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the blow to the Chinese economy could be felt for years
05:01 on 26.8.2020

the blow to the Chinese economy could be felt for years

Investors are still being fairly complacent about the novel coronavirus. After the number of new daily cases suddenly shot up to more than 15,000 on February 12 following more than a week of decline, there were some jitters in the markets. With Chinese authorities saying the increase was due to a decision to broaden the definition for diagnosing people, there were falls in the region of 1% in European markets, and smaller retrenchments in Asia and North America.To get more latest china economy news, you can visit shine news official website.

It is a fairly minor shift in sentiment after a few days in which investor concerns had been steadily receding. There appears to be a real danger of underestimating the likely economic impact of this crisis. China’s manufacturing sector in particular faces an unprecedented challenge because supply chains have been so seriously disrupted.
Well over 80 cities have gone into lockdown, including the entire areas of five Chinese provinces – Hubei, Liaoning, Jiangxi, An’hui and Inner Mongolia – and four main cities in Zhejiang province, affecting well over 275 million people. Since February 10, Beijing and Shanghai have further restricted the movement of people, having already extended the Chinese New Year break.

My parents live in Jiangxi province and are among millions semi-quarantined at home. The local government allows one person from each household to go out every two day to buy necessities. Even in cities not under compulsory lockdown, there are rarely people on the streets. The tweet below shows the Nanjing Road in Shanghai, the busiest shopping precinct in the country. It was taken on January 26 but the situation is not much better now.

This is taking a serious toll on the Chinese economy. No statistics on the actual losses are available yet, but for example, the number of intercity passengers on public transport during the new year break was only 60% of 2019 levels.

Xibei, a famous dining brand with 350 restaurants and RMB5.7 billion (£628 million) annual revenues, said takings during the holiday period were down 87% year on year. The contrast with last year, when Chinese tourism, retail and catering revenues all rose by around 8% during the new year period, is likely to be huge.The problems in the Chinese services sector are primarily a demand shock. This will probably rebound once the epidemic is contained, just like during the Sars outbreak of 2003. The Chinese inflation rate based on the consumer price index (CPI) turned down during peak crisis between February and June 2003, then quickly shifted to positive.

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