An empty road on the Wuhan Yangtze River Bridge at night in Wuhan in the central Hubei province, where the Covid-19 outbreak originated but where domestic cases have now declined rapidly. AFP
An empty road on the Wuhan Yangtze River Bridge at night in Wuhan in the central Hubei province, where the Covid-19 outbreak originated but where domestic cases have now declined rapidly. AFP
An empty road on the Wuhan Yangtze River Bridge at night in Wuhan in the central Hubei province, where the Covid-19 outbreak originated but where domestic cases have now declined rapidly. AFP
An empty road on the Wuhan Yangtze River Bridge at night in Wuhan in the central Hubei province, where the Covid-19 outbreak originated but where domestic cases have now declined rapidly. AFP

What the world's economy can learn from China's handling of the coronavirus outbreak


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China’s deepest economic slump in decades carries warnings and lessons for the rest of the world as nations from Germany to the US face the likelihood of following it into recession.

First, the upheaval led to a dramatic fall in services and consumption as people’s movements were restricted, dealing a hammer blow to airlines, hotels, restaurants and shopping malls. That compounded a collapse in the manufacturing sector as assembly lines went idle while workers stayed home.

The insights from China include the need for urgent measures to contain the virus and not to underestimate the economic hit that it will create. But above all, don’t expect normal service to resume for some time.

“The world is following China in February,” said Trinh Nguyen, Hong Kong-based senior economist at Natixis. “Supply and demand shocks are now going global.”

There are some key economic lessons for the world to learn from China’s experience since mid-January.

Virtually across the board, economists failed to capture how wrenching the fall out would be. Since the first GDP forecast cuts started coming in late January, there have been a succession of lower and lower estimates as initial expectations for a rapid (or V-shaped) recovery vapourised.

Data on Monday that showed a historic slump in retail sales, industrial output and fixed-asset investment – well beyond what economists anticipated – is fueling further outlook cuts. Australian bank Macquarie Group expects a 6 per cent contraction this quarter compared to a year earlier. A Bloomberg Economics model shows China’s GDP is tracking about 20 per cent lower year-on-year in the first two months.

Underestimating the hit isn’t unique to China. In mid- February, weeks into the virus outbreak, global policy makers were still talking of a rebound as their base case. In a surveillance note released February 19, the IMF left unchanged its January projection that global growth will accelerate to 3.3 per cent this year from 2.9 per cent in 2019.

China faced some criticism in terms of the amount of time it took for warnings of the outbreak to emerge. That delay compounded the disruption then needed to control it. It’s a lesson other countries appear to have missed, with charges that governments from Washington to Tokyo have been slow to act, leaving central banks and finance ministries scrambling to contain the damage.

“I think that for all the countries with just a few dozen cases, and maybe just a handful of new cases each day, feeling relatively unscathed, a week can massively change that,” said Robert Carnell, chief economist for Asia Pacific at Dutch lender ING Group in Singapore.

Services in China have taken a bigger hit than manufacturing. Barclays economists last week estimated a plunge in output of around 70 per cent year on year in February, before improving to a decline of 40-45 per cent. That compares to a decline of 30-35 per cent for manufacturing.

Now, a spike in imported cases for China means movement restrictions and home confinement will delay the recovery in services, even as manufacturing slowly gets back on its feet. Store traffic is only creeping back up after falling by as much as 80 per cent at the virus outbreak’s peak.

The virus shut down Hubei province, an economy the size of Sweden’s. It is China’s largest producer of phosphorus, used in fertiliser, and is a key centre for the country’s auto industry with local carmakers like Dongfeng Motor Group and global titans such as PSA Group and Honda Motor making vehicles and components.

Other countries have followed with their own strict shutdowns. In Italy, which is under nationwide lockdown, the crisis has all but paralysed business activity in Lombardy – which accounts for a fifth of the country’s gross domestic product – and the rest of the north, Italy’s economic engine.

It may yet prove that the complete shutdown of an economy is too drastic, said Alexander Wolf, Head of Asia Investment Strategy at JP Morgan Private Bank and a former US diplomat in China.

“Korea’s handling offers a middle ground so I think in time it will make an interesting case study in terms of the economic impact,” Mr Wolf said.

Financial authorities in Beijing acted quickly to support financial markets with liquidity, avoiding the kind of volatility that has rattled the rest of the world. The stock market is among the world’s 20 largest that’s yet to slip into bear territory.

US policymakers didn’t act until the S&P 500 Index tanked 11 per cent in one week. Still, China’s resilience may be tested further.

China’s government has pursued a relatively disciplined policy approach so far. Instead of a borrowing splurge and massive monetary easing, it has been targeting lending to businesses that need it. The People’s Bank of China has pumped money into the financial system and cut the amount of cash that banks have to set aside as reserves.

On the fiscal side, the government has relied on tax cuts and is speeding up spending on infrastructure projects. Local authorities are allowed to sell special bonds to pay for infrastructure investment, and there’s been a push to sell these earlier in the year. There have also been targeted cuts to taxes and social security premiums for virus-hit companies to avoid massive layoffs.

Getting back to normal won’t be easy, though.

Bloomberg Economics estimates China’s back-to-work rate at between 80-85 per cent for the week ending March 13, just above the 70-80 per cent a week earlier. What’s more, they don’t see the process accelerating much faster from here. Health experts have warned that getting back to the office or factory too soon risks a second wave of infection. Therefore, the coming weeks are seen a stress test of how it can be done.

UAE currency: the story behind the money in your pockets
The specs

Engine: 3.8-litre twin-turbo flat-six

Power: 650hp at 6,750rpm

Torque: 800Nm from 2,500-4,000rpm

Transmission: 8-speed dual-clutch auto

Fuel consumption: 11.12L/100km

Price: From Dh796,600

On sale: now

UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

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Labour dispute

The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.


- Abdullah Ishnaneh, Partner, BSA Law 

Last-16

France 4
Griezmann (13' pen), Pavard (57'), Mbappe (64', 68')

Argentina 3
Di Maria (41'), Mercado (48'), Aguero (90 3')

GOLF’S RAHMBO

- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)

UAE currency: the story behind the money in your pockets
THE SPECS

Engine: 6.75-litre twin-turbocharged V12 petrol engine 

Power: 420kW

Torque: 780Nm

Transmission: 8-speed automatic

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The specs

Engine: 8.0-litre, quad-turbo 16-cylinder

Transmission: 7-speed auto

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0-200kmh 5.5 seconds

0-300kmh 11.6 seconds

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THE LOWDOWN

Photograph

Rating: 4/5

Produced by: Poetic License Motion Pictures; RSVP Movies

Director: Ritesh Batra

Cast: Nawazuddin Siddiqui, Sanya Malhotra, Farrukh Jaffar, Deepak Chauhan, Vijay Raaz

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
​​​​​​​Fuel consumption, combined: 10.5L / 100km

Pupils in Abu Dhabi are learning the importance of being active, eating well and leading a healthy lifestyle now and throughout adulthood, thanks to a newly launched programme 'Healthy Lifestyle'.

As part of the Healthy Lifestyle programme, specially trained coaches from City Football Schools, along with Healthpoint physicians have visited schools throughout Abu Dhabi to give fun and interactive lessons on working out regularly, making the right food choices, getting enough sleep and staying hydrated, just like their favourite footballers.

Organised by Manchester City FC and Healthpoint, Manchester City FC’s regional healthcare partner and part of Mubadala’s healthcare network, the ‘Healthy Lifestyle’ programme will visit 15 schools, meeting around 1,000 youngsters over the next five months.

Designed to give pupils all the information they need to improve their diet and fitness habits at home, at school and as they grow up, coaches from City Football Schools will work alongside teachers to lead the youngsters through a series of fun, creative and educational classes as well as activities, including playing football and other games.

Dr Mai Ahmed Al Jaber, head of public health at Healthpoint, said: “The programme has different aspects - diet, exercise, sleep and mental well-being. By having a focus on each of those and delivering information in a way that children can absorb easily it can help to address childhood obesity."

LILO & STITCH

Starring: Sydney Elizebeth Agudong, Maia Kealoha, Chris Sanders

Director: Dean Fleischer Camp

Rating: 4.5/5

Abu Dhabi GP schedule

Friday: First practice - 1pm; Second practice - 5pm

Saturday: Final practice - 2pm; Qualifying - 5pm

Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm

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