\n\tLast year\u2019s tit-for-tat trade war between China and the US, which \ninvolved both sides slapping import tariffs on hundreds of billions of \ndollars\u2019 worth of goods, knocked China\u2019s already ailing GDP growth rate \ndown to six percent in 2019 and helped depress global growth: It fell \nfrom 3.6 percent in 2018 to three percent last year, the Guardian \nreported.<\/p>\n\n\n\n
\n\tA Chinese official warned last week that the spread of the virus from \nits beginnings in Wuhan to about 10,000 victims across the country would\n add to the damage from the trade war, and possibly cause more economic \nharm than the Sars epidemic, almost two decades ago. And with eight key \nregions and two cities in China subject to closure of non-essential \nbusiness until at least February 9, the significance of the epidemic is \nbeyond doubt.<\/p>\n\n\n\n
\n\tZhang Ming, an economist at the Chinese Academy of Social Sciences \n(part of Beijing\u2019s state council), predicted that China\u2019s annual growth \nrate could drop below an annualized five percent in the January-March \n2020 quarter. That would be a sharp slowdown compared with six percent \nannualized growth in the previous quarter.<\/p>\n\n\n\n
\n\tGoldman Sachs believes the fast-spreading coronavirus will knock 0.4 \npercentage points from annualized growth in the US over the first \nquarter of 2020, as Chinese tourism to the US dips and exports of \nAmerican goods to China take a hit. Its central forecast is for a \npartial rebound in US growth in the second quarter, but the risks are \n\u201cskewed towards a larger hit\u201d.<\/p>\n\n\n\n
\n\t \u201cA change in the news flow could lead to increased domestic \nrisk-aversion behavior or a sustained tightening in financial \nconditions. A larger outbreak of the virus in the US or the fear thereof\n could lead to a decline in domestic travel, commuting and shopping,\u201d \nGoldman noted.<\/p>\n\n\n\n
\n\tIn 2002, Sars spread virtually unchecked to 37 countries, causing \nglobal panic, infecting more than 8,000 people and killing about 750. \nThe coronavirus is spreading at a faster rate.<\/p>\n\n\n\n
\n\tThe Center for Economics and Business Research (CEBR) said that because\n those who contract it are infectious before experiencing symptoms, the \ncoronavirus could be much worse. Quarantine measures will largely be \u201ca \nmatter of shutting the stable door after the horse has bolted, unless \nthey apply well beyond those who are currently infected,\u201d it said.<\/p>\n\n\n\n
\n\tThe Chinese authorities were praised last week by the World Health \nOrganization (WHO) after it declared the coronavirus to be a public \nhealth emergency of international concern. But both the communist-run \ngovernment in Beijing and the WHO have faced severe criticism for \nreacting slowly given what is known about the rapid spread of the virus.<\/p>\n\n\n\n
\n\tIt is not easy to estimate the extent of the economic damage the virus \nis likely to inflict, but it is possible to use the Sars epidemic as a \nguide. Pantheon Macroeconomics estimated that Sars dragged China\u2019s \nquarterly growth rate down to 1.8 percent in April-June 2003, from an \naverage of 2.8 percent. The CEBR said the knock-on effect to world GDP \nwas a fall in 2003 of between $30 billion and $100 billion, which was \nequal to between 0.08 percent and 0.25 percent of global GDP.<\/p>\n\n\n\n
\n\t\u201cOur worst-case calculation assumes that the coronavirus has a six \ntimes multiple effect on the Chinese economy. As the Chinese economy is \nnearly four times larger relative to the world economy [than in 2002], \nscaling up for this as well would create a world GDP negative impact of \n1.8 percent to six percent based on the retrospective estimates of the \nimpact of Sars,\u201d the CEBR said.<\/p>\n\n\n\n
\n\t\u201cWith world GDP set to grow by 2.9 percent this year before the \ncoronavirus impact became apparent, it is clear that unless a cure and a\n vaccination are found rapidly, the fragile recovery that we predict is \nat risk.\u201d<\/p>\n\n\n\n
\n\tBritain and the rest of Europe have already had people return from \nChina with confirmed or suspected cases of the virus, leading many \nairlines to suspend flights to China and in some cases Hong Kong, though\n not Macau so far. The US and Canada have also seen their first cases \nand warned citizens not to travel to China.<\/p>\n\n\n\n
\n\tThe economic impact, though, will be most keenly felt across Southeast \nAsia, where China is not only a major trading partner but a source of \nvital revenue from tourism.<\/p>\n\n\n\n
\n\tA decline in tourism spending has already hit the main cruise lines. US\n operator Royal Caribbean Cruises has cancelled three trips scheduled in\n February, which will hit 2020 earnings by about 10 cents per share, the\n company said. A ship owned by the Carnival Corporation, which is listed\n in New York and London, was briefly put in quarantine in the Italian \nport of Civitavecchia, trapping 66 Britons and 6,000 other passengers.<\/p>\n\n\n\n
\n\tShares in Norwegian Cruise Line Holding, Royal Caribbean and Carnival \nwere all at least five percent lower on the New York stock exchange \nfollowing the Italian incident before recovering some of their losses on\n Friday.<\/p>\n\n\n\n
\n\tThe consultancy S&P Global Market Intelligence said the decision of\n regional governments to extend factory closures beyond February 2 to \ncontrol the virus\u2019s spread will be a major blow to China\u2019s GDP.<\/p>\n\n\n\n
\n\tInternational companies are beginning to find ways of circumventing \nChinese companies to obtain electronics parts, though US commerce \nsecretary Wilbur Ross made it clear he thought most firms were unlikely \nto question strategic business relationships as a result of the \noutbreak.<\/p>\n\n\n\n
\n\tThat said, Apple, General Motors, Ikea and Starbucks have closed much \nof their Chinese operations, as have many other foreign companies.<\/p>\n\n\n\n
\n\tChris Rogers of S&P said commitments to buy $33.4 billion of US \nagricultural exports this year, made by Beijing as part of a truce in \nthe trade war, might be difficult to meet.<\/p>\n\n\n\n
\n\tBut he believes there will be an opportunity later in the year to make \nup for lost time. The expectation is that the coronavirus will soon be \nunder control and the overall effect, even on the Chinese mainland, will\n be limited.<\/p>\n\n\n\n
\n\tThe consultancy Oxford Economics has cut its forecast for global growth\n this year from 2.5 percent to 2.3 percent, which would be the lowest \nsince the 2008 financial crash. \u201cWriting in Caijing magazine, Zhang Ming\n said the coronavirus\u2019s economic impact could be \u201csignificantly bigger\u201d \nthan Sars, based on a forecast that the outbreak would peak in \nmid-February and end by April.<\/p>\n","protected":false},"excerpt":{"rendered":"
With tens of millions of Chinese people quarantined inside their cities and thousands of factories closed, it is already clear that the coronavirus is about to sideswipe the global economy. Last year\u2019s tit-for-tat trade war between China and the US, which involved both sides slapping import tariffs on hundreds of billions of dollars\u2019 worth of […]<\/p>\n","protected":false},"author":1,"featured_media":2966,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2,8,6],"tags":[966,1018],"yoast_head":"\n