London Daily

Focus on the big picture.
Thursday, Sep 11, 2025

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
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
On the Anniversary of Queen Elizabeth’s Death: Prince Harry Returns to Britain
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Murdoch Family Finalises $3.3 Billion Succession Pact, Ensuring Eldest Son’s Leadership
Big Oil Slashes Jobs and Investments Amid Prolonged Low Crude Prices
Court Staff Cover Up Banksy Image of Judge Beating a Protester
Social Media Access Curtailed in Turkey After CHP Calls for Rallies Following Police Blockade of Istanbul Headquarters
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
Elon Musk Poised to Become First Trillionaire Under Ambitious Tesla Pay Plan
France, at an Impasse, Heads Toward Another Government Collapse
Burning the Minister’s House Helped Protesters to Win Justice: Prabowo Fires Finance Minister in Wake of Indonesia Protests
Brazil Braces for Fallout from Bolsonaro Trial by corrupted judge
The Country That Got Too Rich? Public Spending Dominates Norway Election
Nearly 40 Years Later: Nike Changes the Legendary Slogan Just Do It
Generations Born After 1939 Unlikely to Reach Age One Hundred, New Study Finds
End to a four-year manhunt in New Zealand: the father who abducted his children to the forests was killed, the three siblings were found
Germany Suspends Debt Rules, Funnels €500 Billion Toward Military and Proxy War Strategy
EU Prepares for War
BMW Eyes Growth in China with New All‑Electric Neue Klasse Lineup
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
US Justice Department Launches Criminal Mortgage-Fraud Probe into Federal Reserve Governor Lisa Cook
Escalating Drug Trafficking and Violence in Latin America: A Growing Crisis
US and Taiwanese Defence Officials Held Secret Talks in Alaska
Report: Secret SEAL Team 6 Mission in North Korea Ordered by Trump in 2019 Ended in Failure
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Florida Murder Case: The Adelson Family, the Killing of Dan Markel, and the Trial of Donna Adelson
×