By Xinhua writers Xu Yuan, Deng Xianlai
Washington, May 24 (Xinhua): The fact that the spread of the novel coronavirus has been effectively contained in China is a demonstration of the country’s ability to handle a public health crisis, a U.S. economist and China expert has said.
In a recent interview with Xinhua, Stephen Roach, a senior fellow at Yale University’s Jackson Institute of Global Affairs, said he expects the qualitative — rather than quantitative — aspects of economic development to gain more discussion at the ongoing “two sessions” in China, namely, the third session of the 13th National Committee of the Chinese People’s Political Consultative Conference and the third session of the 13th National People’s Congress.
Quality Focused Development Strategy
Calling the coronavirus-related lockdown in the central Chinese province of Hubei “pretty extraordinary,” Roach said the measures demonstrated “China’s ability to at least control initially a horrible, horrible outbreak.”
The scholar, who was the former chairman of Morgan Stanley Asia, said “the quality of economic growth means more than it ever has for China and for the world.”
“I would hope in the ‘two sessions’ the qualitative aspects of the growth objectives would be addressed more forcefully and more explicitly than they have in the past,” he said.
With respect to China’s status in the post-coronavirus global economic landscape, Roach said “the Chinese economy will do fine” if policymakers stick to the structural reform agenda initiated at the beginning of the century.
Roach’s suggestion is for China to continue pushing ahead with developing domestic consumption, transforming to a more service-based economy, and making progress on indigenous innovation — all of which are key components of the reform endeavors that Beijing has engaged in during the past decade.
Achieving these goals, according to the expert, would require the using of both monetary and fiscal tools judiciously.
As the coronavirus outbreak has forced countries worldwide to enforce domestic social isolation and close national borders, Roach believes that the shock in external demand for Chinese exports “will continue to be negative.”
Yet, he stressed that “the broad case for China in terms of maintaining its position, if not improving it, as a share of world (gross domestic production) should continue.”
Supply Chain Disruption
One of the most detrimental impacts of the coronavirus on the world economy is the disruption of global supply chains.
Roach said the coronavirus pandemic has raised concerns over supply chain stability and “the lack of security that a nation has in being dependent on someone else.”
“That ‘someone else,’ of course in a disproportionate way, is China, which has played a key role at the center of much of the supply chain activity that’s developed in the past 30 years,” Roach said.
Countries like the United States that have been urging companies to pull their supply chains out of China and bring productions back home will face such consequences as rising production costs and spiking commodity prices, the expert said.
Consumers, who Roach said will ultimately pay the additional prices induced by the shift of supply chains, “have counted on prices being low to make ends meet in a period when their income has been under decades of pressure.”
Supply chains are “sticky” and take a long time to build, said Roach, adding that it is the existence of this “real stickiness” that has made it impossible to alter supply chains arbitrarily or quickly.
“It’s not like just flipping a switch that you can decide to move your sourcing to this country or that country,” he said.
To Roach, changing supply chains is simply not the remedy for the current economic hardship, since the real problem is the failure in “building enough slacks into the supply chains,” which is long overdue. Slacks, he added, are rooms to absorb different types of pressure, be it health-related, economic or political.
“I think in the future we probably want to think more about building some slack into our supply chain if we’re prepared to stick (the shocks) out,” he said.
“W-Shaped Trajectory”
The coronavirus pandemic has hit the global economy so hard that the world is heading toward a recession not seen since the Great Depression in the 1930s.
The International Monetary Fund (IMF)’s latest forecast is for global GDP to shrink by 3 percent in 2020, with only China and India still predicted to gain positive growth.
Roach considered the IMF estimates to be “reasonably accurate” or “as good as any assessment you can get,” adding, however, the risk is that the actual number could be worse.
He said the IMF based its prediction on the premise that an immediate improvement in China will expand to other major economies in the latter half of this year.
“But to the extent that economies are better able to normalize activity on the supply side… (they) have more difficulty in normalizing activity on the demand side,” Roach said. “So I think the rebound is going to be very uneven at best.”
A fairly rapid rebound on the supply side coupled with a much more sluggish resumption on the demand side is an unfolding reality not only in China, but around the globe as well, said Roach, who foresees a choppy, w-shaped trajectory of global economic recovery in the post-pandemic era.
“You do get some improvement fairly quickly, but it doesn’t stick because of the vulnerability on the demand side of the equation,” said Roach.
Calling for vigilance against what he referred to as an “asymmetrical period” ahead, Roach nonetheless expressed his long-held optimism in the Chinese economy, saying the country “for over a dozen years has always been strategically prepared to address imbalances and matters of sustainability and instability.” (Xinhua reporter Hu Yousong contributed to the report.)
(The picture at the top is that of Yale University economist Stephen Roach)
