CGTN: (Gong Jiong) Full control of the epidemic is the primary prerequisite for economic recovery

(Source: CGTN 2020-03-17)

Host: The People's Bank of China began to implement targeted reserve requirement ratio cuts for inclusive finance on Monday (March 16). This is the second reserve requirement ratio cut in 2020 and will release a total of 550 billion yuan in long-term funds. At the same time, a medium-term lending facility (MLF) operation of 100 billion yuan was carried out. What information can we glean from current financial policy? What does such a policy mean for the Chinese economy? Now that people have begun to resume work and production, what impact will these policies have on China's economic development prospects? It's an honor to have you here todayProfessor Gong Jiong from the w88 casinoTo discuss these topics further. Professor Gong, do you think such a policy will help small and medium-sized enterprises that are already short of funds or almost at a standstill?

Gong Jiong: It should be said that more credit entering the market will definitely benefit some small and medium-sized enterprises. But I personally think that the main problem at the moment is that people have not gone out to shop and consume, so the economy has not recovered yet. Relevant financial policies are not a means to fight the epidemic. What we need to do first is to control the epidemic. In my opinion this is the first priority.

Host: Do you think China's manufacturing industry will fully recover? Is it possible to recoup what we lost financially in the first two months of this year?

Gong Jiong: Let us first review the past two months. The added value of my country's industrial enterprises above designated size fell by 13.5% year-on-year, and the national service industry production index fell by 13% year-on-year. Therefore, we are actually talking about a decline of about 13% in GDP. Wuhan was locked down on January 23, so in fact we were not significantly affected in the first 20 days of January. Taking this factor into account, through my personal calculations, the decline in GDP in the worst case scenario is about 22%. But I think the worst is over and things are looking up. We must remember how many lives the economic sacrifices have saved and how many people have been saved from suffering. We can afford the 22% loss of GDP, and we will recover. With the resumption of work and production starting in March, everything will get better. Although we will not quickly recover to the level before the epidemic, we can always work hard on the economy and GDP, and precious lives cannot be lost again.

Host: Policymakers around the world, including China, seem to be in a dilemma. That is, should we use the means of injecting large amounts of liquidity into the market to boost economic projects and promote investment and consumption?

Gong Jiong: I think most financial policies and fiscal policies should work together. In fact, I know that some local governments in China have released plans for the next step of infrastructure construction. The infrastructure here is not just roads, railways, etc., but more about improving China's "soft" infrastructure, which will definitely help the economy. What I want to say is that we have made great efforts, but cases of new coronary pneumonia continue to appear in the country. We must not negate our previous work because of this, but we should continue to persevere. Just imagine, if we had not done all this, or had adopted the so-called "herd immunity" method similar to what the UK is considering, how much harm would this have caused to the economy of China and the world? How many people will lose their lives? There is no doubt in my mind that we made the right decision and we have to stick to it. We will continue to fight this virus, block by block, factory by factory, until the virus is eradicated and a vaccine and treatment are developed. There are no shortcuts to these tasks, and this is what we must undertake during this epidemic.

Host:If there is a gap in interest rates and there are expected risks, investors will follow the trend. Some international hot money may inevitably flow into China. Do you think this speculation is accurate?

Gong Jiong: This situation usually happens. Not only international hot money will enter China, but Chinese funds will also enter other countries. In my opinion, the opening up of monetary funds is something that China will do at a specific stage. We will try it. If it works, we will push it further. If it doesn't, we will stop and think about it. We have taken some measures, such as many trades have been settled in RMB, especially with countries such as Russia. In addition, more and more countries use the RMB as a reserve currency. At this moment, we should not complicate things, but should fight the epidemic, revive the economy, and encourage consumption. Only then will we be able to talk about currency issues.

Host:People often say, "There is always darkness before the dawn." What kind of darkness do you think we will experience?

Gong Jiong: This is a tough question. I think this probability depends on the severity of the epidemic. We're already in an economic recession and it's not going to end anytime soon, I think it's still at least two months away. The U.S. and Europe are largely repeating what we've experienced over the past two months, so the economy won't be recovering any time soon. If we defeat the epidemic soon, the economy will gradually pick up, otherwise it will be a long-term recession, or even a global recession.

(Text organized by Zhang Yimeng)

Original video link attached:

https://s-url.cgtn.com/p/BCIGJEA?from=groupmessage&isappinstalled=0