China released its first-quarter GDP performance and other key economic indicators Friday. Its GDP growth was -6.8 percent in the first three months of this year, the first contraction since the country started reform and opening up more than four decades ago.
Such a figure, which is also the first decline since China started compiling its GDP in 1992, means that in spite of substantial pandemic control progress within China, the Chinese economy is still facing mounting difficulties while the rampant spread of the virus in other countries has brought more uncertainties.
Under these circumstances, employment is more important than GDP increase for China now. In the event that there are numerous bankruptcies and largest-scale layoffs this year, it will not only be difficult to return to normal economic growth, but high unemployment will also endanger our social stability and even national security.
China attaches great importance to credit expansion in efforts to mitigate the side influence of COVID-19. A recent top-level meeting decided to issue new special sovereign bonds — the first time since 2007 — to raise the budget deficit ratio. Meanwhile, the central bank has cut the amount of cash commercial banks must set aside as reserves three times this year, releasing 1.75 trillion yuan (US$247.48 billion) in liquidity to support the economy.
However, instead of being misallocated in real estate and securities sectors, these macroeconomic policies and monetary tools should mainly be used to bolster the real economy, create more jobs, help hard-hit foreign trade, bail out micro, small and medium-sized enterprises, stimulate domestic consumption and boost the construction of new-type infrastructure.
Despite a majority of domestic manufacturers having resumed production, it will not work if overseas businesses remain closed.
With the rife spread of the virus in other countries, many foreign trade companies in China are facing obstacles such as delays, deferments and cancellations of orders, especially in consumer-related industries such as textiles and apparel.
The situation may be even tougher in the second quarter of this year due to the worsening pandemic situation in the rest of the world, especially in the United States, Europe and Japan, which account for more than 40 percent of China's total export.
Measures like special funds, tax exemptions, force majeure proofs and social insurance deferrals can be made to help foreign trade companies restore their earning abilities.
Meanwhile, the Chinese Government should step up quality supervision over its exported medical supplies while facilitating international procurement of pandemic containment materials such as masks, protective gowns, infrared thermometers, ventilators and protective goggles. The country should also actively respond to foreign restrictions, further standardize its production and strictly ban the export of products without proper certificates.
Small and medium-sized enterprises in China account for more than 80 percent of the country's total employment, but are more vulnerable due to their weak financial capabilities. Small businesses based on customer services such as accommodation, food and beverage, and retail are suffering the greatest impact of the pandemic as social distancing measures have been encouraged to cut off the spread of infection.
The mix of policies rolled out by the Central Government and local authorities in China, including targeted tax cuts and fee reductions, waivers in social insurance and the cost of electricity, and deferral of the housing provident payments, have significantly lowered the burden of small and medium-sized firms. However, more sustained efforts such as lowering rent and labor costs are needed to help those firms come back to life again.
With shrinking foreign trade, domestic consumption is of vital importance to the quick recovery of the Chinese economy. Fiscal steps must be taken to stabilize the earnings of individuals and especially low-income persons, thus unleashing consumption potential in the country.
Some sectors such as catering will be affected for the longest time and will show the slowest pace of recovery. It will take some time for people to overcome the psychological barriers as a result of the pandemic and to establish confidence anew. To further stimulate consumer spending, local governments at various levels may temporarily implement two-and-a-half-day weekend and offer discounted vouchers and tickets to scenic spots, hotels, restaurants and other venues.
Government-supported infrastructure investment is also a good way to create jobs and boost the economy. As opposed to previous efforts to ramp up investment in traditional infrastructure projects such as road, water and highway construction, China will mainly concentrate on the new-type projects which include 5G, cloud computing, AI and other Internet-related industries, so as to lay a solid foundation to upgrade its industries and transform its economy.
(The author is the editor-in-chief of Shenzhen Daily with a Ph.D. from the Journalism and Communication School of Wuhan University.)