China’s service economy imperiled by virus emergency
Share Now on:
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.“
If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air. But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.
Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.
When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.