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China economy
Opinion
SCMP Editorial
SCMP Editorial

Editorial | Nervous economies wait and hope over coronavirus cases

  • As outbreak threatens to deliver further blows to growth of both China and the world, signs of a peak in the number of new infections is eagerly awaited

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The People's Bank of China has pumped hundreds of billions into financial markets in an attempt to cushion volatility. Photo: Reuters
SCMP Editorial
China’s economy and the world’s are already suffering subpar growth. The coronavirus outbreak has made things worse. Still recovering from months of civil unrest, Hong Kong is caught in the middle and has entered its first recession for a decade. The world’s second largest economy expanded by 6.1 per cent last year, the worst in 29 years, as it faces weak domestic demand and continuing trade tensions with the United States.

The epidemic is expected to deliver a harsh blow to first-quarter growth. Consumer discretionary spending, travel and manufacturing have all been hit hard.

To reverse the economic damage, Beijing has allowed millions to return to their jobs after the extended Lunar New Year holiday despite the nation being on heightened alert. The central bank has pumped hundreds of billions into financial markets in an attempt to cushion volatility.

The threat to manufacturing was underscored when international carmakers such as Nissan and French groups PSA and Renault pulled out foreign staff. Wuhan, the epicentre of the outbreak, is a major automotive hub also hosting plants for Honda, General Motors, Geely and Renault, as well as parts suppliers.

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In Hong Kong, airlines such as Cathay Pacific have been under pressure as people shun air travel. The city’s flag carrier plans to scale back capacity by 1.4 per cent this year. Wholly owned subsidiary Cathay Dragon, which has borne the brunt of anti-government protests, has offered cabin crew up to 11 months of unpaid leave.

As the International Monetary Fund has noted, world GDP grew by 2.9 per cent last year, low by historical standards. Matching or exceeding it this year will prove a challenge.

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Beijing has taken unprecedented measures to halt the spread of the virus. Hopefully, China’s economy will recover quickly once infections peak. According to two new studies by AJ Bell and JPMorgan, China, Mexico, Africa and Brazil all recovered, respectively, from Sars, swine flu, Ebola and Zika outbreaks within months after new cases peaked.

Health experts now expect that the number of new cases will peak in the coming weeks as there are signs of stabilisation despite rising fatalities. China and the world had better keep their fingers crossed.

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