What impact the coronavirus?

CHINA FINANCIAL - Report 29 Jan 2020 by Michael Pettis

Special points to highlight in this issue:
• The Wuhan coronavirus will have a significant impact on the underlying growth rate of the Chinese economy, but this will not show up as lower GDP growth. It will show up as faster credit growth.
• The ultimate impact of the coronavirus is likely to be to reduce expected consumption growth in 2020 and increase expected public sector spending on infrastructure.
• The recent fall in the prices of certain commodities is likely to be reversed before the end of the year.

At this point it is hard to believe that the rapid spread of the coronavirus from Wuhan is likely to end any time soon. We know that the disease has a long incubation period before symptoms begin to appear, even as the disease is highly contagious in this early stage. We also know that the disease had emerged at least forty days earlier, and possibly more, before Wuhan was closed down on January 23, during which time as many as five million people fled this city of eleven million (with many other streaming in earlier, unaware of the epidemic). Because Wuhan is a major hub connecting the east and southeast regions of China, and because of the Spring Festival celebrations, in which hundreds of millions of Chinese jam the trains and buses to return to their families to celebrate, we also know that people leaving Wuhan must have shared crowded trains and buses with tens of millions of other Chinese travelers.

Now read on...

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