As the Covid-19 rages throughout the world, the trends of world economy and financial markets in 2020 depend on the development and control of the epidemic. How is the epidemic developing outside China? When will it end or be contained? More importantly, how should countries along “The Belt and Road” check it and bring it to an early end? These questions are vital to the economy and finance of the affected countries including China and the world at large.

 

On the evening of April 25, 2020, the International Finance Forum (IFF) held its 4th online academic seminar on the COVID-19 and its economic impact to “The Belt and Road” countries.

Mr. Zafaruddin Mahmood, co-secretary general of IFF and the Silk Road International Association (SRIA), former special envoy of China Pakistan Economic Corridor (CPEC) delivered an opening speech. Mr. Song Min, IFF Academic Committee member, dean of Economics and Management School of Wuhan University, former director of Department of Finance, School of Economics, Peking University released the IFF China Report 2020 and the Report of Central Banks of The Belt and Road Countries on behalf of IFF. Dr. Yan Shuai, researcher of Research Center of Country Risk, China Export & Credit Insurance Corporation, Mr. Zhai Yongping, senior adviser of IFF Global Green Growth Center, director of Energy Sector of the Asian Development Bank and member of Global Future Council on Energy Technologies of the World Economic Forum, Mr. Cheng Cheng, chief economist of Made in Africa Initiative and senior advisor of United Nations Development Programme in the Asia and the Pacific, and Mr. Fan Xiwen, chief risk officer of China-LAC Cooperation Fund shared their opinions on the developments of the COVID-19 and its impacts on the economy of the world/the EU, Asia, Africa and Latin America. Liu Xing, chief editor of Dialogue of CCTV, presided over the meeting. Wang Yuanfeng, member of the IFF Academic Committee, vice chairman of China Association of Development Strategy Studies and professor of Beijing Jiaotong University commented and summarized the reports. More than 160 guests from Beijing, Shanghai, Guangzhou, Wuhan, Suzhou and Hong Kong attended the meeting.

Ambassador Zafaruddin said in his speech that up to now, nearly 3 million people have been infected with the COVID-19, which had cast a major impact on the development of the world economy. That the epidemic is under control and ends as soon as possible in all countries, especially those outside China, are critical not only to the global economy and finance, but also to the world culture and ecology.

The experts of this meeting came from different institutions around the world. After the release of the IFF China Report 2020 and the Report of Central Banks of The Belt and Road Countries, the experts successively analyzed the impact of the epidemic on the world, the European Union, Asia, Africa and Latin America with the latest research conclusions and countermeasures. Song Min introduced the main contents of the five chapters of the IFF China Report 2020, and expounded the six issues involved in the Report of Central Banks of The Belt and Road Countries. Song stressed that the reports were of high quality and inspiring. Given the reports’ authors, the participants, the topics they covered and the time they took, the reports are worth reading.

Yan Shuai briefly introduced the current situation of the COVID-19, and analyzed the four risks for world economy of 2020: global recession caused by the COVID-19, destroyed global value chain, worsening debts and geopolitical risks. Then he analyzed the impact of COVID-19 to the global economy from the European Union’s perspective. Although new cases in Europe have been decreasing recently, the European Center for Disease Prevention and Control believes that the turning point is still yet to come and risks might still be on the rise. In such case, lifting restrictions too early might cause another outbreak. In the short term, the IMF forecasts a 7.1% decline in Europe’s growth in 2020 and a slowdown in debt management. In the long run, the EU is beset with four issues: sharing the burden of the refugee crisis, the trade gap between Europe and the UK and the huge budget deficit after the Brexit, the future development path of Europe, and the rules and internal affairs of the EU. At the same time, the outbreak may also provide an important opportunity for the EU to upgrade its new energy structure, but the China-EU trade will also see more difficulties in the future.

According to Mr. Zhai Yongping, although Asia is hard-hit by the novel coronavirus, the epidemic is controllable thanks to rising temperature which will slow down the spread of the virus as well as appropriate prevention and control measures. Since the virus is more harmful to the elderly, Europe is more affected with an older population. How Europe and the United States will control the epidemic should be watched. No country can develop without globalization. The recovery of Europe and America will not only encourage the international community, but also promote global economic recovery. Since the economy of developing countries in Asia are under shock from the virus, the Asian Development Bank (ADB) is deeply concerned the recurrence of poverty, which could mean years of efforts derailed. Fortunately, Asia is a large regional market with relatively complete supply chains. Besides, China is the world's second largest economy and the largest in Asia. The fact that the outbreak has been contained and production has been resumed in China means the economy of Asia is more resilient than that of other regions.

The COVID-19 is historical for its Matthew effect: those who suffers the most  are the most vulnerable and the poorest either within countries or in the world. Currently, lack of data on the development of the epidemic in Africa is dangerous, which makes it difficult to monitor the scale of the epidemic and to predict its development. Besides, African countries vary in severity of the pandemic due to geographic differences. While the current epidemic data is significant to countries and regions for their own anti-epidemic work, it is of little help for external observation and assessment of the development of the epidemic. From the perspective of development economics, it is estimated that low-income countries around the world will face negative effects. On the one hand, the vast majority of African countries have implemented social distancing or lockdowns; on the other hand, these measures have undermined Africa’s progress in economic growth, debt management, employment, food production and investment, with Sub-Saharan Africa’s situation even harder. In terms of bilateral cooperation, China has been offering Africa essential epidemic prevention materials through barter. As the world recovers from the disease in 2021, more resources for assistance will become available for African countries. At the same time, multilateral institutions should also play an active role in supporting Africa's recovery and development.

Mr. Fan Xiwen said the epidemic in Latin America is severe. The impact of the outbreak on the Latin American economy is tremendous, which could vary from country to country. In addition, the economy of Latin America lacks flexibility in that it heavily relies on commodity trade and tourism. Therefore, many regions in Latin America have suffered greatly from the epidemic for huge loss of tourism revenue, which is difficult to recover in the short term. Capital markets and national finance in Latin America have also felt the pain. Therefore, Mr. Fan expects Latin America's debt problems to become more severe. Meanwhile, as the gap between rich and poor widens, it remains to be seen whether the epidemic will exacerbate Latin America’s long-standing social problems derived from its special political systems. It is also unclear whether the outbreak will push Latin America towards a left-wing political path.

Mr. Wang Yuanfeng summarized the impact of the outbreak on the global economy, adding that apart from economic and political risks, social risks should also be taken into consideration. In addition, as global debt amounts to $255 trillion and debt problems stand out in several countries, it is necessary to reach a consensus on debt relief and freezing. The outbreak also raises questions on whether the global economy is too interdependent to continue in the future, and whether a distributed economy should be considered to reduce risks. Every country should think about whether the pandemic will bring globalization to an end or a new starting point. Rather than recede or cease, economic globalisation is more likely to continue; otherwise the costs will be too high. However, political globalisation has clearly seen a backlash as mistrust grows between countries and the United Nations governance system faces challenges. Will the world return to the same old mindset of Cold War or start anew? As stated in the preface of the IFF China Report 2020, international cooperation is still essential.