The Negative Economic Impact of COVID-19

The Negative Economic Impact of COVID-19

It is essential for China to have a comprehensive grasp of the ways in which COVID-19 impacts the economy and energy in this day and age, when trade protectionism is on the increase. In a world where there is a lot of uncertainty, this will make China’s economy stronger and better prepared to withstand any shocks that come from the outside. Some companies have been impacted more severely by the recession of COVID-19 than they have been by any prior recession (Ashraf, 2020). Some of these businesses are dependent on the flow of people, while others, such as those that are reliant on the exchange of information, have been mostly untouched by the recent disruptions. The impact of the epidemic on the Chinese economy has been shown by a variety of different metrics, including changes in household incomes and fluctuations in the cost of basic items (Kaye et al., 2021). All economic sectors around the world have slowed down, and more than a third of the world’s population has been put under lockdown causing economies around the world, including strong ones like the U.S., to go into a state of global shock on both the demand and supply sides and the consequences have included high rates of inflation, economic meltdowns, and a loss of income from key industries like tourism, hospitality, transportation, and the food sector.

There is not a single nation on the face of the earth, nor is there an international or cooperative organization, that has not altered the manner in which it does its business (Ashraf, 2020) as a direct result of the substantial economic changes that have been brought about by the COVID-19 pandemic. Most of the effects on the economy come from the steps that different governments have taken to stop the spread of the disease, while the effects on health are caused directly by the contagion that spreads the disease. Most countries have taken important steps to stop the disease from spreading, such as closing their borders and slowing down or stopping their economies. Because of this, many places, like businesses, schools, and social services, have had to close for a while.

Because to COVID-19, significant economic pillars like tourism have been severely damaged, and as a result, the hotel and leisure industry now has the highest unemployment rate of all major industries, leading to institutional and business closure, massive unemployment rates, and economic losses. Due to the epidemic and the steps taken to stop it at the start, both domestic and international trade were affected. When the borders reopened at the beginning of June, the temporary rise in food prices that happened when they were shut down in April 2020 and people rushed to buy things has gone down. Important industries, like the tourism industry, came to a complete stop. Because all companies that depended on transportation had to close, the economy lost a lot of money.

While COVID-19 was wreaking havoc on businesses that were dependent on in-person interaction (Kaye et al., 2021), the use of technology for remote employment and commercial transactions increased dramatically, resulting in an increase in the profitability of technological industries such as e-commerce platforms, e-banking, and fintech businesses. According to a recent analysis by Jackson (2021), there is a risk that China will continue to use the same playbook of stimulus-led investment to improve economic development over the medium term. This presents a significant challenge for the country (Ceylan, Ozkan, & Mulazimogullari, 2020). It is anticipated that the rate of economic growth in China would decelerate in the remaining part of 2022 before rising in 2023, reflecting the economic harm caused by the continued presence of COVID-19. Between now and 2027, there will be an unprecedented increase in physical capital investment, which will provide significant growth in the short run (Dai et al., 2022). There will be a massive inflow of funding towards decarbonization and vital infrastructure renovation to the tune of around 130 trillion dollars. However, in China as well as the rest of the world, very few businesses are ready to respond quickly and efficiently to the recent infusion of financial resources due to the economic impacts of the pandemic (Liu, Liu, & Yan, 2020). Businesses should consider top-down planning for portfolio synergies; doing so presents a significant challenge that requires sophisticated stakeholder management, capital market knowledge, and an understanding of the nuances of regulatory procedures.

In China, investment growth is expected to accelerate over the next year, aided by a strong fiscal stimulus, countering weaknesses in real spending, which has been hampered by low consumer confidence as well as the reappearance of COVID-19 and accompanying mobility restrictions. China is now confronted with the dual challenges of mitigating the effects of COVID-19 and maintaining the country’s ongoing economic expansion (Liu, Liu, & Yan, 2020). The high amounts of debt held by corporations and local governments reduce the efficiency of policy easing and stockpile additional risks for the future of China (Dai et al., 2022). There is also the possibility of dangers arising from extended stress in the real estate market, which has the ability to trigger broader macroeconomic and financial consequences. On the plus side, if COVID-19 is effectively controlled with fewer restrictions, growth for the whole year might be higher than what is presently expected due to the recently announced additional stimulus measures. 

In summary, the harsh COVID-related mobility restrictions that were implemented in major cities and provinces throughout China presented substantial negative risks and further delayed the stalled resurgence of consumption and industries, deterred private sector investments, interrupted trade flows, and slowed economic development. Even while the government is making more efforts to relax its grip on macroeconomic policy, the people in charge of making decisions are having a tough time figuring out how to make the policy stimulus effective while at the same time maintaining mobility limits. While considering the economic impacts mentioned in this discussion, it emerges that China might attain a more balanced, equitable, and sustainable economic trajectory by implementing structural changes that stimulate a shift towards consumption, alleviate social inequalities, and revive innovation and productivity growth.


Ashraf, B. N. (2020). Economic impact of government interventions during the COVID-19 pandemic: International evidence from financial markets. Journal of behavioral and experimental finance, 27, 100371.

Ceylan, R. F., Ozkan, B., & Mulazimogullari, E. (2020). Historical evidence for economic effects of COVID-19. The European Journal of Health Economics, 21(6), 817-823.

Dai, X., Rao, F., Liu, Z., Mohsin, M., & Taghizadeh-Hesary, F. (2022). Role of public and private investments for green economic recovery in the post-COVID-19. Economic Research-Ekonomska Istraživanja, 1-21.

Jackson, J. K. (2021). Global economic effects of COVID-19. Congressional Research Service.

Kaye, A. D., Okeagu, C. N., Pham, A. D., Silva, R. A., Hurley, J. J., Arron, B. L., … & Cornett, E. M. (2021). Economic impact of COVID-19 pandemic on healthcare facilities and systems: International perspectives. Best Practice & Research Clinical Anaesthesiology, 35(3), 293-306.

Liu, X., Liu, Y., & Yan, Y. (2020). China macroeconomic report 2020: China’s macroeconomy is on the rebound under the impact of COVID-19. Economic and Political Studies, 8(4), 395-435.