China's Economic Situation, Response and Prospect under the Epidemic Situation

Abstract

On the basis of the demand side and the supply side, the paper respectively analyzed how novel Coronavirus affected Chinese economy: the weak demand caused the demand curve to move to the left, equilibrium output decreased and equilibrium price decreased. Due to the reduction of labor costs, enterprises have the incentive to increase production capacity at the production end. However, when the price is lower than the average variable cost of enterprises, the number of bankruptcies in the society starts to increase. One of the immediate causes of the economic downturn caused by COVID-19, which led to GDP growth of -6.8% in the first quarter of 2020, is a lack of consumption. Therefore, it is suggested that the government can appropriately reduce consumption tax and issue consumption vouchers, to improve consumer confidence and increase output. The ARIMA model was used to predict economic growth for the next seven quarters.