Coronavirus epidemic may be tougher than Sars on China’s banks if it persists, S&P says
- The effect on China’s gross domestic product growth could be worse than Sars if the virus is not ‘swiftly contained’, S&P says
- The shares of some of China’s biggest lenders have fallen by double digits in recent weeks as the health crisis has worsened
China’s banks may be “severely tested” as a rapidly spreading coronavirus outbreak could have a much deeper effect on the country’s slowing economy than the severe acute respiratory syndrome (Sars) outbreak did in 2003, according to S&P Global Ratings.
S&P analyst Ming Tan said the initial effects “seem worse than Sars” as at least 15 cities have been locked down in Hubei province near the epicentre of the outbreak in Wuhan and a number of local governments have asked businesses to let their employees work from home until next week.
The eventual effect on China’s gross domestic product (GDP) growth would depend largely on the severity of the virus attack and how long it disrupts economic activities, Tan said.
“Although the Chinese banking sector and the economy are much stronger today than they were in 2003 and are in better financial shape to meet the challenges, Sars happened when the Chinese economy was gaining momentum after joining the World Trade Organisation in 2001,” Tan said in a research note.
“With that momentum, the economy probably rebounded from Sars faster than it otherwise would. Currently, the Chinese economy is facing multiple risks, which could slow down the recovery of economic activities and potentially bring more pain to the banking sector.”
The coronavirus outbreak has afflicted more than 20,000 people worldwide and killed at least 426, the vast majority in China. It has infected more people in China than Sars did in 2003.