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Coronavirus: China faces economic hit from deadly outbreak | Business News

By January 24, 2020 No Comments
Tourists visit the Jiankou Great Wall covered in snow on December 16, 2019 in Beijing

Beijing’s Forbidden City, part of the Great Wall and Shanghai Disneyland are among the attractions to close as China moves to contain a deadly virus that threatens to take an economic as well as a human toll.

The country has introduced travel restrictions affecting more than 30 million people across 10 of its cities in Hubei province, including Wuhan, the epicentre of the infection.

So far 26 people have died in China, with more than 800 infected.

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Shanghai Disneyland is closed to the public during what is usually a busy holiday period

In response to the crisis, McDonald’s has temporarily shut outlets in five cities following the coronavirus outbreak, while hotels and airlines are offering refunds to people travelling to the country.

The owner of Uniqlo has closed 17 of its shops in Wuhan, with the Swedish flat-pack giant Ikea following suit with its superstore at the request of authorities.

Film premieres have also been postponed.

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With parts of the country in virtual lockdown at the start of the usually busy week-long holiday to mark the Lunar New Year, the virus is expected to damage China’s growth after months of economic worries over trade tensions with the US.

Economists estimate China’s GDP for the first quarter could be hit by about one percentage point, with tourism, retail and hospitality all set to take an impact.

Shares in luxury goods firms have suffered from the anticipated drop in demand from China, and French spirits group Remy Cointreau said it was “clearly concerned” about the potential impact.

However, global stock markets, including London’s top-flight FTSE 100, rose after the outbreak was not declared a global emergency.

Gareth Leather from the research consultancy Capital Economics told Daily Week News the 2003 outbreak of Severe Acute Respiratory Syndrome (SARS), which also began in China and killed nearly 800 people, may give an indication on the likely impact of the latest virus.

Speaking to the Ian King Live programme, he said: “If you look at 2003, the sectors of the economy in China that were hardest hit and also across the rest of Asia were things such as tourism, retail sales, restaurants.

“People were afraid to go out shopping, go out to the movies… and so all those sectors plummeted.

“But as soon as SARS stopped and was brought under control they rebounded again quite strongly.

“The chances are if its a similar kind of outbreak you will get a short, sharp downturn and then rebounding pretty quickly.”

But given it coinciding with celebrations to mark the Year of the Rat, he added: “In terms of the timing it couldn’t really be worse.”

Mr Leather also warned it was not just China which would take an economic hit, with Hong Kong, Vietnam, Thailand and Cambodia all set to feel the impact from the drop in tourism.

Passengers at Shanghai railway station wear facemasks as they travel home for the Lunar New Year

China faces ‘short, sharp downturn’

Meanwhile, Gloria Guevara, president of the London-based World Travel and Tourism Council (WTTC), said transparent communication was vital to “contain panic and mitigate negative economic losses”.

The group had estimated the previous SARS outbreak of 2003 cost the global travel and tourism sector up to £38bn.

Ms Guevara said: “The most effective management of a crisis requires rapid activation of effective emergency plans, and we can see that in the early days of this outbreak, the Chinese government has acted rapidly.

“However, quick, accurate and transparent communication is also crucial in order to contain panic and mitigate negative economic losses. Containing the spread of unnecessary panic is as important as stopping the virus itself.”

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