One of China’s leading economists says that the COVID-19 pandemic and its related impacts will not compel foreign companies to withdraw from the Chinese market.
In an interview with Diyi Caijing Zhu Min (朱民), deputy manager of the International Monetary Fund (IMF) and former deputy governor of the Chinese central bank, said that the COVID-19 pandemic has created “enduring damage” to the global economy, leading to a projected 4.4% decline in global GDP for 2020.
“We forecast that the whole world will probably see an enduring loss of USD$8 – 9 trillion in GDP – these losses already can’t be recovered,” said Zhu.
While COVID-19 has heightened Sino-US tensions and stirred concerns about the prospects of a new Cold War, Zhu believes that “international companies cannot possibly abandon the Chinese market.”
“The Chinese market is too strong and its growth is too vigorous – China’s demand for goods has already made it the world’s largest market,” sad Zhu.
“Our surveys indicate that at present the market share for many international companies in China already exceeds their market share at home, which means that profit sources from the Chinese market are increasing as a share of the global total.
“The last several surveys indicate that the majority of overseas companies will continue to remain in China, although the distribution of science and technology and technological research centres could also change – this cannot be underestimated.
“China has recently vigorously stressed continued improvements to the commercial environment, protection of intellectual property rights and continued opening. I believe that this is extremely important to the current re-positioning of global industry chains.”
Zhu also warns that small and medium-sized enterprises are set to weather harsh times as a result of the economic impacts of COVID-19.
“The peak of SME bankruptcies has yet to arrive, and [we] calculated that it will be from the end of this year to the first half of next year,” said Zhu.
“SME’s have their weaknesses, and inadequate liquid funds are a problem. The market is constrained, and when the overall market experiences liquidity difficulties SME’s find it difficult to respond.”
