Coronavirus threatens Chinese (and global) economy
The virus is already damaging consumer rates and tourism. Economies that depend on Chinese demand are at risk. The multinationals are evacuating the employees of the plants located in the areas affected by the epidemic. Wuhan generates a turnover of 214 billion US dollars, approximately 1.6% of Chinese GDP.
Beijing (AsiaNews / Agencies) - Grounded flights and interrupted transport, canceled tourist packages, temporary closings of businesses and over 50 million people subjected to quarantine: these are some of the measures taken by Beijing to counter the spread of the virus in the heart of the emergency, the province of Hubei.
The capital Wuhan is one of the main engines for the country's economic growth, which Beijing estimates at 6.1% this year - the lowest in 30 years. Before the crisis, the Wuhan government forecast growth of over 7.8%. The city, where 11 million people reside, generates a turnover of 214 billion US dollars, about 1.6% of Chinese GDP. Located in a central region of China, Wuhan is a vital hub in the logistics sector, in the production of automobiles and in the steel industry.
The day before yesterday, Kristalina Georgieva, director of operations of the International Monetary Fund (IMF), said that at the moment "it would be irresponsible to offer speculation about what could happen" to the Chinese economy. The economist cited the experience of the Sars epidemic in 2002-2003, which slowed short-term growth, but then the economy adjusted. However, the emergency then occurred at a time when the Chinese economy was booming. The current one occurs as the authorities witness the slowdown due in part to trade tensions with the United States.
Economists are trying to estimate the impacts of coronavirus on Chinese GDP. Analysts of UBS Group AG, Nomura Holdings Inc. and Barclays Bank Plc. are studying data from the 2003 SARS outbreak to find indications. Barclays says that Chinese consumer confidence and their spending activities will be affected: this will take between 0.1% and 0.2% of GDP in the first or second quarter. For Standard & Poor's, if spending for things like transportation and entertainment across China fell by 10%, overall growth would decrease by about 1.2 percentage points.
Although it is too early to assess the full impact of the emergency on Beijing's economy, it is clear that the virus is already damaging consumption and tourism. According to analysts, the epidemic also threatens the fragile stabilization in the world economy, ready and waiting to benefit from the first phase of the trade agreement between the United States and China and signs of a turnaround in the technology sector.
In China, industrial production will also have an impact - at a time when factories were preparing to return to full capacity after the Lunar New Year - as well as private investment. This will affect economies that depend on Chinese demand: Asian neighbors and commodity exporters will suffer the worst consequences. Meanwhile, the multinationals are evacuating the employees of the plants located in the areas affected by the epidemic; operators of theme parks, cinemas, retailers and restaurant chains have suspended or limited operations to protect workers.
The economic effects of the crisis will be felt in other countries. China has canceled tourist packages abroad and the delay in resuming business after the holidays has affected demand for imports. Hong Kong, Thailand, Vietnam, Singapore and the Philippines are most at risk given their dependence on Chinese visitors and the high share of tourism in their GDP. According to data from the World Tourism Organization (OMT), Chinese tourists spend $ 258 billion annually every year - almost double that of Americans.