SHANGHAI — Worry grew on Tuesday that the extent of economic disruption from China’s coronavirus outbreak was being underestimated as the death toll from the epidemic in the world’s second-largest economy soared past 1,000.
Companies struggled to get back to work after an extended Lunar New Year holiday while hundreds of Chinese firms said they would need billions of dollars in loans to stay afloat. Layoffs also began, despite assurances by President Xi Jinping that widespread sackings would be avoided.
“The coronavirus outbreak completely changed the dynamics of the Chinese economy,” JPMorgan analysts said in a note to clients as they again downgraded forecasts for Chinese growth this quarter.
Another 108 virus deaths were reported on Tuesday, a daily record, taking to 1,016 the total of those killed in China, the National Health Commission said. All but five of the deaths were in the central province of Hubei, the epicenter of the outbreak.
There were 2,478 new confirmed cases on the mainland by Monday, down from 3,062 the previous day, bringing the total to 42,638. It was the second time in two weeks that authorities recorded a daily drop in new cases, offering a hint of hope the epidemic was peaking.
Asian stock markets rallied as investors took some comfort from the drop, even though experts have warned it is too early to assume the numbers represent a trend.
The World Health Organization (WHO) said the spread of cases outside China could be “the spark that becomes a bigger fire.”
Heavily sold currencies such as the Australian dollar also gained and the safe-haven Swiss franc slipped to its weakest since December.
Only 319 cases have been confirmed in 24 other countries and territories outside mainland China, according to WHO and Chinese health officials, with two deaths, one in Hong Kong and the other in the Philippines.
While a WHO team has arrived in China to help investigate the outbreak, the agency began a two-day meeting of 400 researchers in Geneva aimed at accelerating research into diagnostics, drugs and vaccines.
More than 300 Chinese companies are seeking bank loans totalling at least 57.4 billion yuan ($8.2 billion) to help cope with the disruption caused by locked down cities, closed factories and crippled supply lines, two banking sources said.
Among the prospective borrowers are food delivery giant Meituan Dianping, smartphone maker Xiaomi Corp and ride-hailing provider Didi Chuxing Technology Co, the sources said.
Chinese firm Xinchao Media said on Monday it had laid off 500 people, or just over a tenth of its workforce, and restaurant chain Xibei said it was worried about how to pay the wages of its roughly 20,000 workers.
Authorities said they would roll out measures to stabilize jobs, in addition to previously announced cuts to interest rates and fiscal stimulus designed to minimize any downturn.
But analysts at investment bank Nomura said measures of returning workers and passenger traffic flows suggested the virus had “a devastating impact on China’s economy in January and February.”
In a note, they wrote, “We are concerned that global markets thus far appear to be significantly underestimating the extent of disruption.”
Bankers in Asia were bracing for a deal drought with several auctions of assets facing delays or re-assessments and preparations for Chinese initial public offerings slowing.
“Nothing is happening,” said a Hong Kong-based investment banker with a Wall Street bank.
Hubei, where the flu-like virus emerged from a wildlife market in the provincial capital of Wuhan in December, reported 2,097 new cases and 103 new deaths on Feb. 10, its health authority said.
SHIP IN LIMBO
Public anger over the handling of the outbreak has been rising and Hubei’s government dismissed the provincial health commission’s Communist Party boss, Zhang Jin, and director Liu Yingzi, state media said.
Hubei remains in virtual lockdown, with its train stations and airports shut and roads blocked.
One Beijing government official said it would be harder to curb the spread of the virus as people return to work. “The capacity of communities and flow of people will greatly increase the difficulty,” he said.
About 160 million people are expected to return to their homes across China over the next week following the end of the holiday, a transport official said.
The virus has caused chaos in Asia, with many flights suspended, businesses disrupted and entry restrictions imposed by governments trying to ward off its spread.
It has also roiled the world of luxury cruises.
The Diamond Princess cruise ship with 3,700 passengers and crew remained quarantined in Japan’s port of Yokohama, with 65 more cases detected, taking the number of confirmed cases from the Carnival Corp-owned vessel to 135.
Thailand said it had barred passengers from disembarking another Carnival Corp ship, Holland America Line’s MS Westerdam, the latest country to turn the vessel away due to coronavirus fears although no confirmed infections have been found on board.
It has already been turned away by Japan and the Philippines.
“Now we are back in limbo,” passenger Stephen Hansen told Reuters by email.
(Additional reporting by Huizhong Wu, Shivani Singh, Gabriel Crossley, Min Zhang, Liangping Gao, Lusha Zhang in Beijing; Tom Westbrook in Singapore Writing by Michael Perry Editing by Raju Gopalakrishnan and Clarence Fernandez)
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US Treasury Secretary Steven Mnuchin attends a session at the Congres center during the World Economic Forum (WEF) annual meeting in Davos, on January 21, 2020.
FABRICE COFFRINI | AFP via Getty Images
The strength of the U.S. economy will prove to be an important factor when voters head to the polls in November, according to U.S. Treasury Secretary Steven Mnuchin, despite a slew of headwinds that could weigh on growth this year.
Mnuchin warned earlier this month that U.S. growth may not hit Trump’s pledged 3% growth in GDP (gross domestic product) in 2020.
Speaking to CNBC at the G-20 Summit in Riyadh, Saudi Arabia, on Sunday, Mnuchin said disruptions at Boeing could cause a 50 basis point drag on growth, compounded by General Motors strikes and the potential impact of the coronavirus outbreak.
“But the real impact in terms of the American economy, wages are going up, more jobs are being created and more people are coming back into the workforce than ever before,” Mnuchin told CNBC’s Hadley Gamble.
“(GDP) is a global statistic, the statistic people really care about is are they working, are they getting more jobs, are they getting more pay? And on that basis, we’re getting all As.”
U.S. unemployment recently hit a 50-year low, continuing a consistent downward trend set in motion in 2010. Real average hourly earnings for all private nonfarm employees increased 0.6% from January 2019 to January 2020, according to the U.S. Bureau of Labor Statistics.
“The change in real average hourly earnings combined with a 0.6-percent decrease in the average workweek resulted in essentially no change in real average weekly earnings over this period,” the Bureau said in a report Friday.
Mnuchin told CNBC he saw the economy being a very “strong factor” in the president’s re-election. “And as you look at the U.S. economy relative to the world economy, the U.S. is the bright spot on world growth,” he said.
China braces for inevitable big hit to economy from virus, says Xi – Financial Post
BEIJING — China will step up policy adjustments to help cushion the blow on the economy from a coronavirus outbreak that authorities are still trying to control, President Xi Jinping was quoted as saying on Sunday.
The situation is showing a positive trend after arduous efforts but there is no room for “weariness and relaxed mentality” among officials, state television quoted him as saying.
“At present, the epidemic situation is still severe and complex, and prevention and control work is in the most difficult and critical stage,” Xi said.
“The outbreak of novel coronavirus pneumonia will inevitably have a relatively big impact on the economy and society,” Xi said, adding that the impact would be short-term and controllable.
The outbreak is one of the most serious public health crises to confront Chinese leaders in decades.
“For us, this is a crisis and is also a big test,” Xi said.
Chinese policymakers have implemented a raft of measures to support an economy jolted by the virus, which is expected to have a devastating impact on first-quarter growth.
Low-risk provinces should focus on restoring work and production in an all-round way, provinces with medium-level risks should aim for an orderly work resumption, while high-risk regions should focus on epidemic controls, Xi said.
The government would step up policy support to help achieve economic and social development targets for 2020, Xi said.
China would maintain a prudent monetary policy and roll out new policy steps in a timely way, he said, adding the government would also study and roll out phased tax cuts to help tide small firms over difficulties.
The government would also take steps to support flexible employment and help college graduates to find jobs, Xi added. (Reporting by Yingzhi Yang and Kevin Yao; Editing by Frances Kerry and Alex Richardson)
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