London Daily

Focus on the big picture.
Thursday, Mar 05, 2026

Can the Chinese economy weather the storm of 2019-nCoV outbreak?

Can the Chinese economy weather the storm of 2019-nCoV outbreak?

Chinese stock markets witnessed sharp falls Monday as they reopened following the end of the Lunar New Year break, reflecting the widespread concern on the negative impact the coronavirus outbreak is having on the country's economy.

Since January 20, when the Chinese President Xi Jinping made remarks on containing the spread of the coronavirus, the nation has been placed on high alert. As the situation escalates, the country has mounted an aggressive offensive against the novel coronavirus. Since January 23, travel in and out of China's Hubei Province, the epicenter of this outbreak, has been severely restricted. Travel restrictions have later expanded to other regions, while people across the country have stepped up precautions and avoided gatherings or nonessential travel. Furthermore, as the Lunar New Year holiday was extended, most businesses have delayed reopening.

All these reactions undeniably will have adverse implications for the country's economy, at a time when it is still reeling from its two-year-long trade tensions with the U.S. and grappling with a slowing economy.

But how big of a blow will it be exactly? And will the country make it through? As there is still uncertainty surrounding how the outbreak will play out in the following weeks, it is hard to have a definitive conclusion and quantify the impact at this stage.

Nevertheless, a look at China's experiences with the 2003 SARS epidemic can shed some light on the current situation, in terms of which sectors will be affected most and how long-lasting the impact will be. And despite all the concerns over 2019-nCoV's negative impact, the conclusion is that there is no need for over-panic or excessive stress.

Lu Zhengwei, chief economist at Xineye Bank, pointed out that during the 2003 SARS outbreak, which lasted for three quarters, the types of industries that were affected the most were transport, retail, restaurants and tourism. However, soon after the epidemic was over these industries quickly rebounded. And this should happen this time as well. Meanwhile, he added that over the past 17 years, there have been major changes in the Chinese economy which saw the above-mentioned industries take a smaller percentage in the country's GDP. With this in mind, disruptions felt by these industries should be smaller compared to during the SARS.

Looking at the timing of the outbreaks, Li Xunlei, chief economist and head of research institute at Zhongtai Securities, also noted that the impact the SARS epidemic had on the Chinese economy was mostly felt in the second quarter of 2003 with the growth rates of the four quarters that year being 11.1 percent, 9.1 percent, 10 percent and 10 percent respectively. He predicted that as the spread of the 2019 novel coronavirus is happening in the first quarter of 2020, if it doesn't continue into the second quarter, the impact will most likely be limited to the first quarter, the GDP share of which is the lowest among the four quarters.

Another major source of confidence comes from the fact that compared to the SARS outbreak, the 2019 novel coronavirus is less lethal and the Chinese government has acted more resolutely against the virus this time. There is no doubt that since late January, the Chinese government has made combating the coronavirus a national priority, deploying massive efforts to stop its spread. With the constant information sharing with the public and rigorous research efforts, there is a good reason to believe this outbreak can be much more efficiently dealt with than during the SARS episode.

More importantly, past experiences with global epidemics, not only the SARS but also the 2015-16 Zika outbreak and the 2009 H1N1 flu, suggest that the economic shock wave felt during these events are only short-lived. After the outbreaks, economies were always able to bounce back. Economist and Columbia University's School of International and Public Affairs Professor Shang-Jin Wei, also wrote in an article, "Looking at [China's] annual real GDP growth rates from 2000 to 2006, it is very hard to see a SARS effect in the data."

Nevertheless, even though the 2019-nCoV outbreak will not likely hurt the fundamentals of the economy, it does not mean the government should be complacent in dealing with its economic fallout, which the country's economists have repeatedly called attention to in recent days.

One concerning issue that has been highlighted is the pressure the 2019-nCoV outbreak put on China's small businesses. Extended holidays and subdued domestic demand will no doubt add to their financial stress. This will consequently have a damning effect on the country's employment, especially considering the most affected industries, such as transport and restaurants, employ a lot of the country's cheap labor. Moreover, if the crisis continues and causes exports to slow down, the labor-intensive and export-oriented companies will also have to lay off workers.

Huang Yiping, professor of economics at the National School of Development (NSD) of Peking University, provided suggestions on dealing with these problems: Firstly, the People's Bank of China should loosen its monetary policy; secondly, policies needs to be instituted to support the new economy and increase online consumption. Third, the government should offer small and medium-sized enterprises tax reduction; fourth, it should also shore up support for people who lost their jobs during the outbreak and strengthen social protections for migrant workers.

In conclusion, the Chinese economy will most certainly be able to weather the storm this time, as it did with the SARS outbreak. However, the government's response to support the economy, especially the country's small businesses, is also crucial and will have long-term impacts on how quick the economy will be able to regain its feet.

Newsletter

Related Articles

0:00
0:00
Close
Iran Conflict Strains U.S.–U.K. Alliance as Trump and Starmer Clash Over Military Strategy
UK Interest Rates Could Rise Above Four Percent Again if Energy Shock Continues, Think Tank Warns
Starmer Defends Britain’s Iran Strategy as Badenoch Urges Stronger Military Support
Labour MP Says She Saw No Sign Husband Broke Law After Arrest in China Espionage Investigation
UK Jobless Rate Overtakes Italy’s for First Time in Years as Labour Market Weakens
United Kingdom Suspends Student Visas for Four Countries in Unprecedented Immigration Move
Campaigners Warn UK Student Visa Ban Could Push Migrants Toward Dangerous Channel Crossings
First U.K. Charter Flight for Stranded Nationals Set to Depart Oman Amid Middle East Crisis
France and United Kingdom Deploy Warships to Eastern Mediterranean as Middle East Conflict Escalates
U.K. Arrests Three Men Including Lawmaker’s Partner in Suspected China Espionage Investigation
Trump Says UK–US ‘Special Relationship’ Is Diminished Amid Middle East Dispute
UK Economic Forecasts Face Fresh Strain from Middle East Conflict and Rising Energy Costs
UK Reaffirms Close US Ties After Trump’s Public Criticism
Reeves Stresses Stability and Fiscal Discipline in UK Budget Update as Growth Outlook Shifts
UK Deploys Royal Navy Destroyer HMS Dragon to Cyprus After Drone Strike on RAF Base
Green Party Surges Past Labour in New UK Poll as Traditional Party Support Crumbles
Majority of Britons Oppose U.S. Use of UK Military Bases in Iran Conflict
UK Intensifies Evacuation Efforts from Oman, Working with Airlines to Boost Flight Capacity
Trump Condemns UK and Spain in Unusually Sharp Rift Over Iran Military Action
Trump Repeats UK Claims That Diverge from Verified Facts Amid Diplomatic Strain
UK Arrests Prominent Figures Linked to Epstein Network as Questions Mount Over US Action
Trump Says UK ‘Took Far Too Long’ to Approve Use of Airbases for Iran Strikes
Scope of Britain’s Role in the Expanding Middle East Conflict Comes Under Scrutiny
Trump Says He Is ‘Very Disappointed’ in Starmer Over Iran Comments
U.S. Embassy in Riyadh Struck by Drones Amid Escalating Iran Conflict
Starmer Confronts Strategic Test After Drone Strike Near British Base in Cyprus
Rolls-Royce Chief Signals Openness to Germany Joining UK-Led Fighter Jet Programme
UK Stocks Slip as Escalating Iran Conflict Triggers Global Market Selloff
UK Overhauls Asylum System to Make Refugee Status Temporary
Starmer Warns of ‘Reckless’ Iranian Strikes Amid Escalating Regional Tensions
British Base in Cyprus Targeted as Drones Intercepted Amid Expanding Iran Conflict
Starmer Diverges from Trump on Iran Strategy, Rejects ‘Regime Change from the Skies’
U.S. and Israel Intensify Strikes on Iran as Conflict Expands to Lebanon and Gulf States
Violent Pro-Iranian Protesters Storm U.S. Consulate in Karachi
Missile Debris Sparks Fires at Dubai’s Jebel Ali Port Near Palm Jumeirah
Iran Strikes U.S. Fifth Fleet Headquarters in Bahrain Amid Wider Gulf Retaliation
When the State Replaces the Parent: How Gender Policy Is Redefining Custody and Coercion
Bill Clinton Denies Knowing Woman in Hot Tub Photo During Closed-Door Epstein Deposition
Former U.S. President Bill Clinton Testifies on Ties to Jeffrey Epstein Before Congressional Oversight Committee
Dyson Reaches Settlement in Landmark UK Forced Labour Case
Barclays and Jefferies Shares Fall After UK Mortgage Lender Collapse Rekindles Credit Market Concerns
Play Exploring Donald Trump’s Rise to Power by ‘Lehman Trilogy’ Author to Premiere in the UK
Man Arrested After Churchill Statue Defaced in Central London
Keir Starmer Faces Political Setback as Labour Finishes Third in High-Profile By-Election
UK Assisted Dying Bill Set to Fall Short in Parliament as Regional Initiatives Gain Ground
UK Defence Ministry Clarifies Position After Reports of Imminent Helicopter Contract
Independent Left-Wing Plumber Secures Shock Victory as Greens Surge in UK By-Election
Reform UK Refers Alleged ‘Family Voting’ Incidents in By-Election to Police
United Kingdom Temporarily Withdraws Embassy Staff from Iran Amid Heightened Regional Tensions
UK Government Reaches Framework Agreement on Release of Mandelson Vetting Files
×