Impact of Corona Virus on the Chinese Economy

February 2, 2020

 

With nearly 12,000 people infected and 250 confirmed deaths in the last month, the Chinese centralized Corona virus continues to shock the world with it’s aggressive transmission rate and lethality. Not only does the Corona virus pose a drastic threat to the health of Chinese citizens, but also to the Chinese economy. The Chinese government has already begun to flood the medical field with billions of dollars in attempts to contain the virus and help possible victims maintain their health. Last Wednesday, the Chinese government claimed it has already dedicated 27.3 billion yuan in subsidies, approximately 3.94 billion dollars, to aid Corona virus prevention and containment. 

 

Although the impact of the massive relief funds on Chinese economy is likely to be felt more in the short term, there are other factors that could weaken the Chinese economy for a longer period. Due to the virus outbreak, government officials extended the Lunar New Year holiday by three days, with Morgan Stanley analysts predicting a subsequent 1.5-2 percentage drop in Chinese industrial production. Furthermore, due to the rapid growth of infected in China, there is a massive shortage of medical supplies thats inadequate to handle the Corona virus outbreak. To cope with shortage, the Government has had to subsidize factories working around the clock during the Lunar Holidays to provide aid. It is impossible to truly understand the impact of the virus outbreak on the Chinese economy until the full scope of the infection rates are understood. However, if the pneumonia-causing virus continues to grow at the current rate without signs of it receding, China could be in for a financially devastating next few months as it continues to battle one of the worst virus’ we have seen to date.

 

Keith Knutsson of Integrale Advisors commented that, “As the deadly Corona virus spreads across the globe, countries are at risk of a massive health and economic emergency. Making sure countries assets are readily liquidated is necessary to contain the virus quickly.”


 

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