SARS Poses Test for Chinese Economy

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Last updated at: (Beijing Time) Tuesday, May 13, 2003

SARS Poses Test for Chinese Economy

The Chinese economy is facing its toughest challenge since the 1998 Asian financial crisis as severe acute respiratory syndrome (SARS) takes its toll on key industries.

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The Chinese economy is facing its toughest challenge since the 1998 Asian financial crisis as severe acute respiratory syndrome (SARS) takes its toll on key industries.

The tourism, civil aviation, railway and road passenger transport, restaurant, hotel and service sectors suffered marked losses in April.

The sudden outbreak of the disease triggered panic buying in some regions and pushed up prices. But calm quickly returned and in April, retail sales in Beijing rose 14.6 percent year-on-year, mainly driven by surging consumer demands for automobiles, Chinese medicine, personal hygienic products, publications and telecommunication equipment.

With the support of the huge domestic market and resilience of the Chinese people, the economy continued to hum ahead.

The Chinese government was quick to learn in handling the crisis and promptly readjusted its economic policy. In order to control SARS and reduce its impact on long-term economic growth, the government took decisive measures such as canceling the week-long May Day holiday, extending the closure of stock markets during the holiday, offering free medical treatment to farmers andlow income earners and postponing meetings, exhibitions and personnel gatherings.

Governmental departments at both central and local levels reacted strongly in cooperating to control the disease, and their efficiency was seen in the eight-day construction from scratch of a SARS hospital in Beijing.

The disease highlighted problems as the structural short-comings of the economy, industries and products became obvious. Industries enjoying a traditional competitive edge, such as textiles and farm produce, saw overseas orders switch to competitors in other countries. In April, exports of low-cost cotton yarn dropped, but the import of masks and protective gowns surged.

The experience of recent years shows it is the way of China to deal with domestic and overseas challenges by pressing ahead with reform and solving problems in its advances.

The new government demonstrated the same attitude towards the challenge of SARS. President Hu Jintao said the government would stick to the top priority of development and strive to maintain stable economic growth as a nationwide battle was being waged against the disease.

He said China would reduce losses incurred by SARS to the minimum and achieve dual success in controlling the disease and promoting social and economic development.

The State Council put forward eight measures to offset the impact of SARS on the economy. The measures involved such areas asagriculture, investment, consumption, exports, taxation, fiscal expenditure, employment and the normal order of life and production.

Farmers are proceeding with spring sowing and preparations for summer harvests in a normal way. Government-funded large-scale construction projects are progressing on schedule, including the Qinghai-Tibet railway and the Three Gorges dam. Increasing government investment in medical service facilities and infrastructure will effectively boost demand for investment.

The Chinese government has given tax breaks and reduced or waived dozens of administrative fees to industries badly hit by SARS. Taxation authorities in south China's Guangdong Province estimate the provincial government will lose 900 million yuan in tax revenues in the next three months.

The government strengthened financial services for manufacturers of drugs, medical equipment, health and hygiene products so as to stimulate consumption of health care products. It also adopted favorable policies to encourage sales of automobiles, housing and Internet services.

Last week, Vice-Premier Huang Ju visited foreign-funded companies in Beijing, giving a clear signal to the outside world that the Chinese government would stick to its basic policy of opening wider to the outside world, further expanding areas of foreign investment, improving investment and the operational environment and supporting foreign-funded enterprises to accelerate growth.

The government is taking measures to ensure China's market economy will emerge with greater maturity and fulfillment from thetest of SARS.

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