China Is at Risk of Losing 1% of GDP and Facing Economic Crisis from Coronavirus

About one month of the outbreak of the coronavirus, disease has caused the death toll jumped to 80 and more than 2,700 cases reported in China and approx. 50 cases in other countries, including the United States, France, Australia, Japan, Singapore and Thailand.

The concerning signal of Chinese economy is already appeared, Lunar New Year is the period of consumer spending in China, but this year the overall travel passenger plunged 28.8% from a year ago, as reported by the Ministry of Transport. Currently, China is relying on consumer spending to recover its slowing economy and consumer sector is a bigger share of Chinese economy as consumer activity at over half the total economy.

Coronavirus outbreak is interrupting Chinese people to consume and spend money during the country’s biggest holiday. The Government restricted the transportation in several cities and provinces, shutdown museums, theaters and avenues. Moreover, Chinese authorities demand all residents to wear masks and have even imposed fines in some places for those in public spaces who do not wear masks. 

“China’s economic growth was already struggling before the outbreak, and such a public health crisis threatens to drag growth even lower,” said Chen Gong, a U.S.-based economist.

Before the emerge of coronavirus, the economic growth in China was slowly expanded than 2019’s rate of 6.1%, a nearly three-decade low.

The coronavirus outbreak could cost more than 40 billion yuan ($5.77 billion), which could cut about 1% off China’s 2020 growth rate.

Entertainment sectors were hit by coronavirus as well, like; the movie theater, which normally gains one-tenth of its $9 billion-plus annual box office during the weeklong holiday. Many public centres were almost empty.

Impact on factory and industrial sector not yet to decide. Wuhan is one of an economic driven city in central China and hosts many car maker factories. the analyst pointed out that if the authorities order to expand a holiday one week longer, those factories will be affected and will drag an overall of manufacturing industrial production.

Big cities including Shanghai and Beijing already postpone the resumption of the school year until further notice. 

The price of food and meal product as well has cost tripled as the fear of running out of food following the city shutdown. 

Ministry of Transportation revealed that the passenger on trains and airplanes dropped dramatically 41% on the first day of Lunar New Year comparing last year. On Sunday, China Railway Chengdu announced the possibility to stop several high-speed train routes, including some to Shanghai for the next few days, into early February.

Chinese Authorities said at a special press conference on Sunday that the situation will remain in the near future and the country is facing a shortage of medical supplies especially virus protection suit and face mask. But the Government already subsidized 11.2 billion yuan for medical cares. 

And stated that it is just the beginning of a longer-term situation, too early to determine the effect on the economy.