Wuhan Pneumonia, Impact on China's Economy Already Underway... 'Increasingly Challenging'

[Asia Economy Reporter Naju-seok] Foreign media including CNBC reported on the 26th (local time) that the Chinese economy is suffering widespread damage due to Wuhan pneumonia (novel coronavirus infection). The bigger problem is that this issue cannot be resolved in the short term.

As Wuhan pneumonia spreads, the Chinese government is closing cities and encouraging residents to stay at home to prevent the spread of the epidemic. As a result, scheduled events as well as travel are being canceled.

[Image source=Yonhap News]

According to the Chinese government, the number of travelers during this year's Lunar New Year decreased by 28.8% compared to a year ago. Air travel dropped by 41.6%, rail travel by 41.5%, and road travel by 25%. The situation is expected to worsen. For example, some high-speed rail lines in China have announced that they will not operate their routes for the next few days.

The problem is that this situation is only at the beginning stage. The Chinese government has entered an emergency phase, delaying school openings from kindergartens to universities.

Despite being a manufacturing powerhouse, China is experiencing shortages of medical consumables and equipment related to this Wuhan pneumonia. Wang Jinping, China's Vice Premier, stated that masks and protective clothing are "in short supply compared to demand." For example, currently 100,000 sets of protective clothing are needed daily, but only about 10,000 sets can be produced per day.

Of course, the shortage of consumable production is partly due to the Lunar New Year holiday. The Chinese government explained that 40% of the total production capacity for protective clothing is currently operating. Despite the holiday period, production facilities have rapidly begun to increase.

China is in a situation where, on one hand, it must prevent the spread of the infectious disease, and on the other hand, it must produce the supplies necessary to contain the epidemic.

The Chinese government has decided to provide 11.2 billion yuan (1.89 trillion won) to local governments and others to purchase medical supplies.