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The coronavirus outbreak in China sparked a huge dip in consumer spending. Photo: EPA

Coronavirus: China’s economy lost US$196 billion in January, February, says ex-IMF official

  • Dips in tourism, consumer spending could reduce first-quarter growth by three or four percentage points, according to Zhu Min
  • Massive effort now needed to help country rebound, economist says

The deadly coronavirus outbreak may have cost China as much as 1.38 trillion yuan (US$196 billion) in the first two months of the year because of huge dips in consumer spending and tourism, according to a former senior executive with the International Monetary Fund.

Zhu Min, who was deputy managing director of the International Monetary Fund (IMF) from 2011 to 2016, said that the coronavirus epidemic was likely to have cost the tourism industry about 900 billion yuan (US$128 billion) in January and February compared with last year, while consumer spending on food and drink was likely to have fallen by about 420 billion yuan (US$59.7 billion).

While online spending – particularly on education and entertainment services – would offset some of the losses, the total drain on the economy over the period could be as much as 1.38 trillion yuan, said Zhu, who is currently head of the National Financial Research Institute at Tsinghua University in Beijing, which organised the presentation.

Based on figures from China’s National Bureau of Statistics, that would represent about 3.3 per cent of the country’s total retail sales in 2019.

The falling consumption in the first quarter could knock down growth by three or four percentage points. We need a strong rebound, and that needs 10 times as much effort
Zhu Min

“The falling consumption in the first quarter could knock down growth by three or four percentage points,” Zhu said. “We need a strong rebound, and that needs 10 times as much effort.”

Consumer spending is a cornerstone of the Chinese economy, accounting for almost 60 per cent of its growth last year, but with the coronavirus still far from contained, many local governments are reluctant to allow public facilities like cinemas and restaurants to reopen.

Despite the grim estimates provided by Zhu, his figures did not include car sales, which fell by 20.5 per cent year on year in January, their largest monthly dip in 15 years, according to figures from the China Passenger Car Association.

Sales in the first two weeks of February fell 92 per cent from the same period of 2019, mainly due to showroom closures. Over the whole of 2020, the coronavirus epidemic could cost China 1 million car sales, or about 5 per cent of its annual total, the industry group said.

In an effort to minimise that impact, Beijing has told local governments to introduce stimulus measures to boost car sales, including raising licence quotas in areas where numbers had previously been restricted to help fight air pollution.

Commerce ministry official Wang Bin said on Friday that the central government expected consumer spending to bottom out in March before rebounding in the second half of the year.

As for the economy as a whole, Chen Wenling, chief economist at the China Centre for International Economic Exchanges, a Beijing-based think tank, said this week that even if national production returned to 80 per cent by the end of February, first-quarter growth would still be less than 4.5 per cent. By comparison, China’s economy grew by 6.4 per cent in the first three months of 2019.

Economists from French bank Natixis forecast China’s gross domestic product to grow by between 2.5 and 4 per cent in the first quarter, depending on how quickly the situation was stabilised and the effectiveness of the government’s stimulus measures.

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This article appeared in the South China Morning Post print edition as: hit to economy ‘tops trillion yuan mark’