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By Brandon O’Brien | January 26, 2020
China is no stranger to an epidemic outbreak; they battled the SARS disease in the spring of 2003. However, this time the epidemic could have far broader implications as China’s economy has grown immensely since then, becoming the world’s 2nd largest. The new strain of Coronavirus is, in short, a virus that can originate in any mammal, including humans, which can cause respiratory problems that are normally mild, but can become lethal in extenuating circumstances.
Similarly, back in 2003, the SARS disease hammered numerous sectors including transportation, entertainment, restaurants, hotels, and most of all; tourism. Most notably, China grossed $33.1 billion dollars in revenue from the Week Long May-Day holiday in 2002, one of China’s biggest tourism events of the year, but had to cancel it in light of the SARS epidemic. This devastated the tourist economy of China, and only time will tell if this strain of the Coronavirus carries the same implications.
The current Chinese economy could be drastically affected by the spread of this disease. For instance, with Chinese Lunar year right around the corner, the Coronavirus will be detrimental to the tourism industry. In addition, the implications could possibly be much worse if the virus is as infectious as SARS back in 2003. Any company that has a significant amount of business in China, particularly the travel sector, will suffer a huge blow. Places like Las Vegas Sands and Wynn Resorts take in a lot of revenue from casinos in Macao, which is on the southern coast of China. Both companies dropped an astonishing 8.0% this past week due to the massive spread of this disease throughout Asia.
Additionally, airline companies, most notably United Airlines, are worried that the virus will prevent people from flying not only to China, but near the entire Asian region. Similar to Las Vegas Sands and Wynn Resorts, United Airlines dropped 8.7% in one week. U.S-China/Hong Kong account for approximately 5.5% of its capacity, making it a vital part of their business. Many travel agencies and big airline companies will continue to lose out on profits as long as people are afraid to fly near the entire Asian region.
It’s not just travel and transportation companies that are suffering due to the Coronavirus. For instance, Wuhan is one of the biggest industrial cities in China, having many factories producing steel, smart phones, and automobiles. China is anticipating first quarter retail sales growth to decelerate by 0.5% to 7.2% overall, coming in under the 8.0% expected return. The implications of a consumption downturn such as this could make this worse than the SARS outbreak all the way back in 2003. If the industrial city of Wuhan continues to slow or stop production, it will definitely lead to higher costs for companies that are further down in the supply chain. China’s economy was hurting previously due to U.S. tariffs, but could be in for much more turmoil down the line.
In conclusion, the Coronavirus could leave a lasting impression on not only human health, but the economy overall. This is bound to affect tourism, transportation, trade, and more. The only question to be had is how much of an impact it will end up having.
Sources:
https://www.cnn.com/travel/article/wuhan-china-virus/index.html
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