Chinese economy hit by coronavirus
Chinese economy hit by coronavirus
Since December last year, 31,000 people have been infected with the coronavirus worldwide and more than 600 people have died from the outbreak. Today, it was confirmed that a British man has been quarantined with the virus in Japan, while three other people are undergoing treatment for coronavirus here in the UK.
But it’s not just people who are set to feel the impact of this epidemic as economists are now predicting the coronavirus will have a significant effect on the global and Chinese economies.
Many businesses remain shut in China as part of the lockdown to contain the virus, while most overseas airlines have suspended flights to the country and Chinese people have been banned from travelling overseas.
The impact on an already slowing Chinese economy is starting to take its toll. Stock markets in China have seen the biggest daily fall for five years as traders rushed to sell amid continued fears about the impact on the global economy of the coronavirus epidemic.
Chinese authorities have committed to a series of measures to tackle the market panic, including plans to flood the financial system with 1.2 trillion yuan (US$170bn) in extra liquidity to buy up securities from investors seeking to sell.
However, economists at Citigroup have warned the steps taken so far are unlikely to be enough to prevent a sharp downturn in the first quarter.
Goldman Sachs has predicted that the virus could knock Chinese growth down to 5.5% for the year, from 6.1% in 2019, with knock-on effects for the rest of the world economy.
Yesterday, Reuters reported that China’s banking and insurance regulator (CBIRC) has asked lenders to assess the impact of the coronavirus outbreak on their borrowers. Regulators in Beijing have also reportedly asked banks to file reports.
In Guangdong, the CBIRC has pledged to provide support for firms in the retail, wholesale, catering, logistics, transportation and tourism sectors that have been hit by the outbreak.
And on Monday, China’s central bank lowered the interest rate it charges banks for short-term funding.
Capital Economics believes that while the central bank’s move might take some pressure off the banks, the rate cut was not enough to offset the drag on economic activity from the coronavirus outbreak and that more rate cuts were therefore on the way.
- Why central banks may not be able to save China’s economy from the coronavirus
- Chinese shares drop nearly 9% amid fears of coronavirus impact
- China regulator asks banks to weigh coronavirus impact on borrowers
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