Note on the author: Lin Yifu (林毅夫) is a prominent Chinese economist. According to his entry in Baidu Baike (the Chinese version of Wikipedia), he is 68 years old and was born in Taiwan. He has an unusual background. He did undergraduate and postgraduate studies at Taiwan universities and then became a captain in the Taiwan Army. In 1978 he was posted to a guard base on Taiwan’s Kinmen (Quemoy) Islands just off the coast of mainland China. The following May he swam across to the mainland and has been based there ever since. After obtaining BA and Master’s degrees in Economics at Beijing University, he went on to the University of Chicago where he obtained a PhD in Agricultural Economics under the supervision of Nobel Prize winner Theodore Schultz. He did post-doctoral studies at Yale University before completing his studies and returning to China aged 35. Since that time he has held a number of different posts in the Chinese government, at Beijing University, the World Bank, and the All-China Federation of Industry and Commerce. He is currently a member of the Standing Committee of the Chinese People’s Political Conference and the deputy head of its Economics Committee. In 2002 a Taiwan Court charged Lin Yifu with defecting to ‘the enemy’ and issued an arrest warrant, saying that if he was tried and convicted he could be sentenced to death. He is reported to have said at the time: “I am willing to bear a cross for the revival of the Chinese Nation, but I hope that this misfortune of history can soon end.” Baidu Baike does not go into the reasons for Lin Yifu’s decision to leave Taiwan in the first place.
Link to the original article on the Aisixiang website: http://www.aisixiang.com/data/121176.html
Lin Yifu’s article was published on the Aisixiang website on 6th May 2020. It is particularly interesting because he predicts the Covid-19 pandemic will have a more serious impact in the medium term on economies in the rest of the world, and the advanced western countries in particular, than it will have in China. At the same time, he recommends more spending by the Chinese government to stimulate the economy as it recovers from the extensive shutdowns between mid January and early March.
Lin Yifu starts his article by briefly outlining the course of the pandemic up to the time of writing. He states that the epidemic reached its ‘closing phase’ in China during March and that China was able to provide its valuable experience of fighting the virus, plus a window of time, to help other countries to prepare their own defences. The great majority of other countries, however, did not pay sufficient attention to the threat and failed to adopt competent measures to tackle the virus in advance of it spreading rapidly around the world.
Lin says that the only effective way to deal with a virus as contagious as Covid-19 once it has spread, is through social distancing and area or country wide lockdowns. Such measures inevitably affect not just people’s lives but also have a huge impact on economic production. He says the United States and other advanced countries are bound to experience sharp recessions. The IMF in April predicted a 5.9% decline in GDP for the United States during the current year, a 7.5% decline for the Eurozone area and a 3.0% decline for the world as a whole (these are all estimates for the whole year). Lin says there is a possibility that the advanced countries and the entire global economy could fall into a depression similar to the Great Depression of the 1930s, if it is not possible for all countries to cooperate in controlling the virus. Without global cooperation, the pandemic could extend into 2021 and there may even be a ‘second wave’ more serious than the first, as happened during the Spanish Flu epidemic of 1918-19.
The impact of Covid-19 on the Chinese economy and possible measures to deal with it
Lin then focusses on the impact of Covid-19 on the Chinese economy and the Chinese response. He notes that the country aims to achieve its goal of a ‘moderately prosperous society’ (‘xiaokang shehui’) by the end of this year. [NB: this is a key goal of the Chinese Communist Party and government that was set by Xi Jinping in 2012, the aim being to double Chinese GDP by the end of 2020]. To meet this goal it would be necessary to record overall GDP growth of 5.6% in the course of this year. Lin points out that given the 6.8% first quarter GDP decline (the first quarter since 1992 when quarterly statistics started to be published in which there has been negative growth), even if growth recovers to a rate of 10% in the third and fourth quarters, that would produce an overall growth rate for the year of between 3% and 4%. To achieve annual growth of 5% or more would require third and fourth quarter growth in the vicinity of 15%. Given the uncertainty besetting the global economy and the need to preserve some policy leeway, he believes it would be better to aim for overall growth of between 3% and 4%, saying this would be a ‘remarkable achievement’ in the circumstances. If growth in the same range can be achieved in 2021, then the ‘moderately prosperous society’ goal would still be achieved, albeit one year late. In the context of a pandemic and global recession Lin says this would be ‘entirely understandable and acceptable’.
Lin goes to point out that whereas previous economic crises have mainly affected the demand side of the economy, Covid-19 is affecting both the demand and supply sides, in both cities and rural areas, and both at home and abroad. He refers to recent research by Tsinghua University suggesting that many medium and small businesses in China face bankruptcy as a result of the crisis, with significant loss of jobs. He says that currency and finance policies adopted by China in past crises to prop up investment and stabilise the economy may take too long to work this time. He recommends that efforts should be made to support household spending and to help medium and small businesses to weather the crisis. Such efforts could include issuing consumption vouchers to the employed and to low income families, plus raising welfare allowances for poor families in rural areas. He suggests that additional lending to businesses should be considered, and that principal and interest payments on existing business loans could be deferred. along with exemptions or reductions in tax and rent payment obligations.
Reflections on the global impact
Lin points out that the virus could cause a humanitarian crisis in poor countries in Africa, Asia and Latin America, given their lack of testing and medical facilities and inability to fund the needed protective measures. Heavily indebted low income countries may also be unable to afford to repay loans when they fall due. In the face of this humanitarian crisis, he says that China can share its own experience of fighting the virus and leverage its formidable capacity to produce masks, protective clothing, test kits and ventilators for export to other countries around the world. Also, as a ‘big country’, China should encourage and support efforts by multilateral bodies such as the G20, International Monetary Fund and the World Bank to provide emergency assistance and loan deferrals to developing countries.
Lin concludes by saying that this pandemic has reminded us of the fragility of mankind and its economic and social structures in the face of a deadly contagious disease like Covid-19. We are likely to face further pandemic diseases in the future, along with natural disasters like global warming and still more global financial crises. In these circumstances no country can afford to focus on solving its own problems while leaving other countries to solve theirs, even to the extent of shifting their own problems onto other countries [Note: Lin expresses this last point by using a Chinese expression that literally means ‘use one’s neighbour as a drain’]. All countries must cooperate to prevent disasters happening in the first place or at least to reduce the damage to the lowest possible level. Lin ends in expressing the hope that the Covid-19 pandemic will be a turning point in the drive to improve global governance and build a ‘community of common destiny’ in order to prevent future global calamities. [Note: the concept of a ‘community of common destiny’ is frequently mentioned by Chinese writers and politicians, and is a key part of what is sometimes described as ‘Xi Jinping thought’.]
Comments:
Lin Yifu’s prediction that the Chinese economy may well recover sufficiently by the end of this year to achieve an overall growth rate between 3% and 4% seems very optimistic to me. This is particularly so in light of the IMF forecast he refers to that overall world growth this year will be -3%. Despite his relative optimism for the future prospects of the Chinese economy, however, he does say export businesses will suffer from lack of global demand, and also that many small and medium size businesses in China face bankruptcy.
It may be that he is less optimistic on China’s economic prospects than appears from the opening section of his article, however. He goes on to say that the Chinese government should consider issuing consumption vouchers to the unemployed and to poor families, and also provide financial support direct to companies. This echoes the recommendations made by Tang Dajie, whose article on the subject of direct financial payments I summarised in my post of 3rd April. The Chinese government has so far focussed on controlling the spread of the virus and has not followed western governments in providing direct financial assistance to individuals. Lin’s views may well reflect thinking within the Chinese government, as I have read elsewhere within the past two days that they are considering such measures.
Lin’s comments on a possible delay in meeting the target for achieving a ‘moderately prosperous society’ may also reflect current thinking in the Chinese government. It is very clear the Chinese leadership were confident until very recently that they would meet this goal, despite the virus’s inroads on the economy. As Lin himself says, however, there can be no better excuse for delay than a global pandemic on the scale of Covid-19. We may well hear an announcement along these lines within the next few days.
评论：
林毅夫教授预测中国经济会在短期内恢复从而达到3%-4%之间的全年增长率。不过国际货币基金组织4月份预测全球经济今年下滑3.0% 。鉴于此我认为林的预测过于乐观了。虽然他对中国经济的复苏抱乐观态度，但他还是表示中国的出口企业在全球贸易方面面临着大幅度下滑，甚至于许多中小微企业会破产倒闭。
林教授对中国经济前途的真实的态度可能比他在本文的开篇表示的悲观一些。他接着说中国政府为了启动消费应该给失业人口，贫困户和中低收入家庭发放消费券，为了保住中小微企业也应该延缓贷款本金和利息的偿还和减免税收。这些主张符合唐大杰教授在他的文章“ 恢复经济保障民生，建议立即向国民发钱”中的观点（参见我于2020年4月3日在本网站关于这篇文章的发帖）。迄今为止中国政府为了保护国民的健康集中精力防止新冠疫情的蔓延，而没有像西方国家这样给国民发钱。很有可能林教授的看法反映出中共和中国政府领导人的想法。我最近在别处读到他们正在考虑这样的措施。
林所提到的‘小康社会‘目标完成延后一年也许反映出中国政府内部的思考。尽管疫情对中国经济的冲击，中国领导人直到最近几周仍明显地相信能达到这个目标。然而正如林教授指出的那样，这次百年不遇的全球大疫情，为延缓‘小康社会’完成的目标提供了最好的借口。很有可能我们近期会听到这样的公告。
Michael Ingle – michaelingle01@gmail.com
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