Topline: China may cut its economic growth expectations
for 2020 as the deadly coronavirus outbreak intensifies and continues to take a
toll on the global economy, Bloomberg first reported on Monday.
·
Chinese officials are
weighing options to mitigate the fallout from the fast-spreading coronavirus on
the country’s economy, including lowering its 2020 annual economic growth
target, sources told Bloomberg.
·
China may ultimately
lower its GDP estimates, which had initially been targeting growth of about 6%
this year after China’s economy grew just 6.1% in 2019—its lowest rate in
almost three decades.
·
The country’s growth
target is usually first endorsed by top party officials then announced at an
annual legislative gathering which is scheduled for March 5—though that
process could be delayed as the virus continues
to take a toll on business activity across China, according to Bloomberg.
·
Economists have warned of the coronavirus’ impact on
China’s already slowing economy, which has had to cope with weak domestic
demand, rising debt and fallout from the trade war with the U.S.
·
Bloomberg Economics
forecasts that China’s GDP growth could sink to 4.5% in the first quarter of
2020, while JPMorgan analyst Haibin Zhu slashed his expectations for quarterly
growth to 4.9% from 6.3%.
·
Among other measures
to mitigate the economic damage of the coronavirus, Chinese officials are also
considering selling more special government bonds and increasing the planned
cap on the budget deficit-to-GDP ratio, sources told Bloomberg.
Crucial quote: “The coronavirus is different. It is
big. It’s going to paralyze China. It’s going to cascade throughout the global
economy,” Mohamed El-Erian, chief economic advisor for Allianz and ex-Pimco
CEO, told CNBC in an interview on Monday. “Importantly, it
cannot be countered by central bank policy.”
Key background: The Chinese stock market plunged on Monday—its
first day of trading since the extended Lunar New Year holiday. The market
sell-off came despite Chinese central efforts to ease the economic impact of
the virus with a $173 billion liquidity package. Fears about
the rising severity of the coronavirus, which is now more deadly than the 2002-2003 SARS
outbreak, sent the benchmark Shanghai Composite index down nearly 8%—its worst day of trading since August 2015.
The massive sell-off wiped out nearly $400 billion off of China’s stock
market, and more than 80% of listed companies fell by the maximum daily
volatility limit of 10%.
Crucial statistics: As of Monday, the coronavirus has infected
more than 17,000 people and killed at least 361, according to China’s National
Health Commission. The deadly and fast-spreading virus has easily surpassed the
number of infected seen in 2003 during the SARS outbreak which killed some 800
people and infected 8,000. There are rising concerns over the disease’s impact
on China’s slowing economy, not to mention what effect it could have on slowing global
economic growth.
Big numbers: China's annual projected economic growth rate
of 5.9% could be dragged down by 0.5% to 1%, according to estimates from the Economist Intelligence
Unit, or by as much as 1.2%, according to S&P Global.
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