The epidemic did have some negative effects on the real economy, mainly because the city was closed at home in the early stage. For industries that rely heavily on offline production, such as manufacturing, industry and agriculture, and offline service industries such as restaurants and shopping malls, the home isolation action of the whole society has pressed the pause button for these real economies. But this effect is not long-term.

First of all, with the gradual control of the epidemic, the isolation and blockade measures have been relaxed, production and consumption have gradually returned to normal, and the real economy has begun to turn again. According to China's economic figures, since the second quarter, the economy has started to recover and grow. Even consumption, which was widely worried at first, showed a good recovery. In 2020, the total retail sales of social consumer goods will approach 40 trillion yuan, the final consumption expenditure will exceed 55 trillion yuan, and the total capital formation will approach 45 trillion yuan.

Secondly, when offline entities are affected by domestic anti-epidemic, digitalization has become a powerful weapon to promote the transformation and upgrading of the real economy. When consumers can't go out to spend, they turn to online consumption, and factories, restaurants and other entities still need to turn to meet online demand.

Coupled with China's rapid support measures for the real economy, although the epidemic has hit the real economy, it is still under control.

Since March 2022, the epidemic situation in China has rebounded, and the spread of the virus has shown three characteristics: more, wider and more frequent. As of March 29th, there were new confirmed cases 1629 cases in China, covering 27 provinces and cities, setting a new high since March 2020. Among them, more than 500 cases were confirmed in Jilin, Fujian, Shanghai, Guangdong, Shandong and Zhejiang. Considering that Shanghai and the southeast coastal economic provinces continue to be plagued by different degrees of epidemic, the downward pressure on China's economic growth will be amplified in stages. The model analysis shows that the impact of this epidemic will have an impact of 1.8-2. 1 percentage point on the actual economic growth rate in the first quarter. However, considering China's strong economic resilience and the gradual emergence of policy effects, we believe that China's economy is still expected to stabilize the bottom line and achieve the expected development goals this year. China's policy mix will do more in the context of unexpected interference caused by the epidemic. In this regard, we suggest that the policy should be extended moderately, the focus of the policy should be further tilted from macro to micro, and the policy expectation guidance and confidence maintenance should be strengthened.

This round of epidemic rebound will have a triple impact on the economy. The first is the supply impact. Since February-March this year, the impact of the epidemic has prompted Shenzhen and Shanghai, the two major economic centers in China, to adopt isolation measures such as regional blockade. Although this measure has played a key role in limiting the spread and development of the epidemic, from the perspective of economic impact, it will directly lead to a staged shortage of labor supply in manufacturing and service industries. At the same time, the blockade and restriction of traffic and logistics will affect the normal circulation of labor and raw materials, further impacting the majority of small and medium-sized enterprises. The second is the demand side impact. The dynamic zero clearing policy requires rapid and strict prevention and control of local aggregation epidemic. This means that the daily travel and life of urban residents will be affected, and the decline of people flow and gathering will directly affect the service industries such as catering, retail, tourism and real estate sales. Although the epidemic will also boost the demand for medical services, medical equipment, online retail and online education to a certain extent, the increase in online retail demand is difficult to buffer the decline in total demand, because the increase in online retail demand is more a partial replacement for offline consumer demand than an overall pull. The third is the expected impact. Excessive panic and high sensitivity to the virus may affect people's confidence in economic growth, thus further curbing the rebound of consumption and investment in the short term. At the same time, due to the external uncertainties such as the interest rate increase in the United States, the geography of Ukraine and Russia, the expected recession may affect the initiative of private enterprises to expand to some extent.

The service industry will be widely affected. From the perspective of the industry, except for the upstream industrial manufacturing industry, the year-on-year growth rate is significant due to price factors. The manufacturing and service industries in the middle and lower reaches were widely affected by the rebound of the epidemic. First of all, industries that directly affect the supply chain include transportation and logistics.