ECO1207 (JAN2023)

ASSIGNMENT A

GROUP 8

YAP YI HAN (I22023061) ECO1207 (1PBZ1)

GAN WAI JING (I22023215) ECO1207 (1PBZ1)

AOW JIA YI (I22022619) ECO1207 (1PBZ1)

ANJELINAA DE SILVA A/P CYRIL GUNAPALA (I22023414) ECO1207

(1PBZ1)
Coronavirus: China to pump billions into economy amid growth fears

Article: Is There A Secret Growth Hormone Added To China's Economy?

China is to pump a net 150 billion yuan ($22 billion USD) into its economy on
Monday to help protect it from the impact of the coronavirus outbreak. China's
central bank said the move would ensure there was enough liquidity in the banking
system and help provide a stable currency market. The virus has so far infected
more than 14,000 people and claimed 305 lives - all but one inside China. The
money will be deployed when China's markets reopen on Monday. It comes after a
holiday to mark the Lunar New Year was extended in the hope of reducing the
spread of the virus.

Financial regulators in the country have said they believe the impact on China's
already slowing economy will be "short term". But analysts say the impact of the
virus - which has left major cities in full or partial lockdown - could harm growth if it
lasts for a prolonged period. China's travel and tourism sectors have already taken a
hit over an unusually quiet Spring Festival break, while cinemas were forced to close
to try to contain the virus. Meanwhile, numerous factories have suspended
production while companies have instructed employees to work from home Foxconn,
Toyota, Starbucks, McDonald's and Volkswagen are just a few of the corporate
giants to have paused operations or shuttered outlets across China.

The country saw economic growth of 6.1% last year - the slowest in around three
decades, in part because of its prolonged trade war with the US. A partial trade deal
easing tensions was struck earlier this month, but most tariffs remain in place.
Economist George Magnus, associate at Oxford University's China Centre, told the
BBC the size of central bank's injection reflected "policymakers' concerns about the
state of the economy". "The coronavirus repercussions on the economy mark the
latest in a series of setbacks in the economy over the past year, including a handful
of bank failures sparking contagion fears, forcing the central bank to become ever
more generous with the provision of liquidity to markets." In total, the central bank
will inject 1.2 trillion yuan into the financial system on Monday - the largest single
day addition on record.
i) Regardless of above article, explain the policies and vision that made
China’s economy a successful one.

China's economy has grown due to several factors, including significant investments
in infrastructure, an emphasis on exporting goods, and a government-led
development strategy that combines market-oriented reforms and industrial policies.
The government has invested heavily in infrastructure, including transportation,
communication, and energy projects, to connect regions and promote trade and
commerce.

In addition, China's manufacturing industry has become a global leader, producing

goods for export and attracting foreign investment, creating jobs, and reducing
poverty. The government's approach of combining market-oriented reforms and
industrial policies has led to innovation and helped China become a leader in high-
tech and renewable energy.

However, China's economy is vulnerable to external economic shocks due to its

reliance on exports. The nation is moving towards a more consumer-oriented growth
model that depends less on exports and more on domestic spending to reduce this
risk.

China's long-term vision for economic development has guided policy decisions and
ensured sustained growth and social stability. Despite challenges and risks, strong
government leadership, innovation, and reform continue to drive growth and shape
China's economic future.

ii) To what extent do you think the recent coronavirus attack would hinder the
economic growth of China? Analyze them. And also explain how China
handled this situation.

Since December 2019, a number of cases of pneumonia of unknown cause have

been reported in Wuhan, Hubei province, and have quickly spread to other provinces
and cities, with patients suffering from fever, fatigue, dry cough, and breathing
difficulties. On January 14, 2020, the World Health Organization (WHO) officially
named the virus that causes this bout of pneumonia 2019-nCoV.

China's gross domestic product fell 6.8 percent in the first quarter of 2020 from a
year earlier, with sharp declines in industrial production, retail sales, and investment.
The Labour market has been hit hard, with the national surveyed urban
unemployment rate soaring to 6.2% in February 2020, a full percentage point higher
than its year-end 2019 value. Cooling domestic demand and shorter working hours
have further squeezed incomes. Therefore, the Chinese government has quickly
adopted a series of strong financial and fiscal measures to reduce the short-term
impact of the epidemic on the economy. In particular, it pays attention to people's
livelihoods and small and medium-sized enterprises facing difficulties due to the
epidemic, to prevent enterprises from breaking the capital chain or experiencing
difficulties in continuous operation.

China's economy is mainly derived from real estate, the service industry, agriculture,
tourism, and so on. First of all, since the COVID-19 pandemic has had a huge impact
on China's tourism industry, it has been hit hard as the pandemic has spread across
the globe, as people fear being infected and follow domestic and foreign travel
restrictions. The lockdown measures in the epidemic areas of mainland China refer
to the restrictions on the entry and exit of people implemented by the central
government of the People's Republic of China from January 23, 2020, to January 8,
2023, in the face of the 2019 outbreak of the coronavirus disease (COVID-19).In
China, tourism is an important economic source, so the impact of the pandemic on
the industry has been severe. Key indicators of tourism, such as the number of
domestic and foreign tourists and tourist spending, have plummeted. Tourist
attractions have closed, hotel and restaurant sales have plummeted and staff has
lost their jobs. However, with the epidemic under control, China's tourism industry is
gradually recovering. Tourist attractions gradually reopened and the number of
visitors began to increase gradually. At the same time, the Chinese government has
taken some measures to support the recovery of the industry, such as introducing
preferential policies for domestic tourism. Overall, the COVID-19 pandemic has had
a severe impact on China's tourism industry

In addition, the COVID-19 epidemic has had a certain impact on China's agriculture.
As the pandemic spreads, Chinese farmers are facing a host of challenges, including
labor shortages, transportation and sales barriers, and declining consumer demand.
The pandemic has prevented farmers from accessing urban processing plants in
time, resulting in delays in the harvesting and processing of crops. Farmers also face
losses because they cannot get their products to market. In addition, sales of
agricultural products have been affected by the decline in consumer demand.
However, the Chinese government has taken some measures to support agriculture
to mitigate the impact of the pandemic. For example, the government has provided
loans and tax breaks to help farmers through difficulties. In addition, the government
has taken measures to ensure the supply and transportation of agricultural products
so that farmers can sell their produce. Overall, the COVID-19 pandemic has had
some impact on China's agriculture, but the government's support and response
measures have allowed agriculture to continue to function and paved the way for
future development.

In addition, the service industry is also one of the main sources of China's economy.
The pandemic has had a huge impact on the food service industry. Therefore, some
catering industries can reduce some losses through food delivery services during the
epidemic. Under the impact of the epidemic, the restaurant industry lost about 723.7
billion yuan in three months. In the meantime, in order to reduce the operating costs
of key service enterprises, the Chinese government has allowed service enterprises
to extend the payment period of the five social insurance and one fund according to
the development of the epidemic. Not only that but also a combination of rent relief
and government subsidies to reduce the rental costs of service enterprises. The
rental cost of service enterprises will directly affect their survival. Rent waivers and
government subsidies can be two ways to solve this problem. Nevertheless, the
Chinese government has taken a series of measures to help the service industry
weather the difficulties, such as providing fiscal subsidies and loans, reducing taxes
and burdens, and improving consumer confidence. The service industry is gradually
recovering with the gradual control of the epidemic.

In conclusion, while the COVID-19 pandemic has significantly impacted China's

economy, the country has been able to respond effectively and support its economy
through monetary and fiscal measures. As a result, China's economy has been able
to recover more quickly than many other countries and is well-positioned for future
growth.
iii) We have studied in economic textbooks that economic systems such as
capitalist and socialist are used to overcome basic economic problems
encountered by a country. Is China having market economy or socialist
economy? Explain. Reason out your answer.

China uses the socialist economy as its economic system and economic growth
model. China is regarded as having a socialist economy since the government still
exerts considerable influence over private businesses. In China, there are some
privately owned businesses; not everything is owned by the government. However,
with only one party in charge, the government has the capacity to drastically alter the
course of the economy with the wave of a pen. As a result of their dependence on
the government, many businesses cannot predict the future with any degree of
certainty. Due to this outlook, many people believe China has a socialist economy
rather than a capitalist one. The Marxist framework of historical materialism serves
as the foundation for the economic reform towards a socialist market economy. The
CCP leadership and then-Chairman Deng Xiaoping rejected the earlier Maoist
emphasis on culture and political agency as the driving forces behind economic
progress in the late 1970s and began to place a greater emphasis on the
advancement of the material productive forces as the fundamental and essential
prerequisite for creating an advanced socialist society. Market reforms were viewed
as an essential step in advancing the productive forces of society and being
commensurate with China's level of development. This brought Chinese policy in line
with a more traditional Marxist viewpoint, according to which a fully developed
socialist planned economy can only emerge after a market economy has served its
historical purpose and gradually transforms into a planned economy, propelled by
technological advancements that make economic planning possible and,
consequently, lessen the need for market relations.

The socialist market economy is viewed by the CCP as a form of early socialism
where a variety of non-public forms of ownership coexist with public ownership.
Despite the existence of private capitalists and entrepreneurs alongside public and
communal enterprise, the CCP believes that China is not a capitalist nation since the
party still has control over the country's course of socialist development. Market
socialists consider the market as an essential component of socialism because they
feel that economic planning is impractical, unattractive, or ineffectual, whereas
proponents of the socialist market economy see markets as a transitory stage on the
way to a fully planned economy.

Nowadays, China has a mixed economy that combines aspects of capitalism and
socialism. Since the late 1970s, the Chinese government has implemented a number
of economic changes that have moved the nation from a centrally planned economy
to one that is more focused on the market.

The Chinese model allows for private company and foreign investment in many
sectors while maintaining a major state involvement in the economy, including
ownership of important industries like energy and heavy manufacturing.
Furthermore, the state also establishes economic objectives and policies, regulates
the financial industry, and offers its inhabitants safety nets like healthcare and
pension benefits.

China has recently grown to be one of the largest economies in the world, with a
middle class that is fast expanding and a thriving private sector but it still has
problems with things like wealth inequality, environmental damage, and switching to
a more sustainable growth paradigm.

In a nutshell, China is transitioning to a market-oriented system, but it still retains

some socialist characteristics, making it difficult to label its economy as either purely
market- or socialist-oriented. The Chinese model is distinctive and has changed over
time to address the nation's particular economic demands and difficulties.
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Is China a Socialist Country? 2023. (n.d.). https://worldpopulationreview.com/country-

rankings/is-china-a-socialist-country

Stevenson-Yang, A. (2021, August 15). Is China Really Socialist? Forbes.

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socialist/?sh=fcb1e6fd0ecf

Socialist Economies: How China, Cuba, and North Korea Work. (2021, May 18).

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