China to hedge against COVID-19 impacts with stronger policies

By Zhou Renjie, People's Daily

The COVID-19 pandemic is currently exerting impacts all over the world, obstructing global production and demand.

Faced with the unprecedented challenge, the Chinese economy has withstood the test in the early phase, showing robust growth in the work resumption rate of major projects, as well as the purchasing managers' index in the manufacturing sector.

The country must give more sufficient consideration of the difficulties and secure its achievements, hedge against the impacts with stronger policies, and stabilize the economy with more forceful counter-cyclic adjustment, to realize the normal operation and high-quality development of the national economy.

Macro control calls for discretion, and shall be carried out in a forceful, well-controlled and effective manner. The regulations, which are expected to be forward-looking, well-targeted, and effective, must come from science-based analysis.

On the one hand, given the sustained sluggish international economic and trade activities, to offset the negative impacts from decreasing external demand, China should activate the potential of its domestic market, smoothen internal cycle and boost consumption.

On the other hand, its industrial and supply chains shall be fixed and stabilized as soon as possible, to cope with the operational difficulties of enterprises impacted by the disease, and the employment pressure of key groups.

Therefore, macro regulations shall be further enhanced to take forward employment, people's livelihood, the development of market entities, food and energy security, stable operation of the industrial and supply chains, and smooth functioning at the community level, and to keep employment, the financial sector, foreign trade, foreign and domestic investments, and expectations stable.

Besides, the country should also accelerate the restoration of economic and social orders to prevent the short-term impacts from developing into a lasting trend and safeguard the minimum requirement for economic development.

To enhance policy support, the regulation packages shall be rolled out in a more targeted way and fully implemented by regions and departments.

For instance, fiscal departments should make early allocation of special-purpose bond (SPB) quotas to local governments, and monetary policies should be rolled out to expand the re-loans and re-discounts, as well as targeted reserve requirement ratio (RRR) cuts for small and medium-sized banks, to cope with the sudden decrease of internal and external demand, the tough coordination between upper and lower streams of industries, impeded microcirculation and rising losses of enterprises.

Local governments shall be proactive to enhance investment to bolster areas of weakness and support the upgrading of the manufacturing industry. In addition, they shall also ensure people-to-people and point-to-point employment service and expand input on human resource to increase the income and consumption capability of employees.

To enhance policy support, China should foster new growth points and growth poles, and turn crisis into opportunities with a well-planned strategy. For instance, the suburban areas of metropolises, the construction of digital cities and the expansion of internet-type urban agglomeration, as well as the renovation of shanty towns and old residential communities all offer supports for expanding domestic demand and have huge demand and space for development.

Furthermore, the principal role of enterprises and the coordinating role of government shall be brought into full swing in reshaping industrial chains, enhancing scientific innovation and import substitution, straightening the innovation and value chains of industry-university-research cooperation, and strengthening public health system.

However, stronger macro regulations do not equal a deluge of strong stimulus policies, but shall be carried out with precise classification and targeted implementation, strike a balance between the role of the government and that of the market, give play to the decisive role of the market in resource allocation, and have the government play its functions better.

The reforms to delegate power, streamline administration and optimize government services, and the reform of the mechanisms and systems for the market-based allocation of factors both aim at maximizing the effect of policy stimulus, which enhances the risk resistance capability of enterprises with better business environment and market mechanism, to achieve better risk control and reduce leftover problems of development.

Only by innovating macro regulations in reform and deepening reform in regulations can we better combine the advantages of mechanism and market.

Remaining committed to the underlying principle of making progress while keeping performance stable, adopting a new vision for development, and reacting calmly to the complicated external uncertainties, China will surely stabilize its economy, foster new growth points and poles, and take an active approach to development.