Macroscope | Coronavirus: Why markets can count on China’s economy to make a swift recovery after the crisis

Beijing is fighting to contain the epidemic, and it will surely kick-start the Chinese economy just as forcefully afterwards. This is simply the politically astute thing to do, given the public unease over Beijing’s handling of the crisis

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An employee wearing a mask arranges stacks of Chinese yuan notes at a bank in Nantong, Jiangsu province. The People’s Bank of China has been quick to ensure accommodative monetary policy to keep the economy ticking during the coronavirus crisis. Photo: Reuters

Published: 3:00am, 12 Feb 2020Updated: 5:33am, 12 Feb 2020

No one can be complacent about the public health threat posed by the coronavirus 2019-nCoV but unless this turns into a global pandemic with China at the epicentre, then there have to be expectations that the virus’ spread will be reversed.

Once the health emergency is over, the virus containment efforts in China that are delivering a major hit to the country’s economic growth will also be reversed. So markets may need to start pricing in what should be very sizeable economic stimulus measures.

For not only does Beijing have to do everything in its power to contain and reverse the spread of the disease, it must also ensure that once it achieves that, the Chinese economy is able to make up for lost time. Therefore, the Chinese authorities will surely embark on massive stimulus to get the economy back on track.

Currently, the mass quarantine of many millions of people and the virtual shutdown of industry are hurting the world’s second-largest economy, but that is arguably the way it has to be. President Xi Jinping has declared a “people’s war” on the epidemic, and dealing with it is the government’s top priority now.

But markets can expect Beijing to be just as forceful in its efforts to kick-start the economy afterwards. That’s not just common sense, it’s also the politically astute thing to do, especially given the level of public unease in China over the government’s handling of the coronavirus crisis.

The outpouring of anger on social media last week after the death of Dr Li Wenliang, whose early attempt to alert the public to the coronavirus only invited official ire, is just one example of popular discontent.