Experts say epidemic's impact on trade is temporary

By Zhang Jiaqi
0 Comment(s)Print E-mail, February 19, 2020
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The impacts of the novel coronavirus pneumonia outbreak on China's trade will be temporary, according to experts at two of China's economic institutions.

Liu Yingkui, director of the International Investment Research Department of the Academy of China Council for the Promotion of International Trade, told that this is because of China's trade heft and its irreplaceable role in the global market.

Though having confidence in China's long-term economic performance, Liu noted various immediate impacts the epidemic has on trade. He listed labor shortage, interrupted supply chain, as well as impeded trade negotiations, fairs, and international travel, among others.

On Jan. 30, the World Health Organization (WHO) declared the novel coronavirus outbreak in China a Public Health Emergency of International Concern, as certain countries started to close borders and restrict trade to China, and as airlines halted some flights. According to the International Air Transport Association, more than 50 countries and regions have imposed travel restrictions on China and tightened visa requirements.

Hong Junjie, head of the School of International Trade and Economics at the University of International Business and Economics, told that the short-term impacts are mainly on the supply side and the movement of people between countries. He said he expects to see a "compensatory" rebound of trade after the outbreak ends.

However, Hong said the rebound may not be as strong as the one after the 2003 SARS outbreak, because China's high trade volume and its core position in the global value chain today allows not as much room for the trade to surge as in 2003, two years after China's WTO entry.

During the SARS outbreak, the growth of China's foreign trade slowed significantly in the second quarter, but grew rapidly in the second half of the year after the outbreak ended. China's total volume of import and export in 2003 increased 37.1% over the previous year.

"Different from the 2003 SARS outbreak, while going all-out with more stringent measures to combat the virus, more attention has been paid to supporting companies this time," Liu said, adding that the impact will not last long, especially when the government and various organizations are making swift and effective responses to support businesses.

So far, the government has taken measures including promoting paperless customs clearance, improving services of export rebates, and increasing support for financial lending.

To address the dilemma of trade companies unable to perform international trade contracts as scheduled due to the epidemic, the China Council for the Promotion of International Trade (CCPIT) opened online services to provide them with proof of force majeure to the companies. Otherwise, a default would cause financial loss and credibility crisis of a company, Liu said.

The CCPIT is also sharing trade information with the companies after communicating with chambers of commerce, business associations, and companies in other countries.

China's Ministry of Commerce said on Feb. 11 that it will closely monitor the impact of the novel coronavirus outbreak on foreign trade and actively help foreign trade firms to resume operations.

As the government takes actions amid the epidemic, Liu said there are opportunities to push forward fiscal, tax, and financial reforms, such as lowering taxes and piloting measures for low- or zero-interest loans, helping to get small and micro enterprises more access to convenient financial services.

Hong also said separately that he sees opportunities for companies to increase their degree of digitalization and IT application, a move that will be conducive to the long-term development of the country's trade.

With companies gradually resuming work, Hong said it not only helps to guarantee the supplies for epidemic prevention and control, but also is of great significance to the economy.

He suggested the government take appropriate measures to help companies in less affected areas to resume work as soon as possible, while tackling the epidemic with vigorous efforts.

"But various localities should adopt science-based policies suitable for local conditions, instead of taking a one-size-fits-all approach," Hong said, adding that even a small county may face a different situation from the neighboring one.

Liu said his advice for the anticipated trade rebound is for trade companies to maintain contact with clients and business partners while weathering this difficult time. He said the companies should take advantage of well-developed internet capabilities to facilitate their effort to maintain contact with trade partners.

The government should strike a balance between its epidemic prevention and control efforts and helping businesses to resume work and production, Liu said. It should also offer guidance to the companies that are resuming work on ways to keep the staff healthy and safe, he added.

"China is much stronger than it was before," Liu said, adding that he looks forward to seeing trade to go back to normal, and the order in life and production to be restored as soon as possible.

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