As infections and fatalities are swelling, the world’s second-largest economy is almost at a standstill. Given the restrictions put in place to contain the spread of the virus many urban manufacturing and financial centers are on at least partial lockdowns, migrant laborers aren’t working and factories are unable to get raw materials to make their products nor can they ship their goods out consistently. On top of this, consumption has decreased significantly since people are staying indoors. Service industries, like tourism and restaurants, are really feeling the pinch.
China’s central bank is doing what it can to loosen monetary policy, like increase the amounts of cheap credit. Some of their moves increase the liability for banks, but that’s a risk the government is willing to take right now. The main issue is that it’s not known how these policies will impact the economy until commercial activity resumes.
China plays a key role in the global economy due to its size, economic growth and being a major player in the commodity markets. So, the economic impacts of containing the virus will have ramifications all over the world. One example is that oil prices have fallen considerably as China’s growth prospects have weakened. Another example is the huge decrease in international travel. For the United States, the temporary boost in business sentiment and investment that investors were expecting from the U.S.-China trade deal will probably be short-lived. Experts don’t think that a worldwide recession is likely to happen at this point, but the added uncertainty will definitely curb investments and productivity.