COVID-19

China’s service economy imperiled by virus emergency

Scott Tong Jan 24, 2020
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Residents wear masks while buying vegetables in the market on Jan. 23th, 2020 in Wuhan, China. Getty Images
COVID-19

China’s service economy imperiled by virus emergency

Scott Tong Jan 24, 2020
Residents wear masks while buying vegetables in the market on Jan. 23th, 2020 in Wuhan, China. Getty Images
Share Now on:
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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

Which businesses are allowed to reopen right now? And which businesses are actually doing so?

As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.

Will you be able to go on vacation this summer?

There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.

When does the expanded COVID-19 unemployment insurance run out?

The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.

You can find answers to more questions here.

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