Author: Pan Yingli, Professor, Antai College of Economics and Management, Shanghai Jiao Tong University The novel coronavirus pneumonia (COVID-19) that broke out during the Spring Festival was characterized by high infectivity, long latency period, asymptomatic infection and low mortality. The current measures to deal with the virus are generally effective, but accurate and efficient policies are still urgently needed. The Chinese government has previously proposed measures to ensure stability in six aspects. The internal logic is to leverage the stabilization of expectations to stabilize investment, foreign trade and foreign investment, and thus to further stabilize growth, employment and finance. Among them, the core target is to stabilize employment and people’s livelihood, and the bottom line is to stabilize finance. Stabilizing expectations plays a key role in intermediate policy variables, or stabilizing investment, foreign trade and foreign investment, while it also depends on whether the government policy response is appropriate. Therefore, the policies must improve the direct effects and transformation effects on the targets. 1. The central bank purchases long-term treasury bonds issued by the central government and implements targeted, loosening fiscal deficits policy. First, the treasury bond financing should be specifically used for the “Human Capital Development Plan”. Under the plan, the government will purchase skills-training programs that are in urgent need and promote reemployment projects. The government will issue non-tradable, real-name e-education vouchers to migrant workers and laid-off urban workers who need to receive skills-training, and they can be used to purchase corresponding education and training programs in accordance with market demand, individual capabilities and preferences. The government should also encourage innovation in business model in the non-public field of human resources, by offering preferential policies, such as tax exemption and low-interest loans, to modern labor service companies that provide employee training and labor dispatch services for a variety of enterprises in the consumer service sector. The policies will help promote orderly competition and high-quality growth of these labor service companies. In addition, it is necessary to further implement tax and fee reduction for labor-intensive consumer service enterprises, and to suspend or delay the collection of tax and social security premiums. Secondly, local city governments that see the inflow of people should be allowed to issue special bonds in an appropriate amount. The proceeds should be used to fund public services and related infrastructure to help migrant workers adapt to the cities, in a bid to hedge the decline in private investment, and thus unleash the need of migrant workers for consumption and children’s education after the country relaxed the household registration system. Based on the easing of household registration and labor flow trends, the relation between central and local fiscal arrangement could be adjusted with regard to duties and responsibilities. The expenses for compulsory education, basic medical care and retirement pensions could be borne by the central government, which could allocate the amount based on the actual number of people and entrust the local governments in implementation. 2. State-controlled banks set up public welfare finance departments to strengthen the stability and structural balance of central bank policies. I propose that six major state-controlled commercial banks, namely the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and Postal Saving Bank of China, set up public welfare finance departments, which will get targeted funds from the central bank and provide them as credit for labor-intensive medium-, small-, and micro-sized service companies at the central bank’s preferential rates or preferential rates only with risk premiums added. Meanwhile, they could also provide low-interest or non-interest loans in 3-6 months for migrant workers and other low-income population who face difficulties in living due to the delayed resumption of work, to help them cover daily spending. The central bank and China Investment Corporation could also purchase preferred stocks in systemically important companies that have promising business but currently face challenges, and exit the investments in due time after the companies overcome the difficulties. Finally, after the epidemic is over, the central bank could still moderately reduce the reserve requirement ratios and interest rates to spur private investment and economic activities. 3. Long-running effective mechanism is needed to make quick response, offer rescue and improve underdeveloped areas. Economic transformation is still a top priority for China during the 14th Five-Year Plan period. The biggest challenge is the structural imbalance of human resources. Agriculture and industry will release a large amount of surplus labor with only simple skills, while strategic emerging industries, consumer services and some social infrastructure sectors still need to catch up in development, which requires a lot of labor with complicated sets of skills. Therefore, the government could set up state-owned production and construction corps that develop human resources and improve underdeveloped areas in public utilities to absorb surplus labor, leverage social resources for human resources development, and conduct investment and production in underdeveloped industries and businesses. At present, the establishment of state-owned production and construction corps could focus on water conservation projects. Planning and construction of river dredging, water transportation and water storage/irrigation networks should be put on the agenda as urgent projects. The government can help production and construction corps recruit employees, and allow them to undertake various social projects such as water conservancy after receiving technical training.