Posted in: Market News
Published:
January 26, 2020 9:24 PM UTC

China’s Economy on the Brink as Coronavirus Fears Intensify

Coronavirus fears are having a negative impact on Chinese markets and the economy as a whole amid concerns of a global outbreak.

  • Coronavirus fears are already hurting China’s economy.
  • The government’s widespread quarantines suggest the problem could be much worse than we think.
  • Chinese social media posts give clues about the true extent of the crisis.

The world may be on the verge of the next global pandemic. So far, the Wuhan coronavirus has infected over 2,000 people – killing 56. It’s spreading all over the world with cases in East Asia, Australia, and the United States.

As the virus rages on, experts fear that it may mutate into more virulent and deadly forms.

The economic impacts are already being felt in China, the epicenter of the outbreak. Chinese President Xi Jinping has issued an urgent address calling for a wide-reaching response to the “grave” situation. He has set up a central committee to manage the outbreak response efforts.

His committee’s extreme quarantines suggest the outbreak could be much worse than previously expected.

Chinese Stocks Continue to Slide

The China large-cap ETF (NYSE:FXI) continues its week-long slide as fears over the virus intensify. According to preliminary data, coronavirus is already having a significant impact on the Chinese economy.

Source: YCharts

Data from Chinese New Year activity reveal the extent of the decline. On the first day of the holiday, there was a 41.6% decline in civil air travel, a 45.5% drop in rail travel and a 25% drop in road travel.

These headwinds could have wide-ranging economic implications.

U.S.-based companies with Chinese operations are also scaling back their operations. Shanghai Disneyland has shuttered its parks along with Starbucks (NYSE:SBUX), which is closing all outlets in Hubei province. Ford (NYSE:F) and General Motors (NYSE:GM) have also restricted employees from traveling to China.

The Chinese Government is Putting Entire Cities Under Quarantine.

The Chinese government is taking swift and aggressive actions to curtain the spread of the Wuhan Coronavirus. The government has restricted travel in 13 cities, affecting a total population of 35 million people. This is the largest intervention of its kind in history, and is raises a disturbing question.

Is the situation even worse than we think?

Source: Twitter

Across social media, Chinese users are posting images and videos that purport to show infected people collapsing in public due to the Coronavirus. There are also reports of medical staff lamenting the dire situation in overcrowded hospitals.

While these reports are unconfirmed, they do provide useful insights into how the Chinese government may be covering up the true extent of the outbreak.

This article was edited by Sam Bourgi.

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William Ebbs @ebbs_william

As a writer with over five years of experience, William Ebbs has contributed to CCN, The Motley Fool, and other wonderful clients. He has earned millions of page views with his hard-hitting, opinionated work. He focuses on financial markets and entertainment. When Will isn't writing, he enjoys strategy gaming, world travel, and researching for his next article. William Ebbs is based in the United States of America and can be reached at qzh8778@outlook.com

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