China Q1 growth may fall below 5% on coronavirus outbreak - government economist

Author: Justin Low | Category: News

Forecast is based on assumption that the virus outbreak will peak by mid-February and peter out by the end of March

The government economist also says that the impact of the coronavirus on the Chinese economy could be significantly bigger than that of the SARS outbreak.

Adding that Beijing is likely to step up policy support for the economy as such and that the PBOC could further cut RRR and interest rates to bolster economic conditions.

This is arguably the first real take of the coronavirus outbreak situation by China - from an economic standpoint that is - and that is particularly worrying.

Remember, this is going by the assumption that the outbreak is likely to be controlled and contained by the end of Q1 this year. The risk here is that the virus may spread more wildly and have a more prolonged impact on the country and its economy.

In that lieu, keep in mind that when China sneezes, the rest of the world catches a cold - in this case, quite literally. But if the Chinese economy is set to suffer, expect that to weigh on global businesses/markets as well.

The response from risk to the headlines here are a little bit muted but I wouldn't rule out a follow through move later on once markets start to come to terms that the virus outbreak here may not just be more bark than bite.

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