China facing ‘negative’ economic impact from Wuhan coronavirus less than a week after signing US trade deal

The coronavirus is threatening to test China’s already fragile economy less than a week after it signed the breakthrough trade deal with the United States

The outbreak is believed to have spread to 20 other Chinese cities, with six deaths confirmed, while also spreading to Taiwan, South Korea, Japan and Thailand

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Travel booking platforms including Trip.com and Fliggy will offer free cancellations on bookings made for Wuhan. Photo: Reuters

Published: 8:00am, 22 Jan 2020Updated: 2:47pm, 17 Feb 2020

Barely a week after China signed its trade deal with the United States, President Xi Jinping has been thrust into a new crisis that has the potential to disrupt an already fragile economy, with analysts suggesting the Wuhan coronavirus could be the first “black swan” event of 2020.

The virus, which started in the city of Wuhan but is believed to have spread to 20 other Chinese cities, is set to “bring negative impact” on economic growth, said Shao Yu, the chief economist at Orient Securities in Shanghai, although warning that it remains too early to count the long-term consequences.

China maintained a growth rate of 6.1 per cent last year, despite the trade war with the United States, in part due to pro-growth policies adopted by the central bank and the government, but Shen Jianguang, a veteran Chinese economist at JD Digit, said that “it’s too early to predict policy responses such as monetary policy easing”.

A year ago, President Xi Jinping told officials to prepare for “grey rhino” risks as well as “black swan” or unexpected events. The trade war with US as well as the unrest in Hong Kong were often cited by scholars as the “black swans” events of 2019.

“A black swan always arrives in an uninvited way,” Guan Qingyou, an economist with Minsheng Securities, wrote on his Weibo, with followers debating the level of impact the virus could have on the economy, with one user even suggesting it could have a greater effect than the US trade war.

Rajiv Biswas, the Asia-Pacific chief economist at IHS Markit, noted that the Wuhan outbreak was “developing into a major potential economic risk to the Asia-Pacific region” after human-to-human transmission was confirmed just days before the week long Lunar New Year holiday.

The outbreak, which brings with it memories of the severe acute respiratory syndrome (Sars) epidemic in 2003, has seen demand for medical supplies such as masks rise, while forced some to change their travel plans for the Lunar New Year holiday.