THE IMPACT OF

COVID-19 ON
THE ECONOMY
OF CHINA
GROUP: THE DREMA

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 Table Of Contents

Introduction Affected Fields

01. Overview
China Macroeconomic
02. Tourism
Real Estate
Outlook in Covid-19 Ecommerce

China's Policy Response

03. Fiscal Policy
Monetary Policy
04. Conclusion
Lessons
Exchange Rate

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01. Introduction
Timeline THE OVERALL
31/12/19 WHO was informed of cases of pneumonia IMPACT
07/01/20 identify SARS-CoV-2 as the cause of pneumonia
Unemployment
and job loss
11/01/20 its first death caused by the virus.
80 million unemployed
workers by the end of March
SARS-CoV-2 have spread all provinces of
23/01/20 2020 and over 300 million rural
mainland China.
immigrants can’t work due to
the highest rate of new confirmed lockdown
04/02/20
cases (3,887 cases)
Cases: 91,337
the number of new cases per day
06/03/20 had dropped <100 Death: 4,636
08/04/20 Lockdown in Wuhan was officially lifted
08/04/2020
NEW NORMAL
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CHINA MACROECONOMIC
Impact of COVID-19 and China’s
OUTLOOK IN COVID-19 macroeconomy under restoration

China guarded the bottom line and

1 China’s economy transformation 2 met its annual development goals

China's economy shifted from a stage of Enterprises were kept from suspending
high-speed growth to a stage of work and production for no more than
high-quality development. three months

Cyclical slowdown and GDP witnessed a negative growth of 6.8%

structural adjustment in Q1

Urban unemployment rate remained at

The development of the digital economy
"new infrastructure"
The economic growth shifted from
investment driven to consumption driven.
around 6.0%
The economic and social order was restored,
with prices and the financial market remaining
stable, and work resumption taking place in an
orderly manner

Indicators to measure high-quality development: GDP growth,

The economic growth rate in China
regional coordination, improvement of people's livelihood, social in the mid to long term has been
progress and ecological environment
maintained.
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3
The supply recovered faster CHINA MACROECONOMIC
than demand
a steady decline in price growth. CPI, non-food CPI
and core CPI have continued to fall, and the decline of
OUTLOOK IN COVID-19
PPI has expanded again. The problem of insufficient
domestic demand is more prominent.
China’s financial and real estate markets
4 have remained stable
prevents the economy from being affected
by excessive balance-sheet shrinkage.

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CHINA MACROECONOMIC
OUTLOOK IN COVID-19

KEY CHALLENGE
HIGH LEVERAGE:
a medium and long-term challenge for China's economy

Great uncertainties to the international balance of

paymentsYouand
can cross-border
replace the capital
image onflows, and
pressure
the screen with your own work. of the
of degradation to credit assets
financial systems of major economies.
Just right-click on it and select
“Replace
Measures proposed to image”
further increase the
leverage ratio in 2020 (appropriately increasing the
fiscal deficit rate, issuing special treasury bonds and
increasing the scale of special bonds)

China needs to adapt to the slowdown of economic

growth reduce the possibility of structural
imbalance.
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 AFFECTED FIELDS
1. OVERVIEW
1 TOURISM
2. TRENDS

2 REAL ESTATE 1. OVERVIEW

2. RESPONDING

1. OVERVIEW
3 ECOMMERCE
2. RESPONDING
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1. TOURISM OVERVIEW
CHINA TOURISM PRIOR TO COVID-19

Contributing 11% China was the Beijing is one of the

Revenue grew at a
GDP, over 100 fourth most visited leading tourist destinations
strong 13.8%
millions people country by foreign with revenue from
CAGR from
work in tourism and tourists with 65.7M inbound tourism recorded
related areas. 2010-2019 arrivals in 2019 at USD5.16 billion in 2019

Source: WTTC, Statista 2020 Source: www.CEICDATA.com, Ministry of Culture and Tourism 8
 1. TOURISM
IMPACTS OF COVID-19
CNY400B-500B
was the direct loss caused by
shutdown of China’s tourism
industry during the Spring Festival
in 2020

A DECREASE OF
MORE THAN 55%
in the absolute economic
contribution of tourism in
China, from USD 1.67T in 2019
to USD 745.5B in 2020

OVER 450 MILLION

TOURIST REVENUE
was wiped out due to the Tourism revenue during Chinese New Year in China
outbreak of Covid-19 2017-2021
Published by C. Textor, Mar 3, 2021
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1. TOURISM IMPACTS OF COVID 19

DOMESTIC TOURISM INTERNATIONAL TOURISM

The CTA predicted in February that domestic visits would

decline by 56% in Q1 and 15% in the whole year, and
revenue by 69% and 20.6% respectively.
The first half of the year saw over 1.16B domestic visits and
640 billion yuan in tourism revenue, down 62% and 77%
year-on-year, respectively
Outbound tourism was hit hard by the
pandemic. Hong Kong and Macau which
were previously Chinese tourists’ top
destinations, respectively recorded drops of
93.8% and 83% in Chinese tourists in 2020

Beijing suffered the most staggering losses

specifically in inbound tourism where revenue
dropped from USD 5.16B in 2019 to just USD
480M in 2020.

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 1. TOURISM TRENDS
Domestic tourism Virtual and International
boom as Covid-19 livestreaming travel possible in
fears ease tours thrive years to come

- Show a "W-shaped" recovery Outdoor activities →

demand for virtual tours → an international health
- Domestic tourism recovered to
raise the demand for certificate allows authorities to
nearly 80% of last year's level
domestic traveling in the verify tourists’ personal health
- It's expected that a total of 4.1
future conditions → provide Chinese
billion domestic trips will be
citizens a guarantee when
made in China in 2021 – up 42%
traveling abroad.
from 2020.

Screen shot of the live streaming of the Potala Palace, a

landmark in southwest China's Tibet Autonomous Region. 11
Source: China Ministry of Culture and Tourism
2. REAL ESTATE
OVERVIEW

Real estate sector in China's GDP from 7/2018 to 1/2021

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2. REAL ESTATE
OVERVIEW
Investment volume was affected seriously in most countries. CRE Investment in
China plunged about 32% in Q1 2020.

Mainland
China
*CRE: Commercial Real Estate SOURCE: CBRE Asia Pacific Research
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2. REAL ESTATE RESPONDING
1 TRANSACTION VOLUME

China’s property market is highly

concentrated, with the top 200 developers
holding the major market share and sitting
on huge inventories. These developers are
currently under a lot of pressure, having
seen little in the way of sales in January and
February. They must produce more sales
from now through June to jump-start the
market, and pricing will be a major factor in
that. For the year, therefore, developers
focus on transaction volumes, generally
resulting in low-level prices

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2. REAL ESTATE RESPONDING
2 OFFICE AND RETAIL BASE RENT

Net absorption fell into

negative territory across
several key property
sectors in Q1 2020, with
office and retail base
rents dipping by 1-3% in
most markets.

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 15
2. REAL ESTATE RESPONDING
3 SELLING PROPERTIES ONLINE

Developers quickly adapted and started selling online in February, 2020. Sales only
declined 35% YoY and, once the lockdown was lifted in end-March, property sales quickly
rebounded to -12% (YoY) in March and -3% in April, before turning positive in May.
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3. ECOMMERCE OVERVIEW the Alibaba Group,
2003 the company that
Decreased valuations and increased market fluidity are a Jack Ma founded,
common occurrence in most sectors. But in times where established Taobao
many areas of business are struggling, there are
opportunities for others to flourish. One area of business 2008 Beijing Olympics
that is helping economies stay afloat is eCommerce Game -> Ecommerce
booming

China surpassed the

2013 US and hosted the
largest online retail
market in the world

.
With the convenience, safety,
and friendly user experience of
e-commerce having improved
tremendously

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3. ECOMMERCE RESPONDING TRENDS

Comparison
Brick-and-mortar sales 18,6 %
Ecommerce 27,5 %

Impressive year-on-year increases in several categories.

Physical commodities Agriculture products

5.9% 31%
Fresh food Household necessities
China is leading the market of Ecommerce,
70% 40% even in the challenging time of Covid 19

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 3. ECOMMERCE RESPONDING FACTORS
1) Prioritized the health of their customers
Alibaba called on manufacturing partners to reopen
plants in over fifty-eight cities to increase the
production of N95 masks and other medical supplies.

2) Allowed easier access to medical services by

promoting telemedicine and creating COVID-19 test
booking platforms;In 2019, the government removed
its ban on online sales of prescription drugs and
allowed telemedicine services, leading to the growth
of JD Health, WeDoctor by Tencent, and Dingxiang
Doctor.

3) Online grocery shopping surged thanks to

lockdowns: In this outbreak, the majority of the people
stay at home most of the time => drive up the
demands for online shopping to the data of the
National Bureau of Statistics, online retail sales growth
rate in the past five years was 33%, and online retail
sales contributed 23% to the total retail sales of
consumer goods in 2020,
Households remained skittish for many months after
the virus ceased to be a widespread danger, and this
hesitancy toward social activities helped sustain the
ecommerce boost.
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3. CHINAPOLICY SITUATION
RESPONSE COVID-19
City lockdown Social distancing
Economy COMMODITY EXCHANGE
Aggregate
contracted by
demand
6.8% (Q1 2020) Extension of Lunar Quarantine
New Year holidays period
FISCAL POLICY
INCOME

MONETARY POLICY

How it impact on economy?

Implement policies Money supply Interest rate
Support individuals & enterprises Aggregate demand
Stimulate economic activities Drive economic growth

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 FISCAL POLICY

1. Increased spending on epidemic

prevention and control
2. Production of
medical equipment

3. Accelerated disbursement of
unemployment insurance and
extension to migrant workers
4. Tax relief and waived social
security contributions

5. Additional public
investment

Expansionary fiscal policy in 2020: estimated RMB 4.9 trillion (or 4.7 percent of GDP)
 Increased spending on epidemic prevention and control
Total expenditure
Pay for the medical expenses

15,2 %
Organised the Case Identification
and Large-Scale Surveillance

300 Million
Emergency investment of Yuan for key
hospitals in Wuhan: purchase important
medical equipment and provide facility
guarantee
> 1,800 teams of epidemiologists
Installing infrared thermometers
in airports, railway stations,...
Set up thousands of health and
quarantine stations

Launched massive disinfection

campaigns in public facilities

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 Production of medical equipment
Expand production of medical Greatly improved the production
equipment while maintaining capacity of other materials and
stable prices medical treatment equipment is

Investing in new high Scale up Chinese production of some

technology tracking systems key hospital supplies
 ACCELERATED DISBURSEMENT OF UNEMPLOYMENT
INSURANCE AND EXTENSION TO MIGRANT WORKERS

Put 14 million immigrant

cut social insurance payments
workers to a vocational
by RMB 1 trillion
training over the next 2
to incentivize companies
years (2020-2021).
to retain employees.
Rural immigrants
Newly resettled in cities or returned
hometown
Poor laborers

Accelerate disbursement
launched campaign
for up to 6 months with 48 universities
to help colleges in Hubei
unemployment social province find employment
insurance benefits;
extended to migrant workers.
 Tax relief and waived social security contributions
Small and Medium
Hubei: Exempt tax
enterprises: Exemption
Social security
Individually owned
contribute
business and small
company with thin Large firms: Reduced by 50%
profit margin
China: Reduce VAT
collection rate to 1%

Exempt Income
VAT
tax payment

Firms in Accommodation,
Catering, Personal service:
Medical workers Exempt VAT

Firms engage in production

of supplies for Coronavirus
protection: Refund/ carry
forward excess input VAT
 Additional public investment

➔ Built the 1,000-bed

Huoshenshan Hospital
and Leishenshan Hospital

➔ Opened another 1,500

beds in matter of days

Significant increase: up to 53.93

Billion Yuan in 2020
(367% compare to the previous
year)
 MONETARY POLICY

DEFINITION Contractionary monetary policy

Is used to decrease the amount of money
Monetary policy is the macroeconomic
circulating throughout the economy
policy laid down by the central bank.

It involves management of money TWO MAIN TYPES

supply and interest rate and is the
Expansionary monetary policy:
demand side economic policy used by
Is used to increase the amount of money
the government of a country
circulating throughout the economy
=> China mainly uses in COVID-19 pandemic

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 MONETARY POLICY
MONEY SUPPLY

On 13 March the
Liquidity injection By 12 March central bank cut
into the banking 2021, the its targeted
system via open banking sector reserve
market operations had provided requirement ratio
(reverse repos and 1.4 trillion by 0.5 to 1
medium-term yuan of credit percentage
lending facilities) to the points, which
economy released 550
billion yuan of
long-term funds.

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 MONETARY POLICY

To support manufacturers RMB 400 BILLION

of medical supplies and A zero-interest
daily necessities, SME “funding-for-lending” scheme
firms and the agricultural
sector, government
expand re-lending and
ENTERPRISES
rediscounting facilities by
RMB 1.8 TRILLION; and RMB 40 BILLION
reduce their interest rate Subsidizing 1
50bps (re-lending percent of loan
facilities), 25 bps principles for the
rediscounting facilities) banks to extend
payment holidays for
eligible loans

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 MONETARY POLICY
ENTERPRISES
RMB 350 billion
policy banks’ credit
extension to micro- and
small enterprises
Support bond issuance
by financial institutions to
finance SME lending
Encouraging lending to
SMEs, raising the target for
large banks’ lending growth
to MSEs from 30 percent to
40 percent
Additional financing support
for corporates via increased
bond issuance by corporates,
including relaxing rules on
insurers for bond investments
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 MONETARY POLICY
INDIVIDUALS
Easing of housing policies by local
governments
Delay of loan payments (extended to end
March 2021), eased loan size restrictions for
online loans
Increased support for credit guarantees
EXCHANGE RATE
On 27th May 2020, the renminbi lost 0.7%
of its value (the lowest level since 2008)
A weak yuan will help Chinese goods
become cheaper when exported, gaining
a competitive advantage over domestic
goods.
Increase export value and decrease
import value
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CONCLUSION "China's GDP growth rebounded rapidly in the second quarter,
thanks to the successful epidemic control, orderly resumption of
work and production, and supportive government policies.”

THESE MACRO POLICIES HAVE DRIVEN

Pent-up demand A catch-up in

Aggregate production
demand increase

Services replace
Surge in medical industry as the
product exports growth driver in
short-term

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4. CONCLUSION
The COVID-19 disease has had different effects on different industries in China.
However, there are signs of recovery thanks to response policies.

Moreover, the Government has issued many policies to help small and medium
enterprises so that they can survive and go into normal production after the
pandemic => reduce the unemployment.

L A responsible and transparent attitude toward epidemic control work is the

primary requirement for officials, which will boost national confidence to battle
E COVID-19.
S
S Comprehensive, Thorough, and Rigorous Intervention Measures
O
N Plan for the future
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 REFERENCES
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● Derrick Bryson Taylor, (2021). “A Timeline of the Coronavirus Pandemic”, The New York Times.
● Doreen Saik , (2020, October). “China Property: Recovery From the COVID-19 Lockdown”, Neuberger
Berman.
● International Monetary Fund, (2020). “Policy Responses to COVID 19”, International Monetary Fund.
● Javier C. Hernández, (2020). “Coronavirus Lockdowns Torment an Army of Poor Migrant Workers in
China”, The New York Times
● JianXiong Xue,(2020). ”COVID-19’s Impact on China’s Real Estate”, GLG Insights.
● Jiatong Nan, (2020). “Under Covid-19, Challenges and Opportunities for Hospitality and Tourism Industry
of China”, Journal of Tourism & Hospitality.
● Kevin Suns, (2020). “TRD Insights: Commercial real estate investment in Asia hit hard by Covid-19”, The
Real Deal.
● KPMG China, (2020). “Government and institution measures in response to COVID-19”, KPMG China.
● Larry Brain, (2020). “Domestic tourism in China suffers staggering losses", Tourism review news.
● Savills team, (2020). ”Coping with COVID-19 – China Residential”, Savills Research.
● Xiaoguang Liu,Yuanchun Liu &Yan Yan, (2020). “China macroeconomic report 2020: China’s
macroeconomy is on the rebound under the impact of COVID-19”, Taylor & Francis Online.
● Yi Huang, Chen Lin, Pengfei Wang, Zhiwei Xu, (2020). “Saving China from the coronavirus and economic
meltdown: Experiences and lessons”, VOXEU.
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THANK YOU
THE DREMA TEAM
BUI MAI NY
NGUYEN NGOC NHA QUYNH
NGUYEN KHANH TOAN
BUI THU UYEN
HUYNH QUOC VIET
TRAT THI MY XUYEN
TRUONG BOI NHI
CAO NGUYEN MINH THUY

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