February 18, 2020 / 2:45 AM / in 2 months

China regulator says epidemic's impact on industry 'major' in February

BEIJING (Reuters) - The impact of the coronavirus outbreak on China’s various industries will mainly show up in February, a vice chairman of the country’s state assets regulator said on Tuesday, as containment measures disrupt production and supply chains.

Travellers with face masks and shields are seen at the Shanghai Hongqiao Railway Station on the last day of the Spring Festival travel rush, as the country is hit by an outbreak of the novel coronavirus, in Shanghai, China February 18, 2020. REUTERS/Aly Song

Authorities throughout China have implemented various curbs on travel and movement in order to contain the epidemic, which has killed nearly 1,900 and infected more than 70,000 in the mainland alone. Such steps in turn have hampered the ability of companies to resume production, receive raw materials or send products to clients, disrupting their operations.

“(The outbreak) in turn had a comparatively controllable impact in January operations and a major impact in February,” Ren Hongbin of China’s State-owned Assets Supervision and Administration Commission (SASAC), told reporters during a press briefing, adding that consumer-oriented firms and firms at the end of industrial chains have been hit the hardest.

More than 95% of central government-controlled companies in key sectors such as oil, communication, power and transport are in operation, Ren said.

Capital Economics said in a report that it is now all but certain that China’s economy will contract in quarter-on-quarter terms in the first quarter. “We have penciled in a fall in output of 2.5% q/q,” Neil Shearing, group chief economist, wrote.

Peng Huagang, a SASAC spokesman, said during the briefing the regulator will encourage centrally held firms to extend or revise contracts with small- to medium-sized companies that are struggling to deliver goods or make payments due to the coronavirus outbreak.

The regulator will also instruct state-owned firms to step up health monitoring of employees to be sent abroad for various overseas projects in order to prevent further spread of the coronavirus, Peng said.

The outbreak has had an impact on offshore projects and the state-owned firms will communicate with governments of relevant countries to ensure proper understanding of the situation, Peng added.

Shearing of Capital Economics said the virus had hit global supply chains and could have longer-term repercussions.

“One plausible consequence is that it could accelerate the process of deglobalization that is already spreading through the world economy and which we have previously warned about.”

Reporting by Lusha Zhang and Se Young Lee; Editing by Jacqueline Wong

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