China coronavirus could inflict more economic pain than Sars, analysts say

The coronavirus outbreak has cast fresh doubts on the trajectory of the Chinese economy, with economists saying the fallout could be worse than Sars

China is already grappling with record low economic growth and the disruption is likely to hit investment and production, analysts say

4-MIN READ4-MIN

Many cities across China have turned into virtual ghost towns, with entertainment venues, restaurants and shops closing their doors due to the coronavirus. Photo: AFP

Published: 8:30pm, 30 Jan 2020Updated: 7:05pm, 15 Feb 2020

The outbreak of a novel coronavirus in China is increasingly viewed by analysts as posing a greater threat to growth in the world’s second biggest economy than that of the Sars epidemic more than 15 years ago.

The virus, which originated in the central Chinese city of Wuhan but has spread to every province, municipality and autonomous region, has cast fresh doubts on the trajectory of the Chinese economy, from its ability to support US purchasing demands as part of the phase one deal or meet Beijing’s goal of doubling gross domestic product (GDP) between 2010 and 2020.

It has come as the country’s growth rate hit its lowest level in nearly three decades, slowing to 6.1 per cent in 2019.

The new pneumonia virus, which on Thursday had killed at least 170 people in China and infected nearly 8,000 around the world, nearing the total number of cases caused by the severe acute respiratory syndrome (Sars) epidemic in 2002-2003.

As the disease has spread, government controls to contain the outbreak have seen entertainment, commercial and transport activity across the country grind to a halt, turning the Lunar New Year holiday, which is famed for consumer spending, into a period of silence.

While there are hopes it may only have a short-lived impact on economic growth, much like that of Sars, analysts say circumstances have changed drastically since the beginning of the 21st century, meaning the disease could leave much deeper scars.

Zhang Ming, a researcher at the Chinese Academy of Social Sciences, said in the case of an “optimistic scenario” where the outbreak was brought under control by late March, China’s GDP growth rate in the first quarter could still drop below 5 per cent.