1、 April 21, 2020 Disclaimer: This paper is the product of professional research performed by staff of the U.S.-China Economic and Security Review Commission, and was prepared at the request of the Commission to support its deliberations. Posting of the report to the Commissions website is intended to
2、 promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of U.S.- China economic relations and their implications for U.S. security, as mandated by Public Law 106-398 and Public Law 113-291. However, the public release of this document does not necess
3、arily imply an endorsement by the Commission, any individual Commissioner, or the Commissions other professional staff, of the views or conclusions expressed in this staff research report. Kaj Malden, Policy Analyst, Economics and Trade Suzanna Stephens, Policy Analyst, Economics and Trade Cascading
4、 Economic Impacts of the COVID-19 Outbreak in China U.S.-China Economic and Security Review Commission Table of Contents Key Findings .3 Overview: COVID-19 Response and Impact .4 Chinese Consumer Demand Plummets .5 U.S. Sales of Goods and Services Falling .6 Consumption Remains Sluggish Amid Uncerta
5、inty and Threatened Incomes.6 Cascading Effect of Lockdowns in China Upends Global Economic Flows .7 Transportation Stoppage and Restrictions on Movement .7 Production Downturn in China .9 Turmoil in Energy Markets .11 Global Shipping Flows in Disarray, Disrupting U.S. Trade .12 Production Breaks in
6、 China Choke Supply Chains for U.S. Companies .13 Dual Supply and Demand Shocks Shake Market Sentiment .15 Chinas Policy Response .15 Considerations for Congress .16 U.S.-China Economic and Security Review Commission 3 Key Findings Halt in economic activity: In addition to COVID-19s extensive human
7、toll, the outbreak and response to it in China brought economic activity to a standstill. As a result, Chinas National Bureau of Statistics reported a 6.8 percent contraction in first quarter GDP growth in 2020.1 For the year, Chinas 2020 GDP is expected to grow at its slowest rate since 1976, 2 wit
8、h forecasts ranging from 3 percent (Goldman Sachs, March 17)3 to 1.2 percent (International Monetary Fund, April 14)4 to 1 percent (Nomura, March 31)5.* o Demand arrested: Retail sales in January and February fell by 20.5 percent over the same period in 2019 according to Chinas National Bureau of St
9、atistics. This drop affected U.S. corporate revenues in China: half of 119 companies surveyed by American Chamber of Commerce (AmCham) in China in late March reported revenue declines of 10 percent or greater in their operations in China. o Workers return to cities blocked: Movement restrictions to
10、contain the spread of illness slowed the flow of workers returning to cities for work after the Lunar New Year. Post-holiday data from the China Ministry of Transport show a 70 percent drop in passenger traffic. o Production and export flows stalled: Labor shortages caused a significant decline in p
11、roduction and export shipments. Industrial output plummeted, and recent data indicate a manufacturing contraction in February 2020 below the lowest figure seen in the 2008 financial crisis. o Energy demand plummets: Given Chinas position as the largest global oil importer,6 OPEC members expressed co
12、ncern at the sudden stop in oil demand, “particularly in China” but also “in the Asian region and gradually in the world.”7 o U.S. supply chains disrupted: The halt in production in China upended global transportation and shipping, and snarled global supply chains. The break in these flows affects U
13、.S. companies: survey data suggest about 75 percent of U.S. companies experienced some COVID-19-related supply chain disruption, and over 80 percent said they may experience a negative impact beyond the first quarter. Policy response: Chinas policymakers froze economic activity in implementing strin
14、gent control measures to curtail COVID-19s spread. Preliminary policy responses have focused on supply-side measures to shore up businesses and prevent their failure, as well as mitigate risks of unemployment. The effectiveness of these measures is being challenged by mounting prospects of reduced e
15、xternal demand. As Beijings financial system is impaired following years of credit-fueled stimulus, authorities are leaning more on targeted fiscal support that may reinforce state-led management of the economy. Looking ahead: The shutdown in Chinas economic activity has now been followed by halting
16、 economic activity internationally as other countries respond to the pandemic. On April 14, the International Monetary Fund forecasted a global GDP contraction of 3 percent in 2020, assuming the pandemic subsides in most countries in the second quarter of 2020.8 International Monetary Fund Chief Eco
17、nomist Gita Gopinath emphasized the forecast assumed the resumption of economic activity in the second half of 2020.9 Scope Note This paper addresses the economic impact of the COVID-19 outbreak as it occurred in China and traces how subsequent disruptions have radiated across the world economy and
18、impacted the United States. This assessment is preliminary, and new and updated data published subsequently will bring greater clarity and definition to trends discussed in this paper. * Given great uncertainty regarding how quickly the global pandemic can be contained, these forecasts are highly va
19、riable. As of mid-April 2020, many forecasts are being revised every two to three weeks. U.S.-China Economic and Security Review Commission 4 Overview: COVID-19 Response and Impact In the wake of a deadly COVID-19 outbreak that started in Wuhan, the capital of Hubei Province, the Chinese government
20、imposed quarantines and other restrictions on movement to prevent the spread of illness in China. Concerns about a new respiratory virus were evident prior to December 31, 2019, when Beijing first notified the World Health Organization (WHO) of the outbreak.10 Chinese officials did not take decisive
21、 action to contain its spread until late January. On January 23, transport linkages from Wuhan were suspended, followed by the lockdown of 12 other cities in Hubei on January 24 (see Figure 1).11 Beyond Hubei, provinces including Zhejiang, Liaoning, and Jiangxi also placed official lockdowns on resi
22、dential areas as localities across China implemented formal and informal restrictions on movement.12 These restrictions quickly and dramatically shut off the flow of people returning from their hometowns to their places of work after the Lunar New Year, Chinas largest annual holiday. Store closures,
23、 authorities restrictions on movement, and public fears of contagion drastically reduced in-person transactions in routine and holiday spending, resulting in retail sales plummeting by 20.5 percent year-on-year according to official statistics. Though these containment measures immediate economic im
24、pact fell on consumer demand, as more data are released, major disruptions in supply chains are becoming clearer. The slow trickle of migrant workers returning from their hometowns back to work sites after the Lunar New Year led to large manufacturing and logistics labor shortages that arrested the
25、production and flows of goods within China and between China and other countries. With some notable exceptions, Chinas economic activity came to a standstill. Chinas National Bureau of Statistics reported a 6.8 percent contraction in first quarter GDP growth in 2020.13 Chinas annual 2020 GDP growth
26、forecasts range from 3 percent (Goldman Sachs, March 17)14 to 1.2 percent (International Monetary Fund, April 14)15 to 1 percent (Nomura, March 31)16. Shocks to both supply (e.g., manufacturing output) and demand (e.g., consumer spending) have been felt outside of China, even before the virus spread
27、 internationally. Figure 1: Coronavirus Outbreak and Official Action Taken Note: The precise date of first infection is unknown, but medical research has posited early December. Qun Li et. al., “Early Transmission Dynamics in Wuhan, China, of Novel Coronavirus-Infected Pneumonia,” New England Journa
28、l of Medicine, January 29, 2020. Source: Created by Commission staff.17 U.S. officials offered assistance to China on several occasions. According to U.S. Department of Health and Human Services (HHS) Secretary Alex Azar, on January 6, HHS offered to send a team from the U.S. Centers for Disease Con
29、trol and Prevention (CDC).18 This offer was reiterated on January 27, on January 28 via the WHO,19 and on February 3, when U.S. CDC National Center for Respiratory Diseases Director Nancy Messioner stated: “As soon as the CDC is allowed to go, we will be there we are still waiting for that invitatio
30、n.”20 On January 28, following high-level discussions with the WHO in Beijing,21 China agreed it would accept an international team of experts from the WHO, including two experts sent from the United States, which began its mission in China on February 16.22 Meanwhile, the United States moved to res
31、trict travel from China on January 31.23 On February 4, WHO U.S.-China Economic and Security Review Commission 5 Director-General Tedros Adhanom Ghebreyesus said widespread travel bans and restrictions “could have the effect of increasing fear and stigma with little public health benefits.”24 Chines
32、e Consumer Demand Plummets The COVID-19 outbreak started at the beginning of the Lunar New Year cutting deeply into spending on services and goods that typically occurs around the holiday period. Affected consumer areas included services like domestic and outbound tourism, restaurants, and entertain
33、ment. U.S. restaurant chains including McDonalds and KFC announced partial closures and reduced operating hours, while Starbucks closed more than half of its 4,292 cafes.25 Nearly all movie theaters in China closed and movie releases were postponed.26 Box-office data company Comscore reported that C
34、hinas box office sales in January and February totaled $238 million, compared to $2.15 billion for the same two months in 2019.27 The outbreak also affected purchases of consumer goods which typically increase in January and February around the Lunar New Year holiday. Monthly retail sales in January
35、 and February plunged 20.5 percent compared to the same two months in 2019, when they had grown by 8 percent (see Figure 2).28 Struggling retail sales will have a greater impact on Chinas current economy than previously. Chinese consumer spending accounted for about 60 percent of Chinas GDP growth i
36、n recent years according to management consulting group McKinsey.29 Figure 2: Change in Monthly Retail Sales, February 2019February 2020 Note: The National Bureau of Statistics does not release separate January retail sales figures. February retail sales figures combine January and February data to
37、accommodate the Lunar New Year. Monthly retail sales were calculated from year-to-date sales by subtracting the prior months year-to-date figure from current months year-to-date figure within a given year. Source: China National Bureau of Statistics via CEIC; staff calculations. Specific retail cate
38、gories provide more detail. Total mobile phones sales dropped from 14 million devices sold in February 2019 to 6.34 million devices sold in February 2020, a decline of 55 percent and the lowest amount for February since 2012 when data publication began.30 Total sales of motor vehicles, which had bee
39、n slowly declining as of mid-2018, fell from 1,481,602 cars in February 2019 to 309,942 cars in February 2020, a drop of 79.1 percent.31 While most industries in China experienced major disruptions, niche markets supporting communication online saw an uptick in usage from time spent indoors. As stud
40、ents moved to online classes, Chinese online education providers like VIPKID and Alibabas DingTalk began offering free classes and services.32 Free usage could help Chinese online education providers edge in on a valuable industry: in 2018, Chinas online education market increased 25.7 percent to $3
41、5.9 billion (renminbi RMB 251.7 billion) over 2017.33 Similarly, technologies to support working from home also accelerated. Mobile market intelligence firm Sensor Tower tracked growth in remote work application downloads between January 22 and February 20, including DingTalk (a 1,446 percent increa
42、se), WeChat Work (a 572 percent increase), and ByteDances Lark (a 6,085 percent increase).34 -21.1% -25% -20% -15% -10% -5% 0% 5% 10% 15% FMAMJJASONDF 20192020 year-on-year Retail U.S.-China Economic and Security Review Commission 6 U.S. Sales of Goods and Services Falling With consumption in declin
43、e, the commercial performance of U.S. multinational enterprises (MNEs) that rely on China as a source of demand has been affected. A mid-February survey conducted by AmCham China* found that 48 percent of U.S. companies surveyed expected 2020 revenues to fall if they cannot resume normal operations
44、by the end of April.35 This number jumped to 57 percent just one month later as Chinas policymakers struggled to restore economic activity and the virus global spread expanded, further dimming business sentiment.36 As of March 25, half of 119 companies surveyed by AmCham China reported revenue declines of 10 percent or higher.37 U.S. firms across a range of industries have warned investors of the risks to healthy sales growth. In a rare advisory released on February 17, leading U.S. consumer electronics firm Apple said i
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