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China’s service economy imperiled by virus emergency
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The coronavirus in China has come during Chinese New Year, its biggest holiday. Which means it’s hitting what’s now a critical part of the Chinese economy: the service sector.
Chinese factories are struggling from the U.S. trade war, but China’s overall economy is still growing at a rate of about 6% because of its service economy: retail, transportation, hotels and entertainment.
“One of the big successes for China’s policymakers has been a rebalancing away from an old, clunking, heavily-polluting industrial sector, towards a larger role for services,” said Tom Orlik, chief economist at Bloomberg Economics.
Services are now at risk because the virus is keeping people at home. Movie screenings have been canceled. Travel is down, and so is eating out.
Mohamed El-Erian, chief economic adviser at Allianz, said the service slowdown could spill over to the rest of the world.
‘If you are even a U.S. company that flies people to the impacted areas, you’re going to be impacted,” El-Erian said. “The longer this uncertainty lasts, the more the spillovers start to cascade.”
During China’s SARS virus outbreak 17 years ago, growth dipped and came right back. Now, though, said Michael Hirson who covers China at the Eurasia Group, China’s economy is much bigger — and more globally linked.
“And that’s why you see companies like cruise lines and tourism [and] casinos being impacted by this, in ways that they weren’t when SARS hit,” Hirson said.
One bright spot could be video games for people stuck at home. The top game in China right now is called “Plague Inc.“
COVID-19 Economy FAQs
Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?
This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.
Could waiving patents increase the global supply of COVID-19 vaccines?
India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
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