China’s Economy under COVID-19: Short-Term Shocks and Long-Term Changes

Under the impact of the epidemic and policy responses, China’s economy in 2020 is expected to maintain a “low rebound and overall soundness”. However, as a major public health event, the long-term impact of COVID-19 on China’s economy should not be ignored. On the basis of confirming preventive savings at the micro level, this paper uses the macro neoclassical economic growth model to point out that COVID-19 epidemic may promote China’s savings rate to increase the potential output level in the medium and long term. However, given the continued downturn in the global economy, a rebound in China’s savings rate may exacerbate the global economic imbalance. Therefore, the Chinese government needs to make a good plan to strengthen international cooperation while actively encouraging consumption to stimulate domestic demand.