The COVID-19 pandemic has brought an unprecedented threat to both public health and the global economy. The world economy is now at severe risk with the clear prospect of a strong contraction this year. The IMF’s WEO 2020 projections suggest an economic shock that far exceeds the one experienced during the 2008/10 crisis and the worst recession since the 1930s. This is truly a global problem: the virus and the necessary lockdowns have affected the vast majority of countries. We are seeing large scale loss of confidence, lack of liquidity, unemployment, and supply side disruption. Output and employment, particularly informal, are deeply damaged. Strong, collective efforts are urgently needed, to protect lives, support the global economy and ensure the resilience of the financial system. Without strong action the world could enter a depression that could be long lasting, posing great danger to social fabrics and political systems around the world. The next months are decisive for the world, and coordinated action across countries is required to manage the risk and consequences of this unprecedented crisis.

Most countries of the world are either in the rescue phase or moving from rescue to recovery. At this time the top priorities are to tackle the public health emergency and prevent COVID resurgence; to protect the most vulnerable, particularly in relation to employment; to give strong support to the banking system and supply of finance, to ensure that liquidity issuesdo not destroy viable firms; and to foster confidence necessary for both private consumption and investment, by setting clear paths and strategies for growth and linking short-term actions and medium-term expectations. Forceful stimulatory fiscal and monetary policies need to be in place, which recognise the need for substantial deficit financing, likely to involve both borrowing and money creation. Responding too rapidly to increasing public debt due to the costs of COVID with overly tight fiscal policies following this rescue period risks choking off recovery and risks plunging economies into larger and deeper recession, with profound economic, health and social consequences.

The recovery should mark the beginnings of a global transformation to strong, sustainable, inclusive and resilient economic development and growth, if we are to overcome poverty, make progress on the SDGs and manage the immense climate risks. The dangers from unmanaged climate change are likely still bigger and longer lasting than those from COVID, immense though these are, and it is therefore wise to choose a path out of the depression focused on investment in the sustainable economies and activities of the future, not only in physical capital, but also in human and natural capital. The short-term stimulus should support economic recovery and avoid high-carbon investments. Investment in traditional approaches and methods in industry and infrastructure, which ramp up fossil-fuel consumption, could lock-in decades of polluting, high-carbon and less productive development. The consequences for the world would be devastating. We must be very clear on the necessity of not going back to pre-pandemic business as usual. We should protect and enhance natural capital to reduce the risk of both future climate change and of pandemics. We must be wary of opportunistic attempts to reinstate dirty industries in the name of recovery of growth; such policies are routes to insecurity and decline. If we follow this path, and do this well, we will strengthen social cohesion within and across nations and in this sense build our social capital, alongside and mutually supporting, the other three capitals.

China’s role in the world is now of a magnitude that makes its actions in the immediate future critical to how the world goes forward, both in the short term and over this century. The world will not emerge strongly and quickly enough from the recession unless China plays a very strong role through its consumption and investment demand. And the commitment of the world to tackling climate change will depend on what China does in the coming months and years. This influence is even greater than is implied by China’s size; it comes also from its technologies, its strategies, and its leadership coming out of the COVID crisis. It is vital that the 14th Five-Year Plan take into account that world context.

Download the full report：From rescue to recovery: towards a post-pandemic sustainable transition for China