Coronavirus: China’s economy faces tough time as epidemic set to weigh on exports

Despite efforts to get domestic production back on track, the global spread of the deadly disease is likely to cause a sharp decline in demand for Chinese products

First quarter contraction remains on the cards as measures to contain outbreak at home bite into consumer spending

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The value of China’s exports for January and February fell 17.2 per cent from the equivalent period of 2019 to US$292.45 billion. Photo: Martin Chan

Published: 8:30pm, 7 Mar 2020Updated: 2:09pm, 16 Mar 2020

The road ahead for China’s foreign trade will remain difficult as the full impact of the coronavirus outbreak now spreading around the world has yet to be felt, analysts said after the country recorded its first trade deficit in eight years in the January-February period.

While the Chinese economy has started to recover, progress has been slow, reducing the amount of goods able to be shipped to foreign markets. As the virus spreads overseas, China faces the risk that foreign demand for its goods will weaken sharply.

That would put more downward pressure on an economy already reeling from the impact of the epidemic on domestic industries. Some economists now expect China’s economy to contract in the first quarter.

Although Beijing did not begin publishing quarterly growth figures until the 1990s it has not reported a full-year economic contraction since 1976, the year of Mao Zedong’s death and the end of the Cultural Revolution.

Another problem facing China is that consumer spending is now a larger contributor to the economy than exports. So while Beijing is hoping for a quick rebound in shipments, even that might not be enough to compensate for the expected dip in consumption caused by the restrictions introduced to contain the virus, which not only stopped people from returning to work after the Lunar New Year holiday – leaving them with no wages – but also closed restaurants and entertainment venues.