Les Echos: The Coruna virus hit the Chinese economy hard

If it is too early to determine the economic impact of the new Coronavirus, which has spread in China, some sectors such as tourism, trade and transportation have already been affected.

After 18 months of tensions, the goal of signing the trade agreement with Washington on January 15 was to bring more recovery to the Chinese economy, writer Friedrich Scheffer said in a report published by the French newspaper "Les Echos".

More recently - the author adds - the Chinese government has registered with satisfaction signs indicating the stability of the economy, after recording periods of slowdown, but it appears that it has not taken into account the spread of the new Coronavirus and the strict measures to try to eradicate it.

Although it is too early to determine the economic impact of the epidemic, some sectors have been hit hard, according to the author.

"The epidemic is affecting China in the middle of the lunar new year, a period in which families spend more than usual on travel, entertainment and gifts," said Sean Roche, an analyst at Standard & Poor's.

Measures to avoid public gatherings
Even outside the quarantine area that has affected nearly 60 million people in Wuhan, strict measures have been taken across China to avoid public gatherings.

The writer pointed out that tourism in China was badly affected by the virus, as millions of Chinese canceled their trips during the new year.

Since Monday, travel agencies have been prohibited from selling tickets for organized travel and hotel reservations, and this has dealt a severe blow to the local industry, and to many of the preferred destinations for Chinese tourists who have been denied visits in Asia, such as Thailand, Vietnam, Japan and the Philippines, and in France as well.

Luxury goods, air transport, and luxury goods in particular have also suffered from a change in investor confidence, according to the author.

Families consumption at the front
The writer emphasized that given the precedent of severe acute respiratory syndrome (SARS) in 2003, economists had expected household consumption to be the engine most affected by the crisis.

"The outbreak of the Coruna virus is likely to have a strong but short-term effect compared to the period of the SARS virus," said analysts at Oxford University's School of Economics.

In the spring of 2003, the growth of the Chinese economy fell to 9.1%, before it recovered quickly, again and at double rates, but there are many changes that require observation.

And if the economic impact - the author says - depends on the duration of the crisis, then "consumption" is occupying much more weight in the Chinese economy than it was 17 years ago, when it constitutes 57% of GDP growth.

The writer noted that the new Corona virus will directly affect the Chinese economy, which is slowing at present.

He also indicated that the new virus is likely to affect production in the large industrial city of Wuhan and in the rest of the country.

But after the elimination of the SARS epidemic, China has become twice as heavy as before the outbreak, and accounts for about a fifth of global GDP, compared to 8.7 percent in 2003, so global growth can be more affected.