Chinese Economy Capable of Growing Despite SARS

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Last updated at: (Beijing Time) Tuesday, April 29, 2003

Chinese Economy Capable of Growing Despite SARS - Experts

The negative impact of severe acute respiratory syndrome (SARS) on the Chinese economy should not be over-exaggerated, experts said.

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The negative impact of severe acute respiratory syndrome (SARS) on the Chinese economy should not be over-exaggerated, experts said.

Wang Jian, a senior researcher with China Macro-Economic Society, highlighted the fact that SARS is preventable and the majority of those infected recover.

And so long as China takes effective measures in treating SARS patents and prevents the further spread of the disease, the country is capable of maintaining the growth advantages of its economy, said Wang.

"People should not exaggerate the negative effect of SARS to create unnecessary worries," he said.

The disease first emerged in South China's Guangdong Province, which continues to have the country's largest number of SARS infected patients.

In spite of this, the province's gross domestic product (GDP) grew by 13 per cent year-on-year during the first quarter of 2003, said Wang.

That growth was 2.2 percentage points higher than the 10.8 per cent growth for 2002.

In 2002 the province's exports grew 24.2 per cent, while the growth rate reached 29.8 per cent during the first quarter of this year.

In recent years, income generated by tourism during week-long holidays, such as the May Day holiday and National Day, was about 30 billion yuan (US$3.6 billion).

"Even if the government cancelled the two holidays, the effect will not be so large because tourism income only accounts for less than 0.3 per cent of the total economy," he continued.

People may reduce spending on dining-out, shopping and entertainment because of the disease outbreak, but they may increase spending on other disease-related items, such as masks and disinfectant.

For exports and utilization of foreign direct investment, so long as developed countries demand labour-intensive products, China still has advantages, Wang said.

"For ordinary people, they have to work to live," he said. "People will not give up their work to avoid the disease."

Jemal-ud-din Kassum, vice-president for East Asia and the Pacific of World Bank, said SARS is, in principle, a temporary shock,although there is a great deal of uncertainty as to how considerablethe SARS crisis will ultimately be.

"China is still generally expected to grow at robust rates," he said.

Another analyst, Yao Jingyuan, chief economist of the National Bureau of Statistics of China, said it was still too early to say how much of a negative impact SARS will have on the economy.

"Presently, the disease outbreak will not have a large negative effect on investment, but it will have some effect on domestic spending, especially the tourism and catering industry," he said.

The growth in retail sales of catering in Guangdong dipped about 5 percentage points during the first quarter of this year, compared to the same period in 2002, the local statistics bureau revealed.

Retail sales of catering stood at 8.3 billion yuan (US$1 billion) and 8.0 billion yuan (US$963 million) in January and February, but dropped to 6.5 billion yuan (US$783 million) in March.

Tourists arriving at the province's major hotels dropped year-on-year 0.4 per cent during the January-March period to 19.3 million, the bureau said.

In Beijing, more than 1,440 tour groups of 40 or more people have postponed tours since the outbreak of the SARS, the local tourism bureau revealed.

Occupancy rates have dipped to as low as 20 per cent at hotels catering for foreigners in the capital.

With the aim of minimizing the spread of the virus, central government has cancelled the week-long May Day holiday.

A group of scholars from the Peking University, including Hai Wen and Zhao Zhong predict the SARS outbreak will result in a loss of 140 billion yuan (US$16.9 billion) to the tourism industry this year.

They believe the disease is likely to drag the economy down by 1 to 2 percentage points to 7 to 8 per cent in 2003.

In response they suggest the government carries out a series of consumption-stimulating measures, such as providing more housing and car loans to minimize the negative impact of SARS on the nation's economy.

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