Posted on 05/07/2003 4:06:33 PM PDT by blam
Sars threatens to wreck Asian markets
By Jasper Becker in Beijing
08 May 2003
In Beijing's vast Friendship department store, the few customers are watched by a host of unoccupied shop assistants. The jackhammers on the many building sites across the city have fallen silent and no one cuts you up on the empty airport expressway.
Over-attentive waiters hover over customers in restaurants. No one dares cough and proprietors are so glad to see a customer that views on the outbreak of severe acute respiratory syndrome are earnestly solicited. "If it is not over by the summer, I'll be bankrupt," said Mrs Lin, owner of the three-storey Pink Loft restaurant.
The government media keeps pumping out reassuring statements by "noted Chinese economists" that the country will maintain its "steady growth".
But every foreigner who can is leaving town and, with travel throughout China on the wane, any investment decisions are being postponed until the summer is over. Hong Kong's Dragonair airline, which serves mainland cities, says it is carrying only 700 passengers a day, compared with 13,000 at the year's start, and has grounded nine of its 21 aircraft. Cathay Pacific, its rival, is seeking to delay the delivery of seven new planes after cutting nearly half of its flights.
Big state companies that were planning to lift spirits in the world's ailing financial services sector with big public stock offerings are holding off. The huge People's Insurance Company is delaying its $600m stock market float until the autumn, as are Sinotrans, Shanghai Forte Land and Soho China. Standard & Poor's is predicting that bank profits could slide this year by as much as 45 per cent in Hong Kong and 25 per cent in Singapore if the slowdown lasts until the end of the year.
Sales of computers in China, the world's second-biggest market, are dropping so quickly that the price of computer chips is already down. That will hit hard companies such as Hynix Semiconductor of South Korea, which is already struggling to survive in an overcrowded market.
But while the effect of Sars is being compared in Asia to the disastrous plunge after the 1997 Asian financial crisis, overseas pundits are remarkably blasé about its impact on the world economy. In January, China was described as the motor of economic growth.
Stephen Roach of Morgan Stanley, a top China bull, has just trimmed his forecast for China by a mere half a point to 6.5 per cent for 2003. Others have cut their growth forecasts for Hong Kong in 2003 by about 1 percentage point, Singapore slightly less, and Malaysia and Thailand by about half a percentage point on the assumption that the virus will be brought under control by the end of next month.
Gerard Lyons, the chief economist at Standard Chartered bank in London, said: "Sars will dampen global growth this year, albeit marginally." He estimated that the disease would reduce combined gross domestic product by $16.5bn, or 0.7 per cent, in the nine Asian countries most affected by the disease.
The Asian Development Bank forecasts that economic growth in China, Hong Kong, South Korea and 38 other member countries will slow to an average of 5.3 per cent this year from last year's 5.7 per cent. Only JP Morgan Chase is alarmed enough to predict that the Chinese economy will shrink, by 2 per cent in the second quarter after a 9.9 per cent rise in the first.
Foreign investment is also bound to fall steeply. The number of contracts signed at the Guangzhou trade fair this year was down by three quarters and Chinese businessmen also fear going abroad in case they are put into quarantine.
Some hope that if Hong Kong and Singapore can curb the outbreak, as they appear to be doing, China should be able to manage. Others predict that the virus will fade away in the summer and reappear again in the winter as other viruses do. The 1997 Asian financial crisis had political as well as economic ramifications across the region, including the downfall of the Suharto regime in Indonesia and the independence of East Timor. China escaped unscathed then, but it may not be so lucky this time.
Less business gets done. Look at the drop in air travel within China. Those weren't peasants. They were businessmen.
This is going to smack the Chinese economy like a wet fish in the face, and these investment houses are lying. They know better.
I agree. I spent a week in Beijing a couple years back and it's hard to believe the pictures coming out now. Where on earth are all the people?!? It looks like a ghost town now by comparison.
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