The COVID-19 pandemic has resulted in significant impacts on the world, including China, as well as turmoil in markets globally. What is the current situation of the epidemic and the economy in the United States and Europe? What can be expected in China’s current economy and its future? What measures can be adopted to address the risks of the global financial and economic crisis?

On the evening of April 8, 2020, IFF's 3rd webinar took place with the theme ‘Global Market Turmoil and China’s Economy amidst the COVID-19 Pandemic’. Six financial speakers were invited, including Robin Xing, chief China economist of Morgan Stanley; Wang Yan, deputy director of IFF Institute, former World Bank senior economist; Xia Le, IFF Academic Committee member, chief Asia economist of BBVA, Chen Bingcai, IFF Academic Committee member, executive director of the IFF Institute, former inspector of National School of Administration, and Song Min, IFF Academic Committee member, dean of Economics and Management School of Wuhan University. They discussed the impact of the pandemic on the world economy, the economic situation in the United States and Europe and government rescue measures, as well as the present and future of China’s economy, providing reference opinions on for decision-makers, enterprises and individuals. Liu Xing, chief editor of China Central Television (CCTV) programme Dialogue, presided over the webinar. Wang Yuanfeng, executive director of the IFF Institute, vice chairman of Chinese Association of Development Strategy Studies, professor of Beijing Jiaotong University, made a summary and commented on the reports. More than 200 guests from Beijing, Shanghai, Guangzhou, Wuhan, Suzhou, Taiwan, Hong Kong and the United States attended the webinar.

Experts from different kinds of organizations all over the world were invited to the webinar and made analysis from various perspectives. Overviews of global economy, finance and employment were given with specific focus on the dynamic in the US, Europe and China. Speakers also shared latest research results and provided countermeasures as well as suggestions. This presentation is of high quality and delivered inspirational points. First of all, concerning whether this pandemic will bring about global financial crisis and economic crisis, Robin Xing, Chief China Economist of Morgan Stanley, thought that the global economy is expected to go through recession and that the economic downturn in Europe and the U.S. will be even worse than expectation. This economic downturn - some called Great Coronavirus Recession (GCR), is not a systemic crisis like the 2008 financial crisis, or the Great Depression in 1929-33 which lasted for 3-5 years. The characteristic of economic response to the outbreak this time is a sharp decline of a deep-V type and a slow recovery of a U type. It is foreseen that the global economy will decline by nearly 2% this year. According to the model calculation, the U.S. won't return to its 2019 GDP level until the end of 2021 and Europe won't return to its end-2019 level until the third quarter of next year. Both European and the U.S. economies will stagnate for about two years.

Why is the pandemic crisis that unlikely to cause consequences as the Great Depression in 1929-33 did? The experts pointed out that it results from the strong intervention of governments to combat crisis and recession. Wang Yan, Deputy Director of IFF Institute, Former World Bank Senior Economist, introduced and commented on the unprecedented $2.2 trillion bailout plan of the U.S. Xia Le, Chief Asia Economist of BBVA, analyzed Europe’s €800 billion bailout plan. The experts commented on China’s various plans which help enterprises to develop and revitalize their economy, such as the “New Infrastructure” plan. Measures taken by governments, such as European Union have played a significant role in stabilizing the economic situation of the world and the countries concerned. Speakers generally thought highly of measures adopted by governments and central banks in the US and EU, believing quick, strong and targeted plans are vital to the economic stabilization. Moreover, this bailout plan has been praised by economists since it shifts focus on helping enterprises and individuals, unlike the 2008 bailout measures concentrating on banks and financial institution.

However, will the current measures taken by governments and central banks be up to the future challenges? The economists believed that there will be further intervention. New and stronger financial and fiscal policies will come out in the US and Europe. The US Congress is discussing a new bailout plan of at least $1 trillion (possibly up to $1.5 trillion), which focuses on handing out money to individuals and bailing out SMEs. The EU may provide more loans and credit guarantees as well as issuance of EU anti-pandemic bonds or funds. It may also make use of the Common Budget and the European Investment Bank to provide support for its member states and economic departments. In addition, the member states will be allowed to bail out the banking sector and be given more flexibility in improving the implementation of fiscal disciplines. But there is room for debate on the direction and precision of all these polices. Stiglitz, Nobel laureate in economics, argued that the bailout plans of states are not to stimulate their economies, but to help pull through the hardship.

In combating the economic impacts of the pandemic, how can China learn from the western countries and formulate more appropriate and effective policies according to its own characteristics? For instance, some countries in Europe and the US resort to Helicopter Money Drop, which leads to the concern ‘will China do the same’. Robin Xing pointed out that China could consider issuing larger scale special national bonds for infrastructure and public health expenditure to cover the losses of enterprises and individual during the epidemic. Approaches of “three exemptions, on refund and one issuance” can also be adopted, namely: exemptions from rents, interest, five social insurances and housing fund; refund of taxes; issuance of consumption coupons or cash. Song Min, Dean of the School of Economics and Management of Wuhan University, thought that China should adopt a hedge policy instead of a stimulus policy. China needs to learn from advanced international practices and adopt precise support, such as providing employment subsidies for SMEs to maintain the level of consumption, and to connect supply and demand. It is also important for China to be precise in its bailout efforts. Meanwhile, China should vigorously develop digital finance and increase supports for SMEs.

This pandemic has not been encountered for 100 years, and it is very important for governments to be innovative in overcoming it. Some have suggested the use of unconventional policies such as “wartime finance” and “wartime currency”. Chen Bingcai, executive director of IFF Institute, former inspector of National School of Administration, put up with a question: will crisis management policy remain in the long term? That's worth thinking about. The shock to the world economy has come from outside the financial system, but isn’t there anything wrong with the current economy and society? Wang Yan said that the U.S. response to the epidemic has witnessed market failure and government failure. The market failure is manifested in the response to infectious diseases, inadequate construction of public health system, and a large number of fragile bubbles in the U.S. economy and finance. Therefore, non-market roles need more attention in the future.

What should governments do in the future? Will strong financial and fiscal policies be enough to tackle the situation? Where is the limit of fiscal deficits? Can the central bank print up money and carry out quantitative easing without any limit? Chen Bingcai pointed out that this deeper issue, which involves the future mode of development, is the comparison and choice between the Chinese model and the western model in the wake of the epidemic in the world. Now there is discussion about the future direction of capitalism and how the Chinese socialist market economy model will develop in the future. Chen believed that the general direction is reform and innovation. The goal of China's economic modernization is to establish a modern and powerful country by 2050, and it must follow the path of high-quality development and build a modern economic system.