Lessons From SARS: How The New Bird Flu Could Hit The Chinese Economy

china bird flu

A new form of bird flu, H7N9 avian influenza, has been spreading across China. Four have died in Shanghai. 

Bank of America’s Ting Lu writes that if the new bird flu worsens his Q2 GDP forecast would be revised down to reflect 8 per cent growth, from 8.1 per cent. 

To get a better sense of what to expect, Lu points us to the impact of SARS in 2003. At the time, SARA caused Chinese GDP growth to fall by 2 percentage points in one quarter, or an annualized 0.5 per cent. 

“Overall, SARS imposed a sizeable but non-lasting negative shock to the Chinese economy. While SARS hit the economy across the board, it also boosted demand in certain products such as masks and vaccines.”

Here’s a breakdown of the economic impact of SARS in 2003:

GDP – The SARS virus began in November 2002 and continued until March 2003. GDP growth climbed from 8.1 per cent in Q4 2002, to 10.8 per cent in Q1 2003, and fell to 7.9 per cent in Q2 2003. But in Q3 it climbed to 9.6 per cent.

impact of SARS on catering in China

Catering and accommodation sector

– This sector took a big hit going from 17 per cent YoY in March, to 4 per cent in April and -14 per cent in May.Industrial production – In Jan-Feb industrial production stood at 17.5 per cent. Many Chinese economic indicators at the start of the year are considered on a Jan-Feb basis because of the New Year holiday. In March this fell to 16.9 per cent and continued to decline reaching 13.7 per cent in May.

impact of SARS on Chinese transportation


– But this sector took the biggest hit, with railway passenger traffic declining from +5 per cent YoY in March, to – 11 per cent in April and -67 per cent in May.Home sales – Home sales were barely impacted by SARS but since the property sector has ballooned since then, it could have a more significant impact this time around. Hong Kong’s property market was hit hard by SARS.

Financial market – The Shanghai A-share market didn’t register a huge impact from the SARS virus, but Hong Kong’s market did.

Bottom-line: The biggest impact should be seen on the catering sector, which has already taken a hit as China has cracked down on “gift giving”, and the transportation sector.

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