Many factories closed for the Lunar New Year break have delayed reopening - exceeding a three-day extension of the holiday that authorities imposed to prevent large public gatherings.
Manufacturing accounts for around a third of China’s economy and the auto industry is set to take a sharp blow, given that Hubei’s quarantined capital, Wuhan, is among China’s largest production bases.
A Ford spokesman told AFP production would resume around next week, but said the epidemic has already ‘sup
pressed or delayed consumer purchases to a large degree’.
Dongfeng Motor Corporation, which is based in Wuhan and is one of China’s biggest auto groups, said its reopening ‘will depend on the prevention and control of the epidemic’.
Ratings agency S&P has predicted the delay in opening factories could hit car production by up to two per cent and warned the real impact may be larger as workers could poten
tially shun Hubei when called back to work.
Oxford Economics believes the virus could knock at least two percentage points off China’s growth in the first quarter before seeing an improvement in April-June.
Still, it cut its full-year outlook to 5.4 per cent expansion - markedly down from its previous estimate of six per cent, which was in line with 2019 and the slowest in three decades.
However, the biggest hit to the economy is likely to be from China’s army of consumers saying at home, observers said, with Moody’s analysts expecting spending on transportation, retail, tourism and entertainment to be hammered.
The 2019 Lunar New Year holiday saw retail and catering enterprises report combined sales of around US$150bn, according to state news agency Xinhua.
Domestic travel revenues clocked in at more than US$73bn, it said, as people travelled across the country to visit family, while the Forbidden City hosted nearly half a million visitors.
But this year, shopping malls, eateries, cinemas and transport hubs were quiet, while the Forbidden City was closed.
Big-name high-street titans are also feeling the strain. Nike and clothing giant H&M have
both closed half their stores in China, with the Swedish firm telling AFP a ‘short-term impact on sales is inevitable’.
Jewellery chain Pandora said there had been ‘an unprecedented decline in consumer traffic in China and Hong Kong’.
Apple and Starbucks have also shut down outlets. Passenger volumes on air, rail, road and water transport plunged more than 70 per cent from a year ago.
While authorities have stepped up to provide support - the central bank has pumped more than US$200bn into financial markets this week - Moody’s analysts said the full benefits are ‘unclear’ for now.
“Given the high levels of uncertainty, consumers may simply save the spending they had planned for the Lunar New Year holiday, and could spend more cautiously in general,” they said.