Global economy amid the COVID-19 outbreak and challenges for China

TONG Jiadong1,2 SHENG Bin1,3 JIANG Dianchun3 YAN Bing3 DAI Jinping3 LIU Cheng1,4

(1.School of Economics, Nankai University)
(2.Academic Committee, School of Economics, Nankai University)
(3.Center for Transnationals’ Studies, Nankai University)
(4.APEC Research Center, Nankai University)

【Abstract】While the global economy suffers from sustained slow growth and is in search for a driving force for growth, the novel coronavirus has spread across the globe at a jaw-dropping pace, which has brought strong negative shocks to the world economy, triggered financial market turbulences, and disrupted GVC. From a mid-and long-term perspective, however, the global spread of the COVID-19 provides an important opportunity for global investment in the digital economy and China’s development of a complete, efficient and secure value chain in its domestic market.


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(Translated by LIN Qingjia)


    [1]. [1] Andrew, K. Rose, “Agent Orange: Trump, Soft Power, and Exports,” NBER Working Paper No. w25439, National Bureau of Economic Research, 2019. [^Back]

    [2]. [1] WTO, IDE-JETRO, OECD, RCGVC-UIBE, World Bank, Global Value Chain Development Report, 2017. [^Back]

    [3]. [2] From the perspective of production, the global or national GDP can be decomposed into the value added of pure domestic production, traditional trade production, simple GVC and complex GVC. Among them, pure domestic production refers to the value added of producing final products absorbed by the domestic market; traditional trade production refers to the value added of producing exported final products; simple GVC refers to the value added of producing intermediate goods that are exported and directly absorbed by the importing country (cross border once); and complex GVC refers to the value added of producing intermediate goods that are exported to the importing country and then returned to the country or re-exported to a third country (cross border at least twice). The sum of simple and complex GVC constitutes the exported value added of intermediate goods, and its ratio to GDP is “forward participation.” Similarly, from a usage point of view, the value added of the final product of the world or a country can be decomposed into the above-mentioned four parts, and the ratio of the imported value added of the intermediate goods to the total value of the final product is “backward participation.” [^Back]

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    [5]. [2] The breakdown data of global GVC production in this part comes from WTO, IDE-JETRO, OECD, RCGVC-UIBE, World Bank, Global Value Chain Development Report, 2019. Relevant data of China come from the calculations provided by Associate Professor Wang Lan and Associate Professor Jiang Genghua, for whom the authors would like to express great gratitude. [^Back]

    [6]. [3] For the index system and database of the Global Value Chains Database from the University of International Business and Economics, see: [2020-04-05]. [^Back]

    [7]. [4] The quantitative predictions here may underestimate the negative impact of coronavirus on GVC due to the failure to consider the decline in global FDI. The latest monitoring report released by the UNCTAD shows that the outbreak and spread of COVID-19 will reduce global FDI by 5% to 15% in 2020 (depending on different scenario assumptions regarding the development of the pandemic). See the United Nations Conference on Trade and Development, Impact of COVID-19 on Global Investment, Investment Trends Monitor (Chinese version), March 2020. [^Back]

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    [12]. [4] WTO, “World Trade Statistical Review,” 2019, [2020-04-03]. [^Back]

    [13]. [1] Calculation and analysis are based on data from UNCTAD COMTRADE. [^Back]

    [14]. [2] OECD, Interconnected Economics: Benefiting from Global Value Chains, 2013, [2020-04-03]. [^Back]

    [15]. [1] Considering that more than 1/3 of investment transactions did not disclose the amount of money, these data may be underestimated. [^Back]

    [16]. [1] UNCTAD, Digital Economy Report 2019, United Nations Publications, New York, 2019. [^Back]

    [17]. [1] This research is the mid-term research result of The National Social Science Fund of China (ZX20180248). [^Back]

    [18]. [2] Goodhart, C. and Hofmann B., “Asset Prices, Financial Conditions and the Transmission of Monetary Policy,” Conference on Asset Prices, Exchange Rates, and Monetary Policy, Stanford University, 2001. [^Back]

    [19]. [3] Borio, C., “The Financial Cycle and Macroeconomics: What Have We Learnt?,” BIS Working Papers, No. 395, 2012. [^Back]

    [20]. [1] This article is the mid-term research result of the Ministry of Education (17JJDGJW013). [^Back]

    [21]. [1] After several years’ prosperity in stock market, the total profit of American companies in 2019 remained at the level of 2014, while the proportion of corporate profits in GDP remained at the level of 2005. [^Back]

    [22]. [2] The financial survey of the Federal Reserve shows that the annual net financing of non-financial corporate bonds in the United States is approximately USD 260 billion on average, while the annual net financing of corporate stocks is approximately USD −418 billion from 2010 to 2019 on average. Debt swap equity is prominent. [^Back]

    [23]. [3] Here is a metaphor for the “canary effect” in coalmine safety alerts. The interest rate spread of high-yield bond is a proxy index for the earning risk premium (ERP), and tends to run ahead of the stock market. [^Back]

This Article


CN: 11-3799/F

Vol , No. 03, Pages 9-28+4

May 2020


Article Outline


  • 1 The pandemic’s contagious impact on the world economy and China’s response
  • 2 The impact of COVID-19 on GVC and policy enlightenment
  • 3 COVID-19 and overseas investment of China’s digital economy: impact and prospects
  • 4 Global foreign direct investment under the impact of COVID-19 and its impact on China
  • 5 Are we experiencing an international financial crisis? [1]
  • 6 The US financial market turmoil under the pandemic: causes and trends [1]
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