China's Economic Upsurge Irreversible by SARS: Experts

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Last updated at: (Beijing Time) Saturday, May 10, 2003

China's Economic Upsurge Irreversible by SARS: Experts

Noted Chinese economists said on Friday that China's economic upsurge cannot be reversed by the severe acute respiratory syndrome (SARS) now ravaging some parts of the country.

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Noted Chinese economists said on Friday that China's economic upsurge cannot be reversed by the severe acute respiratory syndrome (SARS) now ravaging some parts of the country.

Both domestic and overseas researchers are not worried that China will be able to attain its goal of seven-percent economic growth for this year despite the adverse impact on investment, consumption and export by SARS.

They set the possible negative impact of SARS on China's economic growth at 0.3 to one percentage point.

Economist Prof. Chang Xiuze said the service trade, such as the tourism, catering, transportation, recreations and exposition industries, has been the most hit by SARS disease, but its still holds a small proportion of the country's gross domestic product (GDP).

On the other hand, noted Prof. Chang, the growing demand to fight the SARS epidemic has meant growth for industries producing medicine, medical apparatuses and equipment, textiles such as face gauze masks and protective suits, sanitation detergents and disinfectants, as well as for the telecom sector.

Prof. Chang held that though economic growth in south China's Guangdong province and the national capital of Beijing will be adversely affected, the epidemic has been felt lightly in other booming powerhouses such as the Yangtze River Delta, most areas of the Bohai Rim, and central and western Chinese regions, so their roles to support and propel China's economy will not be weakened.

The prestigious Chinese economist voiced his confidence that investors still favoring China and its economy will surely have a fine performance as the Chinese economy is at a climbing stage of the economic cycle, and the economic growth is continuing in spite of some existing deep-rooted problems.

"Some investments and economic and trade activities with China have or will be postponed because of the SARS factor, but other similar activities will crop up and will not shrink," said Prof. Chang.

Prof. Chang's point of view has been echoed by Zhang Liqun, a macroeconomics research fellow with the Development and Research Center of the State Council, or the Chinese central government.

Viewing from at the overall situation, SARS' impact on China's economy will be quite limited, said Zhang.

A slight fall in consumption because of consumers' hesitation to go shopping is just one aspect of the adverse influence SARS has inflicted, but Zhang, based on his investigative surveys to several furniture selling locations around Beijing, concluded that consumers' medium- and long-term purchasing plans would not be affected because normally consumers do not buy durable goods in a random manner.

With no drop in the consumption of food, daily necessities, automobiles, housing and furniture, spending on medicine and disinfectant will rise sharply, so SARS' impact on consumption is also limited, Zhang added.

Meanwhile, Zhang predicted SARS' impact on China's investment environment would be short-lived though at present there has been less business travel and project scouting by businesspeople from overseas, which will affect the growth in the inflow of overseas capital into China.

"A fine economic development trend, cheap labor and a vast market will always attract foreign businesspeople and will eventually help China to resume normal development in terms of foreign trade and economic cooperation," said Zhang.

Prof. Hu Angang, a prominent expert on China's economic development situation, acknowledged that SARS' adverse impact could be offset by a host of other factors which might also spur economic growth because China, with its huge market, has a strong capability of confronting shock from the outside.

Along with a strong economic strength, the Chinese government has been more capable of handling macroeconomics issues and has accumulated a wealth of experience in handling domestic crises, said Prof. Hu with the elite Qinghua (Tsinghua) University.

He was convinced that the Chinese economy had shown an obvious self-propelling and self-increasing inertia.

"The economic growth for the whole of 2003 will be around nine to 10 percent, but might be adjusted to anywhere from eight to nine percent if the negative impact by SARS is taken into account," Prof. Hu noted.

Quite a number of economic experts caution that it is essential to pay heed to the delayed effect of SARS' impact on China's economy, which may take some time to emerge while directly addressing the shock.

For instance, the service trade contributes a tiny proportion to the nation's GDP, but the chain function on other related sectors, especially the negative impact on the manufacturing industry, could not be overlooked, they noted.

The experts agreed that it is not necessary to take special macro control measures to interfere with the economy because SARS will not possibly have a major impact on China's macro economy.

Zhang Liqun further explained that the industrial sector, as China's backbone pillar of economy, has been developing unaffected by SARS and production has been going on in enterprises.

Zhao Jinping, another research fellow for foreign trade and economic cooperation with the Development and Research Center of the State Council, said that the overheated economy in the first quarter of the year will not continue in the second quarter because of SARS, so the previous practice of using economic performance in the first quarter as a yardstick to forecast economic growth for the entire year should be corrected.

To further reduce the negative impact of SARS on the economy, greater efforts should be made to prevent and control the SARS, suggested the experts, who have also underlined the necessity of taking effective measures to keep spurring domestic demand and to continue to work on the task of increasing income and cutting expenditure.

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