another platform helps calm down the public by debunking rumors and conspiracy theories.

Lika Zhorzholiani, for