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China’s economy, having weathered the trade war, is now jolted by coronavirus

Empty tables at a restaurant in Shanghai on Monday. The coronavirus outbreak has delivered a jolt to the world’s second-largest economy during what is normally a busy time of year. (Qilai Shen/Bloomberg News)

BEIJING — The Lunar New Year holiday is usually one of the busiest weeks of the year for Niu Mangmang, a hot pot restaurant chain that specializes in beef slices dipped into communal cauldrons of bubbling oil or soup stock.

But this year, as a new coronavirus spread from the city of Wuhan, Chinese families opted to stay home rather than celebrate over restaurant meals — and certainly not in restaurants where customers load up at buffets and slurp from the same pot.

“Normally, we’d have a full house, with all 30 tables booked at least one week in advance and many more people queuing in front of the store,” said Liu Bo, manager of a branch on the Chunxi shopping street in Chengdu, 700 miles west of Wuhan. “But now, it’s almost empty.”

Instead of the usual holiday turnover of $7,000 a day, Liu said he would be grateful for a fifth of that. He and other staff members are on half-pay as the restaurant battles through this period.

Similar tales are emerging throughout China as coronavirus infections mount. The latest figures show 20,438 people, across every province and region of China, have been infected.

The outbreak has sent a shudder through China’s already-slowing economy, with experts predicting annual growth could fall below 4 percent in the first quarter.

“Tourism, travel and dining out are going to be hit the most,” said Tao Wang, chief China economist at investment bank UBS.

The full extent of the impact will depend on how long the outbreak remains uncontained and how long the Communist Party enforces draconian shutdowns implemented throughout the country.

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Coronavirus fears have brought this nation of 1.4 billion almost to a standstill. From Beijing, where normally clogged ring roads are as clear as country lanes, to the barricaded hamlets that have shut themselves off to outsiders, China is hunkering down in the hopes of halting the pneumonia-like virus.

The figures suggest a significant dent to private consumption, which accounts for more than a third of the economy.

Movie theaters have had to refund presold tickets, amounting to $50 million just on Jan. 25, Lunar New Year’s Day.

The number of holiday-related plane and train trips was 40 percent lower this year than in 2019, when domestic tourism spending during the seven-day break totaled $73 billion. Beijing and Shanghai have halted long-distance bus services, while cities far from Wuhan have shut down public transportation.

Weddings and family gatherings have been canceled, contributing to a fall of as much as 12 percent in China’s liquor consumption this year and hurting sales of baijiu, the firewater that, ironically, is probably the closest thing to consumable disinfectant.

Market analysts say that if the ban on gatherings continues through March, baijiu companies could lose a fifth of annual sales. First-quarter sales account for more than a third of annual revenue for high-end baijiu makers such as Moutai.

Turning to delivery services is not always possible. Online vendors and restaurants are offering limited services at best, and many residential compounds have blocked entry to delivery vehicles. Monday’s news that a food-delivery man in Shenzhen worked for 14 days before discovering he had the new coronavirus can only further suppress the national appetite for takeout.

“Overall consumption will be especially badly hit in the first quarter,” said Louis Kuijs, head of Asia research at Oxford Economics. “People are forced or choose to stay in their homes. Nobody is going to the cinema or eating out — they’re not buying anything.”

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Industrial production is normally low at this time because businesses typically close for Lunar New Year. But with the holiday extended in parts of the country, including Shanghai and Chongqing, and office workers asked to stay home, output will take a hit.

The shutdown is also hurting U.S. companies in China. Starbucks and Apple have closed stores, and Tesla has shuttered its Shanghai plant.

Some of this business will never be recouped, said Wang, the UBS analyst. “People are not going to drink twice as many cups of coffee or see twice as many movies once this is over,” she said.

Businesses in Wuhan are the hardest-hit, among them Levi’s, which opened its biggest store in China there in October, and General Motors, which produces a fifth of its Chinese output at its Wuhan plant.

Compounding the difficulties, the outbreak of swine flu that devastated the pork industry last year has been joined by a new occurrence of avian influenza, or H5N1, in chickens in Hunan province that could disrupt food supplies.

Even if the coronavirus is swiftly controlled, economists say China’s annual growth rate will slump to between 3 and 4 percent in the first quarter, while the figure for the whole year may reach only 5.4 percent. But if that optimistic scenario does not pan out, the annual figure could easily fall below 5 percent, Wang said.

That would pose a challenge for the ruling Communist Party, which has been trying to delicately manage a years-long slowdown and had set a growth target of 6 percent for 2020. Its goal of doubling the size of the economy between 2010 and 2020, an ambitious endeavor that economists say would require massaging the numbers, is now almost impossible.

The state-run Shanghai Institutes for International Studies said the epidemic will have “much negative” economic impact in the short run, although it forecast China’s economy would “manifest strong surprising resilience” in the longer term.

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The economic toll of the coronavirus seems likely to be greater than the estimated $40 billion hit from the 2002-2003 epidemic of severe acute respiratory syndrome, largely because SARS was relatively confined to the southern province of Guangdong, while factories, offices and schools elsewhere remained open.

“If we use the benchmark of SARS, which was also a virus and also led to a government response, all signs point to this being a bigger deal,” said Kuijs of Oxford Economics.

Victor Ng, a veteran banker and an adjunct associate professor at Hang Seng University of Hong Kong, estimated the economic impact from the new coronavirus could be five to 10 times that of SARS.

Back then, though, China’s economy was booming, with growth rates approaching double digits and climbing.

The economy has since matured and entered a structural decline, complicated by President Trump’s trade war. U.S. tariffs imposed in that dispute continue to hurt manufacturers and other exporters.

But unlike the trade war, this outbreak is a sudden event. And China is a much bigger part of the global economy than during the SARS era, when it was the sixth-largest economy, and Chinese tourists were just beginning to venture into the wider world. Today, China is the second-largest economy and for many Asian countries in particular, the biggest trading partner and top source of tourists.

In addition, Wuhan plays a vital role in the global supply chain. The city is home to international automakers and parts manufacturers for companies such as Apple, and it is an important railway hub. But many trains have been canceled until the end of February.

Beyond the numbers, there’s the more nebulous impact on confidence and consumer sentiment.

Chinese people care more about a “sense of gain” than about numbers, Xie Jiu, chief financial editor at Life Week magazine, wrote in a column last week.

“It makes no big difference to an ordinary citizen whether [gross domestic product] grows by 5 percent or 6 percent, or even if it is doubled or not; people care more about their own sense of gain in reality, not some cold data at the cost of their own health and most fundamental safety,” he wrote.

Xie’s thoughts were not appreciated by Chinese officials who are trying to control the coronavirus narrative. The post was quickly erased from the Chinese Internet.

Lyric Li contributed to this report.

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