From surging inflation to collapsing home sales, China is reeling from the month-old coronavirus epidemic.
Coronavirus is wreaking havoc on the Chinese economy: Inflation surged in January, home sales plunged in the first week of February and GDP growth is expected to be 1 percentage point lower in 2020.
As the true cost of Beijing’s coronavirus cover-up adds up, the Communist Party is quietly ‘removing’ senior officials over their mishandling of the epidemic.
The first week of February was particularly grim for Chinese real estate. New apartment sales dropped a staggering 90% from the same period a year ago, according to data on 36 cities collected by China Merchants Securities Co.
The resale market was also hit hard: Existing home sales plunged 91% in eight cities where data are available.
Even before the outbreak, housing was already on the back foot as government officials adopted measures to curb over-lending and runaway price growth. As Bloomberg reports, Chinese real estate is on course to experience a bigger drop than during the 2003 SARS pandemic.
Shenzhen has reportedly banned all forms of home sales over the rise of infections in the sub-provincial city. Shenzhen’s metro region is home to more than 23 million people.
While some analysts expect home sales to pick up later this year, citizens in quarantined zones have seen their incomes decline. Lockdowns impact as many as 400 million Chinese citizens.
Coronavirus has disrupted businesses and supply chains as residents flocked grocery stores to load up on essential supplies. The result has been a massive uptick in inflation.
On Monday, the National Bureau of Statistics reported that China’s consumer price index surged 5.4% annually in January, the highest in eight years. Compared with December, consumer prices spiked 1.4% after flat-lining the month before.
Analysts at Nomura believe CPI inflation will remain comfortably above 4% annually through the first half of 2020.
Factory-gate inflation also rose in January from a year earlier, snapping six months of year-over-year declines. The producer price index (PPI) edged up 0.1% annually after falling 0.5% in December.
Speculation that coronavirus will lead to a worldwide recession have echoed loudly in recent weeks as the number of infected countries reached 27. As the data on home sales and inflation showed, China’s economy is already suffering.
On Monday, a senior member of the Chinese government attempted to quantify the extent of that suffering.
Zeng Gang, vice chair of the National Institute for Finance and Development, says coronavirus will shave 1 full percentage point off China’s economic growth this year.
He said, as per Reuters:
At present, according to different scenario assumptions, researchers expect the negative impact of the epidemic on full-year GDP growth to be in the range of 0.2% to 1%.
China’s economy is already growing at its slowest pace in almost 30 years. Last month, the International Monetary Fund (IMF) called for the continuation of that trend. In its biannual World Economic Outlook publication, the Fund forecast China’s gross domestic product (GDP) to expand 6% in 2020.
If Zeng’s forecast is correct, Chinese GDP growth could slow to around 5% this year.
Official reports place global coronavirus infections at around 43,200, with the vast majority concentrated in mainland China. Some researchers think the official numbers are being suppressed by the Chinese government in a desperate attempt to control the narrative. Ironically, state censorship may have enabled the outbreak to spread.
This article was edited by Josiah Wilmoth.
Last modified: February 12, 2020 1:06 AM UTC