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
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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