Market's herd behavior won't dent China's long-term economic resilience

BEIJING -- Since the outbreak of the novel coronavirus epidemic, capital markets in China and other countries have seen notable fluctuations.

But there's no need to panic. For the Chinese economy, the impact of the disease is only temporary.

The recent ups and downs -- results of short-term herd behavior -- will neither swing the Chinese economy's growth expectations nor reduce its resilience and potential in the long run.

After experiencing an initial decline, the value of some relevant Chinese assets has rebounded; shares in Chinese companies listed in the US stock markets have gone up; offshore and onshore RMB exchange rates have come back to the mark of 1 to 7 against the US dollar; domestic shares have also begun to stabilize and post gains.

These developments can be taken as a signal that the market has moved away from panic and has started to come to its senses.

Various international organizations have also voiced their confidence in China's ability to overcome the virus shock, as they believe that the long-term competitiveness, potential for expansion, and resilience of China's economy will not change, in spite of the epidemic challenge.

The World Bank tweeted on Monday, "The Chinese authorities have policy space to respond & have announced a sizeable injection of liquidity, which should help mitigate the costs to economic growth."

"We are confident that China's economy remains resilient," the International Monetary Fund Managing Director Kristalina Georgieva said in a statement posted on both Twitter and Weibo.

The Chinese economy is resilient, and will remain so because of a cluster of fiscal, monetary, and financial measures Beijing has taken. The central bank and several other departments have said that China will work to maintain reasonable and sufficient liquidity, while beefing up financial support for the anti-virus campaign.

Another reason to believe in the strength of the Chinese economy is that the country has the largest middle-income group of populations in the world, a massive market and huge potential for demand. The epidemic may stem market demand, but only temporarily, with a bounce well anticipated afterwards.

The confidence in a resilient Chinese economy also comes from the country's role in global supply chains.

China is the only country in the world to host all industrial categories of the United Nations industry classification system, with a notable edge in productivity and infrastructure.

As China continues to reform, restructure its economy, and upgrade its industries, it has been climbing up the global industrial, supply, and value chains. The ongoing epidemic cannot change that.

"China's long-term trends of moving toward a more consumption-oriented economy of rising services share in the overall economy and technological upgrade should continue as well," global financial services company UBS said in a research note on Monday.

All in all, China's economic strength and material foundation have enabled the country to secure long-term economic development in the midst of the current public health emergency.

With the raft of measures China has taken to fight off the disease, along with the efforts of the international community, the epidemic will ultimately be defeated and its impact minimized.