Economist expects outbreak to have short-term impact

• Friday, February 21, 2020
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[Ferro-Alloys.com] The novel coronavirus pneumonia outbreak will deliver a sharp blow to China's economy, but it won't be "devastating", and recovery will be rapid and without long-term damage, said economist Stephen Roach.

 

He expects first-quarter year-on-year comparisons of China's economic output will be bleak, but said the conditions will improve steadily in the second quarter.

 

"In the third quarter, I think you'll see a meaningful rebound aided by measures taken by the central bank," he told China Daily.

 

Official Chinese manufacturing data are scheduled to be published on Feb 29.

 

Roach said Chinese officials acted aggressively to contain the coronavirus, imposing travel bans and isolating entire cities. He called the actions "draconian" but necessary－and effective.

 

The measures crimped production, workers couldn't travel and many supplies could not be shipped to factories.

 

But there are early indications that manufacturing centers along the coast are resuming production as some travel restrictions are eased, Reuters reported.

 

Limiting travel and instituting quarantines appear to have slowed the spread of the new strain of the coronavirus. Figures as of Thursday morning showed the virus infecting 74,576 people and killing 2,118, or about 2.8 percent of those infected.

 

Roach said he looked at the consumption of coal used to generate electricity as a rough measure of the impact of the coronavirus on China's economy.

 

On Tuesday, Goldman Sachs said the average coal consumption at major power companies was less than 400,000 tons, down about 40 percent from the post-Lunar New Year period in 2019.

 

But three sectors－smelting, chemicals and building materials－account for about 54 percent of China's total industrial demand for electricity. The reduction in coal consumption may underscore the current state of these sectors, but may not be a good indication of the present situation of light manufacturing, including the export-heavy consumer electronics sector, analysts said.

 

The outbreak plays out against a sluggish worldwide economy, but so far the US economy, now in its 11th year of expansion, has not been hit hard.

 

But there are no guarantees.

 

"(Former Federal Reserve chairman Alan) Greenspan said it best: 'The US is not an oasis in the global environment'," Roach said. (CHINA DAILY)

 

 

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