Slower China growth will hurt rest of Asia

  • Business
  • Wednesday, 23 Apr 2003

SINGAPORE: Asian economies may be hurt by a slowdown in China's growth rate as caused by the spread of the Severe Acute Respiratory Syndrome (SARS) virus. 

China’s growth this year may slow by half a point to 7% as its people cut spending on travel and entertainment to avoid contracting the deadly illness, said Pu Yonghao, a Manila-based consultant to the Asian Development Bank’s (ADB) macroeconomic monitoring unit. 

A drop in growth and consumption in China would compound the woes of a region already hurt by a slowdown in the US and the spread of SARS, which is hitting sales at companies from Singapore Airlines to hotel operator Shangri-La Asia Ltd. The ADB reckons that China would replace the US as the biggest importer of Asian goods by 2005. 

“China’s growth dropping substantially – below 7% – will reduce demand for overseas-made goods,” Pu said. “That will put growth under pressure in the rest of Asia, which is increasingly dependent on exports to China.” 

If the SARS crisis lingered beyond this quarter, China’s growth rate may dip below 7%, compared with last year’s 8%, Pu said. 

The outbreak of SARS came as a slowdown in the US and disruptions caused by the Iraq war pared exports of Asia’s cars, computer chips and other products. The index of leading US economic indicators fell in March for a second straight month, evidence that anticipation of the Iraq war had dimmed the economic outlook for the next three to six months, a US Conference Board report showed on Monday. 

Economists had expected China, which posted 9.9% economic growth in the first quarter, to provide a cushion by ordering more Asian products. That may not happen now as many of the 70 million Chinese who travelled and shopped during the May Day holidays last year stay home this year, pulling down retail sales and economic growth, economists say. 

“We’re trying to factor in how much the loss of Golden Week will cost the Chinese economy,” said Tai Hui, economist at Standard Chartered Bank in Hong Kong. “Before SARS, I was looking at 8% growth for the second quarter. Now, I’m more inclined to adjust it downwards.” 

China’s government said it would cut the May Day holidays to five days from seven. That makes it less likely the Chinese will match the US$3.4bil they spent during 2002 holidays. 

Shanghai’s benchmark stock index saw its biggest decline in two months on Monday after China’s Communist Party, which was facing international flak for suppressing the true extent of the illness' spread, boosted the number of cases by about a third in 24 hours. 

The number may jump again as the World Health Organisation, which pressed Beijing into admitting the city had 10 times more cases than reported, shifts its focus to Shanghai, where only two cases have been disclosed. 

To be sure, Chinese consumers are not as important to the rest of Asia as their counterparts in the US, the world’s No. 1 economy and the biggest market for most Asian countries. 

A fifth of China’s US$161bil of imports from Asia last year consisted of products solely for use within the country, such as foodstuffs and consumer goods. Two-fifths or more consisted of components and materials used to make goods for export to the US and Europe, according to Goldman Sachs & Co. 

Even so, consumers in Asia’s second largest economy are starting to play a bigger role in the region. China’s entry to the World Trade Organisation has increased Asian exporters’ access to the world’s most populous country, which now absorbs more than three times as much of the region's exports as in 1998. – Bloomberg 

For more foreign business news click here

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Did you find this article insightful?


Next In Business News

Malaysia initiates WTO dispute over EU palm oil measures
Goldman Sachs blockbuster profit helps absorb US$3bil Malaysian 1MDB settlement
Oil price gains on stimulus optimism ahead of Biden inauguration
ANALYSIS-Yellen-backed policies set to aid risk assets, raise longer-term worries
Lumentum to buy laser manufacturer Coherent Inc in US$5.7bil deal
Wall St closes higher as Yellen backs more stimulus
Cushioning the impact of MCO 2.0
The perk that fuelled UK Covid housing boom is as good as gone
Hartalega likely to see record 643% surge in earnings
Cagamas kicks off 2021 with bonds, sukuk issuances worth RM710mil

Stories You'll Enjoy