What challenges will China's economy face under the COVID-19 epidemic? What impacts will the epidemic have on international relations, global value chains and economic trends? What adjustments can the Chinese government make to ensure economic and social stability this year?

To answer these questions, China Development Forum (CDF) launched a special column, CDF Online series, in which we will talk with forum delegates on the economic and political impacts of the virus outbreak.

Recently, Yu Jiantuo, Deputy Secretary-General of the China Development Research Foundation, had a call with Professor Zheng Yongnian of the National University of Singapore to discuss the impact of the epidemic on the global political and economic situation and the measures Chinese governments should take.

Zheng Yongnian believes that at this time controlling the epidemic comes first, while the economy is in the second place. A prolonged outbreak may pose a risk of international supply chain disruption.

He believes that China should introduce measures to support small and micro enterprises, and resume the production of key commodities in the international supply chain as soon as possible.

At the same time, communication strategies should be changed.

Internally, a credible community of scientists, doctors, and political leaders should be formed as a " stability center ".

Externally, China should attach importance to communication with other countries, especially the United States, and strengthen cooperation with the international scientific community. Prevent the epidemic turning into an economic crisis

● The bigger challenge at present is not GDP growth, but small and micro enterprises

● Prolonged outbreak may cause international supply chain disruption 

● Local governments should avoid one-size-fits-all solutions, and gradually resume production

Yu: In both short and long term, how will the epidemic affect the domestic economy?

Zheng: The short-term impact is very significant. Not only in Wuhan, but economic activity in most provinces has been suspended. But the bigger challenge is not GDP growth, but small and medium-sized enterprises, especially micro-enterprises.

These enterprise’ contribution to GDP is not huge, but they carry a large number of employment, which is of vital importance to social stability and normal operations of China.

If the epidemic cannot be controlled, and economic activities cannot be restarted as soon as possible, many small and micro enterprises would find it hard to survive, which may lead to a crisis.

On the other hand, the continued impact of the epidemic is likely to create a risk of international supply chain disruption.
China produces half of the world's face masks. China's undersupply of masks means the other countries have to find suppliers across the global.

If the epidemic is controlled within a few weeks or a month, I think the industry chain will not break. However, if it continues for a long period, other countries have to find industrial chains outside of China, which will have a bad long-term impact on China's economy.

Yu: Some comments said that the impact of the epidemic on the industrial chain may be greater than the trade war.
Zheng: It is a race against time. Foreign manufacturers are also looking for alternative suppliers elsewhere. Once they move away, it will be more difficult to return to China.

Yu: In your opinion, what strategies should China use to deal with the epidemic in terms of economy?
Zheng: The top priority is to get the epidemic under control as soon as possible. At this time, dealing with the epidemic comes first. Economy is in the second place. While fighting the epidemic, on the economic front I recommend the following:

First of all, avoid one-size-fits-all solutions. Areas with better epidemic control should start to focus on the economy. Local administrators at all levels, such as provincial or county level and even in the factory community, must take responsibility and initiative. Their initiative and sense of responsibility is beneficial to balancing local economic development and epidemic control.

In addition, we must actively introduce support measures for small and micro enterprises. Government should take efficient measures such as implementing tax exemptions immediately to help these enterprises survive, to prevent the epidemic from turning into an economic crisis, which will affect social stability.

It is recommended to follow the example of attracting investment in 1980s, to announce the exemption of taxes for small and micro enterprises immediately and continuously for several years. Many larger private enterprises are more resilient. So large and medium-sized enterprises must show solidarity and tough it out.

It is also necessary to resume the production of key goods and parts in the international supply chain as soon as possible. Proper internal and external communication during the anti-epidemic period

● The dialogue should be centered on science

● Form a community of scientists, doctors, and political leaders, and create a " stability center " 

● Engage in high level diplomacy and promote international cooperation  Yu: How does the international community view China's response to the epidemic? 

Zheng: The international reactions on the prevention and control of the epidemic in China is of two extremes. On the one hand, after China mobilized, most of the international organizations and governments that truly understand the epidemic hold positive attitude towards China's work.

On the other hand, a new wave of anti-China sentiment has emerged in North America, Europe, and even in Asia, including Japan, South Korea and Singapore.

This is detrimental to China's international image and is also easily used by hardliners to exploit public fear to pressure the government in the face of the epidemic.

Many western countries imitate the United States and do what the United States does. The US’s response to the outbreak has led to a less than good start.
However, no matter how politicians attack China, the attitude of American and international professionals towards China's anti-epidemic is objective and affirmative. Scientists believe that viruses are what they are in both domestic and international media. They also believe in China-US cooperation over the matter.

Yu: Under such circumstances, how should the government carry out the next step of communication?
Zheng: Internally, the dialogue should be centered on science, and turn the focus of the problem to science. We must maintain a rational attitude, and avoid turning scientific issues into political issues.

At present, the primary task of governments at all levels is to deal with the epidemic situation. Passively responding to public opinion and responding to rumors is futile. It is better to find an alternative discourse to form a “stability center” and lead the dialogue.

We should form a community consisting of scientists, doctors and political leaders, and form a strong credible team to act as a " stability center ". It’s important not only for China, but also for the entire world.
In terms of external communication, the following points are suggested:

First, engage in high level diplomacy. The recent phone call between President Xi and President Trump has come into effect, which not only stabilizing Sino-US relations, but also bringing a sense of stability to other countries. The phone call between Prime Minister Li Keqiang and chancellor Merkel had a similar effect.

Second, change the way of diplomatic response, learn to communicate with the west, and emphasize universal values and human rights concepts. The history of humanity is also the history of conflict with the viruses. Virus is the common enemy of mankind, not just China. It also reflects the connotation of “a community of shared future for mankind”.

Third, engage with the US scientific community, especially with the US Centers for Disease Control and Prevention. China should speed up the diplomatic actions with scientists of the United States and WHO, and promote cooperation with a positive attitude as soon as possible.

This interview has been edited for clarity and flow.