Source: Wenhui Newspaper, April 27^th, 2020

Recently, Zhong Ninghua, professor of the Department of Economics and Finance, Tongji SEM published an article in Wenhui Newspaper, calling on individuals to try their best to increase consumption, emphasizing that increasing consumption equals to taking joint anti-epidemic actions. The original text is as follows.

Source: Visual China

With the spread of the COVID-19 pandemic around the globe, the economy of nearly all major countries in the world has shrank at the same time, which is quite rare in the economic history for the past hundreds of years. China has almost never come across such situations in the past four decades since the reform and opening up.

Under the severe test of the COVID-19 pandemic, Shanghai seeks opportunities in times of crisis, by vigorously developing the digital economy, and promoting technological innovation. In the first quarter, the added value of information transmission, software and information technology services industry in Shanghai increased by 13.1% over the same period last year. The retail sales of online stores accounted for 17.7% of the total retail sales of consumer goods, a year-on-year increase of 4.9% year-on-year. Driven by these new industries and new forms of businesses, the GDP growth rate of Shanghai in the first quarter remained basically consistent with that of the whole country. In this regard, this result has been quite hard-earned.

Looking ahead, focusing on the uncertainty of the epidemic in developed countries and the greater external demand shock that may occur in the short term, the meeting held on April 17 by the Political Bureau of the CPC Central Committee emphasized the need to actively expand domestic demand. The first task of expanding domestic demand is to unleash the consumption potential and expand the consumption of residents. This meeting also emphasized the need to support enterprises to carry out domestic sales of commodities originally produced for exports. Due to the high proportion of service industry and exports in Shanghai, achieving the two goals is the key to stabilizing the economic fundamentals. We need to take some measures through strong actions to promote consumption and help export enterprises to better integrate into the internal economic cycle as soon as possible.

Recently, Shanghai has launched Several Measures to Boost Consumer Confidence and Vigorously Unleash Consumer Demand, by adopting a series of measures to boost consumer confidence, unleash consumer potential, and promote consumption quality. By organizing the “May 5^th Shopping Festival and shopping discount season”, the events have achieved full coverage of local platforms, merchants, terminal products, and all the consumers in the city, thus maximizing the enthusiasm of market players and platform companies, and maximizing the leverage of policies and funds.

In the early April, as one of the initiators from Youth Economist Society(YES), I also issued an appeal: during this special period, individuals and the government should work together to boost consumption. YES is made up of a galaxy of young economists from Shanghai Jiaotong University, Fudan University, Tongji University, Shanghai University of Finance and Economics, Central University of Finance and Economics, Sun Yat-sen University and so on. YES aims to provide recommendations for the national economic development based on rigorous economic analysis. After full discussion, we issued an appeal: individuals should try to increase consumption, since increasing consumption equals to taking joint anti-epidemic actions.

The impact of the epidemic on the Chinese economy will particularly affect low-income groups, especially employment groups in labor-intensive export industries such as catering, accommodation, transportation, wholesale and retail, and textile. At this critical moment, individuals may contribute to the fight against the impact of the epidemic by increasing his or her consumption. For the general public, if you want some household equipment (such as electrical appliances) replaced, or if you have put some items in your online shopping cart before, you had better buy them right now with no more hesitate and wait. There is also a suggestion to buy more goods that can be stored for quite a long time. The daily necessities such as textile products are exported to overseas in a large quantity. During this critical period, buying more these goods means supporting companies turn to the domestic market and weather the storms. When the negative economic shock arrives, the prices will go low. At the same time, with the easing monetary policy, price of commodities may rise in the future. In this regard, the current consumption action will not cost too much for individuals.

The current economy functions as a very complex system, as the supply and demand are affecting each other and different industries are intertwined. In such a system, no one can simply step away from it. To put it simply, if there are no domestic demands or overseas orders, some companies will be forced to lay off its employees or close down, and these employees will receive less income and be forced to reduce their spending, which will in turn lead to demand reduction in other industries. This cycle continues to expand the spread of the crisis in more aspects. Therefore, both individuals and governments should act actively. In this regard, increasing consumption and supporting market players is a way of helping others and ourselves as well.