Author: Cai Fang, CASS

The ongoing coronavirus epidemic has hit the Chinese economy dramatically because the major measure that countries have taken to contain its spread is to block the movement of people. This reduces labour migration, household consumption, travel and tourism, and operation of shops and factories. But it is likely to generate negative economic impacts only for one or two quarters and not the whole year.

This year is of particular significance for China. It is the deadline for both the completion of building a comprehensive well-off society and the 13th Five-Year Plan. The three most symbolic objectives scheduled to be achieved by the end of 2020 are: doubling GDP based on its 2010 volume; doubling average household income compared to its 2010 level; and completely eliminating rural poverty.

Whether these objectives are achieved will be indicative of the extent that the epidemic has impeded China’s long-term development and how much the world can rely on China’s growth, as China contributed over 40 per cent to global growth in 2019.

It is too early to assess precisely China’s economic losses and damage to people’s livelihood with the epidemic yet to be contained and economic activities still on hold. But based on emerging trends of the epidemic and what China had already done by the end of 2019 towards accomplishing the goals it has set, China can be confident in meeting them by the end of 2020.

The first goal is to double China’s GDP based over the base of 2010. China’s GDP was 41.2 trillion RMB (US$5.9 trillion) in 2010 and it is expected to reach 82.4 trillion RMB (US$11.8 trillion) this year. China will need a growth rate between 5.54 and 5.63 per cent to realise its goal of doubling GDP in 2020.

The underlying trend of China’s growth will determine whether China will reach its target. Since China’s working age population is shrinking, causing the population dependency ratio to rise, a growth slowdown is expected. The year 2019 saw the lowest GDP growth post-1990, and it is expected to slump further in 2020 and beyond. Before the coronavirus outbreak, economists expected a growth rate of 5.8 to 6 per cent for 2020.

Economists have different estimates of the impacts of the coronavirus epidemic on China’s growth rate in 2020. The estimates range between 5.5–5.7 per cent depending on assumptions about whether the coronavirus will be contained, allowing economic activities to resume, by the end of the first quarter or the second quarter. But both scenarios will allow China to accomplish its goal of doubling its 2010 GDP.

The second goal is to double household income. Average disposable income of rural and urban households was 12,520 RMB (US$1800) in 2010 and is expected to increase to 26,795 RMB (US$3600) at constant prices by the end of 2020. Thanks to the inflation of ordinary workers’ wages as a result of a labour shortage and minimum wage rise, household income has rapidly increased at an annual rate of 7.79 per cent. As a result, household income increased to 24,582 RMB (US$3500) in real terms in 2019. The objective of doubling household income can be easily achieved with a growth rate of just 1.9 per cent this year.

The third goal is eliminating rural poverty. The poverty line is defined at 2300 RMB (US$330) at 2011 prices with expected yearly adjustment based on price index and other considerations. In 2012, there were 99 million rural poor — population with income under 2673 RMB (US$383) per person per year.

Between 2012–2019, the average number of people lifted out of poverty each year was over 13 million, leaving only 5.5 million to be lifted out of poverty in 2020. Fulfilling the goal of reduction in poverty by the end of 2020 can be expected.

Even though the coronavirus epidemic will generate short-term economic pain, China’s long-term development and the achievement of the goals outlined in its 13th Five-Year Plan by the end of 2020 are still on track.

Cai Fang is Vice President at the Chinese Academy of Social Sciences (CASS).

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.