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Yu Miaojie: Politics, Pandemic, and Economic Prospect

Mar 30-2020   



 

As part of the National Development Lectures Online for the MBA students, a signature academic activity of the NSD, Prof. Yu Miaojie recently spoke on the growth outlook of the Chinese economy in light of the ongoing pandemic and the China-US trade frictions. He’s CPC Party Chief and Deputy Dean of the NSD.

 

Prof. Yu characterized the mid and long-term relationship between China and the US as “limited cooperation, long-term competition, and mutually dependent”. An eventual de-coupling is highly unlikely due to the insurmountable complexity embedded in global value chains and industrial chains, he said.

 

The first-phase deal will be in force for two years wherein political reasons can be discerned: 2020 is election year in the US and 2021 is of great political significance in China. Hence, bilateral relations are likely to remain stable, with trade cooperation outshining friction.

 

As for the fallout of the pandemic, Prof. Yu believed that China’s GDP shall be able to achieve 4.5% growth this year, but to reach for 5% shall require a portfolio of extensive policy undertakings. Despite the trade deficit to be recorded in the first quarter, China shall maintain a trade surplus for the whole year, at around 2 trillion yuan, lower than the 2.9 trillion yuan logged in 2019. Inflation will remain tamed. Overall employment will escape unscathed provided that the epidemic is brought under effective control by April.

 

The Chinese economy is seven times that in 2003 when the SARS broke out, yet it is going through a harder time given the seriousness of the current epidemic and the integrated nature of its economic growth. The first industry (farming) will suffer the least impact, as farmers have to stay at home right in the spring planting season. The second industry will be significantly affected, especially SMEs. Foreign enterprises in China might see their confidence eroded. The third industry (services) will be worst dented.

 

To mitigate the onslaught of the pandemic, Prof. Yu offered policy advice in three aspects: First, adjust growth expectation and bolster confidence. The 6% target should be forsaken. If managed well and even at 4.5% growth rate, the year 2020 could wrap up the 13th Five-Year Plan nicely and set a positive tone for the 14th Five-Year Plan. Second, both fiscal and monetary policies should be effectively deployed. By raising fiscal deficit to 3.5%, budgetary funds might reach 26 trillion yuan this year and its main investment outlet should be new infrastructure construction. Third, expand opening-up and re-forge global value chains. Support should be provided to foreign enterprises to resume production. Besides, China should build its core competitiveness on a unified and free domestic market rather than cheap labor. 

Yu Miaojie: Politics, Pandemic, and Economic Prospect

Mar 30-2020   



 

As part of the National Development Lectures Online for the MBA students, a signature academic activity of the NSD, Prof. Yu Miaojie recently spoke on the growth outlook of the Chinese economy in light of the ongoing pandemic and the China-US trade frictions. He’s CPC Party Chief and Deputy Dean of the NSD.

 

Prof. Yu characterized the mid and long-term relationship between China and the US as “limited cooperation, long-term competition, and mutually dependent”. An eventual de-coupling is highly unlikely due to the insurmountable complexity embedded in global value chains and industrial chains, he said.

 

The first-phase deal will be in force for two years wherein political reasons can be discerned: 2020 is election year in the US and 2021 is of great political significance in China. Hence, bilateral relations are likely to remain stable, with trade cooperation outshining friction.

 

As for the fallout of the pandemic, Prof. Yu believed that China’s GDP shall be able to achieve 4.5% growth this year, but to reach for 5% shall require a portfolio of extensive policy undertakings. Despite the trade deficit to be recorded in the first quarter, China shall maintain a trade surplus for the whole year, at around 2 trillion yuan, lower than the 2.9 trillion yuan logged in 2019. Inflation will remain tamed. Overall employment will escape unscathed provided that the epidemic is brought under effective control by April.

 

The Chinese economy is seven times that in 2003 when the SARS broke out, yet it is going through a harder time given the seriousness of the current epidemic and the integrated nature of its economic growth. The first industry (farming) will suffer the least impact, as farmers have to stay at home right in the spring planting season. The second industry will be significantly affected, especially SMEs. Foreign enterprises in China might see their confidence eroded. The third industry (services) will be worst dented.

 

To mitigate the onslaught of the pandemic, Prof. Yu offered policy advice in three aspects: First, adjust growth expectation and bolster confidence. The 6% target should be forsaken. If managed well and even at 4.5% growth rate, the year 2020 could wrap up the 13th Five-Year Plan nicely and set a positive tone for the 14th Five-Year Plan. Second, both fiscal and monetary policies should be effectively deployed. By raising fiscal deficit to 3.5%, budgetary funds might reach 26 trillion yuan this year and its main investment outlet should be new infrastructure construction. Third, expand opening-up and re-forge global value chains. Support should be provided to foreign enterprises to resume production. Besides, China should build its core competitiveness on a unified and free domestic market rather than cheap labor.