The COVID pandemic was a major event in 2020 that has profoundly changed global political and economic pattern. Measuring from the two aspects of supply and demand，it has brought a total impact comparable to the Great Depression in the 1930s，and has exerted an unprecedented impact on the production of human society，the way of communication and world economic and trade activities. Such impact is more of a structural shock to the long-term development of economy，which will accelerate the effective application of new knowledge and new technology worldwide，making digital development a significant factor in driving economy recovery，changing the way of communication and promoting theory development. Moreover，it will profoundly affect North-South as well as international political and economic relations，and become a catalyst for major changes unseen in a century.

Legacy Model and New Impetus Jointly Promote the ¡°V-Shaped¡± Recovery in the Post-COVID Era

Since 2020，as a black swan，COVID-19 has brought a hard hit to global economic and social operations，basically，two necessary countermeasures were taken by anyone economy: one is short-term policy response - to manage economic downturn and systemic financial risks with policy tools; the other is long-term structural adjustment - while working to solve or partially solve the root causes of shocks，to minimize the probability of turning such shocks into crisis，and form a new organization pattern of production and factors. One of the examples of long-term structural adjustment during the past period was the use of new energy as an alternative for fossil energy resources as an effort to cope with climate changes. Thus，to judge the economic and financial operation situation in the post-COVID era，besidesinvestigating the effectiveness and costs of short-term policy responses，it is also necessary to explore the long-term structural adjustment.

To view from the short term perspective，policy and expectation adjustments have effectively promoted the “v-shaped” recovery of the global economy. Both supply and demand ends of economic operations have suffered strong influence from the pandemic，while with the stimulation of fiscal and monetary policies，residents and enterprises were able to know more about the virus and have adjusted their expectation and investments decisions，and have both realized certain rebounds. According to the forecast of IMF in October 2020，global economy will shrink by 4.4% in 2020 and grow by 5.2% in 2021，which is respectively 0.8 percentage points higher and 0.2 percentage points lower than the June forecast. In real operation，the seasonally adjusted QoQ GDP of the United States rebounded to 33.1% during the third quarter of 2020; GDP growth rates of the Eurozone and the UK were -4.4% and -9.6%，respectively，and the declines were 10.4% and 11.9% smaller than the previous quarter; emerging economies are also showing signs of recovery. China has been the most eye-catching one among all global economies. Our GDP had a 0.7% year-on-year growth during the first three quarters of 2020，with the peak of 4.9% in the third quarter. The benefits of policy and expectation adjustments are obvious - global economies have achieved “v-shaped” recovery one after another; yet its prices are also clear - to contain current sharp contraction with future recovery and growth will inevitably lead to the rise of macro leverage ratio. Global economies have once again entered an era of overall quantitative easing after the one in 2008: since 2020，the central banks of more than 40 countries and regions have cut interest rates nearly 70 times. The Federal Reserve implemented an average inflation target system and announced an open quantitative easing policy to further promote the liquidity of the money market，allowing unlimited purchases of bonds and mortgage-backed securities (MBS) on demand. The policy orientation of various countries has driven the world to an era of “ease monetary policy and low interest rate”. As for the financial market，on one hand，open market transactions are less affected by the movement of people，thus are showing a synchronous development trend; on the other hand，under the influence of ease monetary policy and low interest rate，major financial markets have maintained their stability after abrupt decline，showing a “v-shaped” recovery trend.

From a historical perspective，great shock is often accompanied by the acceleration of scientific and technological progress of human society. Some 700 years ago，the bubonic plague spread among the Europe in the 14th century，modern medicine and physiology made its start there and ushered in rapid growth，Europe then entered the time of Renaissance and later the Industrial Revolution period. The Spanish flu outbreak in early 20th century，leading to the global death toll of 20 to 50 million，while in turn，it had also urged the fast development of bacteriology and epidemic prevention，medicine development，promoted the deep integration of physics，chemistry and life medicine，and spawned a large number of scientific and technological innovations that have changed human society，such as the discovery of antibiotics and the use of X-rays for medical diagnosis，which not only better protected people’s health，but also was a driving force for the prosperity of social and economic activities. The same goes for technological innovation under the impact of the COVID-19 epidemic. As of November 2020，48 vaccines are currently under clinical testing，including lipid nanoparticle-based mRNA vaccine，DNA vaccine，adjuvant protein vaccine，inactivated virus particle vaccine and non-replicating virus vector vaccine. Some 64 drugs are also in clinical trials. It is almost certain that we will be able to keep the social and economic impact of the virus within an affordable range. Therefore，the “v-shaped” economic and financial recovery is the result of the joint action of traditional policy support and the emerging scientific research.

Factor Revolution: Digitization is the Major Factor Transformation in the Post-COVID Era

What is the post-COVID era going to be? Evidence shows that digitization is anirreversible trend of this era.

Digital economy has undergone rapid growth even before the pandemic ，accounting for 40% of the global economy. According to the “New Vision of the Global Digital Economy (2020)” released by the China Academy of Information and Communications Technology in October 2020，the total scale of global digital economy reached 31.8 trillion US dollars in 2019 with a year-on-year increase of 5.4%，accounting for 41.5% of global GDP，and was 3.1% higher than the nominal GDP growth rate over the same period. In China，the digital economy reached 35.8 trillion yuan in 2019 with a year-on-year increase of 15.6%，accounting for 36.2% of GDP，and was 7.9% higher than the GDP growth rate over the same period. Based on the 2020 Hurun Global Unicorn List released by the Hurun Research Institute，among the world’s 586 unicorn companies，89 are e-commerce companies，63 are artificial intelligence and financial technology companies，53 are software service companies,33 are shared economic companies，28 are health technology companies，and 20 are big data companies: digital economy-related companies take half of the market.

The spread of the pandemic further accelerated the development of digital economy. The outbreak of COVID-19 at the beginning of 2020 restricted social contacts to a great extent，to meet the situation，many enterprises transferred their businesses online，digital operation has then became a vital method to keep business going. Forbes reported in September 2020 - research data from Twilio Consulting showed that 97% of companies acknowledged that the COVID-19 pandemic has accelerated their digital transformation. And according to its estimates，global digital process has been accelerated by at least 5-7 years due to the pandemic.

Among this great development trend of digital economy，China’s digital financial innovation has been advancing with its digital economy side by side. Relying upon China’s huge population and market advantage，digital economy has undergone fast development，which further resulted in thriving digital financial development，and spawned various digital financial innovations in different application scenarios: Sovereign currency - Digital Currency Electronic Payment (DCEP) is the legal encrypted digital currency with unlimited legal compensation. It is the digital form renminbi，and is currency in essence. Payment platforms，including Alipay and WeChat have already integrated into people’s daily payment scenarios. Asset management - big data customer acquisition and robo-advisors are becoming more popular in various wealth management scenarios. Risk management and supervision - risk management models based on big data and artificial intelligence have been widely implemented in various financial institutions. Big data and block chain based advanced management technologies are also improved under the supervision of China’s financial regulatory authorities. For example，the cross-border financial block-chain service platform of the State Administration of Foreign Exchange has already been established and launched. China has gained the first-mover advantage in digital financial development，we admit that there are also issues such as monopoly and other risks that need to be addressed and optimized during the development process，but with the acceleration of technological innovation and the booming digital economy，digitization remains to be anirreversible trend of financial development.

More and more signs indicate that data has become the new production factor. Similar to other production factors，the improvement of data quality and quantity can promote the quality and quantity of digital economic products，and thus to become one of the independent variables of the production function. From labor，land to productive capital，and data，the factors used in human production activities are becoming more contactless and less competitive，the resulted scale economy，network effects and scope economy effects，however，are increasingly stronger.

Theory and Policy Reflections toward Structural Adjustment

During the pandemic，China has adopted a macro policy that aims at covering the basic needs of people and society，also along with the innovative impetus of emerging technologies as well as the long-term digitization process，the inherent and spontaneous adjustment of the economic structure has become a certainty. Below are some reflections on economics and economic policies under such background.

The first is to explore monetary theory and macro policies from the perspective of macroeconomics. The “anchor-seeking” process of currency will still going on in 2021 and the years to come，during which actual interest rate will act as the key indicator. On one hand，how and when to implement the normalized monetary policy is a problem that the regulatory authorities of various countries need to figure out. Two possible situations are: policies that used to drive the recovery of normal employment indicators actively withdraw; or policies that has led to high debt ratio and systemic financial risks get eliminated by the authorities. On the other hand，based on above analysis on digitization，when the process made certain progress among the government，enterprises and financial sectors，the transmission path of liquidity investment may change. For example，monetary policy department may achieve accurate and efficient money supply by means of digital technology to address the problem of poor monetary policy transmission mechanism. By then，issues such as unlimited easing and financial risks may no longer exist. Another more theoretically challenging issue is the reshape of monetary theory. For instance，the launch of digital M0 with smart contracts will probably lead to the vanish of any unnecessary liquidity reserves，which will ultimately rewrite the money demand theory based on transaction，speculation and cautious motivation proposed by Keynes in the early years. What is monetary equilibrium and how to achieve such equilibrium will become major theoretical topics for future research.

The second is to explore the integration of economic finance and digitization from the perspective of microeconomics. In the view of welfare economics，digital technology innovation and its deep integration with economic and social activities，no matter at the individual level or public level，will be an effective tool that can promote social welfare. At the individual level，human beings may obtain and handle more information with the aid of digital technology innovation，meanwhile make more accurate decisions on clothing，food，housing，transportation，medical care，pensions，and savings. At the same time，with authorization and proper privacy protection，enterprises will be able to use and process individual information，and thus to offer their clients customized services. The popularization of digital currency will reduce the demand for cash reserves of social subjects in social economic activities and increase the demand for profitability，thereby realizing the profitability of traditional reserve cash. At the public level，the legal and rational use of big data can help the government in making macro adjustments and monetary and fiscal policy decisions，so as to perform its function of offering public goods more concisely and effectively. For example，based on big data in the social and economic fields，the government may have more accurate judgement and prediction on macro economic situation，economic turning-points and public emergencies，thereby develop policies scientifically and with foresight，and regulate social and economic operations more effectively and soundly. From the perspective of microeconomics，special attention needs to be paid to the pricing issues of digital economy and digital finance. For example，whether customized services equal product quality difference? If two products with the same quality has price difference，then is it complete price discrimination or is it the left shift of the supply curve due to cost reduction resulted from information gain? While the former means vanish of consumer’s surplus，the latter is practical welfare. This is also an important academic issue that needs researching.

The third is to study the issues in data ecology from the perspective of regulation. Regulatory and legislative departments shall keep up with the situation changes and continue to improve the construction of institutional mechanisms and legal frameworks，so as to better prevent and regulate various risk issues，such as the monopolistic development of large platform companies，companies that offer varied prices for same product or service based on different consumers by means of big data analysis，personal data privacy etc. From the Libra controversy to the recent drafts of the Digital Markets Act and Digital Services Act announced by the European Union，the digitization process of the economy and society are still facing many common challenges，and we have every reason to expect great innovations in the theory and practice of digital regulation.

The author is the Deputy Administrator of the State Administration of Foreign Exchange