The unexpectedly severe virus outbreak has put the brakes on the slight improvement in economic activity in China following the signing of the US-China trade agreement in January.
China’s industrial production had rebounded to 6.9 per cent in December 2019 from a historic low of 4.4 per cent in August. Exports also registered a decent growth of 7.9 per cent in January after five consecutive months of contraction. However, the virus outbreak will have negative impact on both demand and supply.
On the demand side, economic activity involving human interactions has been halted. These include tourism, catering and onsite services, and property transactions. In supply, logistic activities are constrained by the interruption of transport services.
Migrant workers are key economic inputs to China’s urban economy. The migration data collected by Baidu’s map tool has a positive correlation with provincial GDP growth. In addition to blue-collar workers, many professional and skilled workers also remain trapped in their home towns. The employees of most multinationals have been asked to work from home, according to anecdotal reports.
ANZ Research’s previous estimate on the impact of the virus was based on the assumption factories can resume production on February 10. That no longer holds true.
As a result, ANZ Research has recalibrated and looked to provide a range of GDP estimates in various scenarios. China’s National Bureau of Statistics compiles its GDP data using the production approach, so GDP has been forecast in different industries based on different rationales.
In the primary sector, using the 2002-03 SARS epidemic as precedence, the impact of the novel coronavirus outbreak on agriculture or the like should be minimal.