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Zhang Qi Commented on the Global Economy and Oil Markets during the Outbreak of the Epidemic


Recently, the COVID-19 epidemic has spread globally, and its impact on the global economy has been severe. In last week, the global stock market average closed more than 20 percent below recent high, led by the Dow Jones Industrial Average in USA, ending its bull market that began in 2009. At the same time, the oil price plunged nearly 30 percent at the start of trading on Monday, almost the biggest one-day drop in recent 20 years. WTI was close to its lowest level at $30 per barrel.

On March 13, at the invitation of the Global Energy Association (GEA), Professor Zhang Qi, President of the China Energy Strategy Research Institute and Deputy Dean of the School of Economics and Management of CUP, commented on the global economy and oil market during the epidemic, and the impact of the epidemic on the global economy and world oil markets.

From the perspective of global economic, he believes that the COVID-19 exposes deep-rooted economic, financial, and social problems in some countries. If the epidemic is still difficult to be controlled effectively, the global economy will face huge challenges, and some countries that have relied on loose monetary policies for several decades are likely to be on the verge of collapse in this challenge.

But "from the long-term viewpoint, especially in China, the opportunity is greater than the risk." China has achieved success in epidemic prevention and control in a short time. China has sent rescue teams to other countries suffering the virus. Therefore, he believes that although the global economy is facing huge risks, China's economic situation is much better. This is because China has great potential in the industrial revolution and urbanization. It has been firmly committed to supply-side reforms to defuse financial risks, and actively invested in new infrastructure construction to expand market demand and stabilize economic growth and social employment.

From the perspective of the crude oil market, he believes that the COVID-19 has reduced the market's demand for oil, and has significantly affected the price of crude oil. On the one hand, US shale oil companies expanded their scale through large-scale debt financing. The outbreak of the epidemic has caused shale oil to be generally at a loss, and the risk of shale oil company bankruptcy may trigger a corporate bond crisis. On the other hand, negotiations between Russia and Saudi Arabia on oil production have broken down, resulting in an expected surplus of market supply. Therefore, he believes that the problem of oil prices is expected to be resolved through multi-party negotiations on production reductions, especially Russia, Saudi Arabia and the United States.

The epidemic has caused huge uncertainty and huge risks in the global economy and oil market. But he believes that in the long run term, especially in China, we can still believe that opportunities outweigh risks. With the increasingly close economic relationship between Russia and China, China's economic growth will also bring positive impact and good expectation to Russia.