Roach, Roach Thinks Outbreak will Hit China Economy by Two-Quarter

Roach Thinks Outbreak will Hit China Economy by Two-Quarter

On Friday, Stephen Roach stated that the coronavirus outbreak has a high chance of hitting the economy of China over the course of two quarters.

He said, “The Chinese economy is flat-lining right now.”

According to Roach, the bizarre quarantines and travel bans have led the Chinese economy in a virtual standstill. The indicators of economic activity in China, like the coal consumption and transportation traffic, are well below the levels during this time last year – the aftermath of any recent Lunar Year holidays.

Back in late January, Beijing began to impose large-scale lockdowns and quarantining cities. As a result, it halted factory and economic activities that are slowly coming back online.

Then, the World Health Organization showed on February 27, over 82,000 people affected in the outbreak of the coronavirus globally. Formally known as COVID-19, the virus has already spread beyond China, hitting markets.

Nonetheless, Roach indicates that he wishes the Chinese government will not let up on efforts to cage the coronavirus outbreak even if there will be a short-term economic impact.

He explained, “A premature relaxation of quarantines and travel restrictions could lead to a relapse that would be far more dangerous than the outbreak at present.”

During his tenure as chairman of Morgan Stanley Asia, Roach lived in China from 2007 to 2012.

And Roach believes that China plans to prevent this whatever the cost may be. That is significant around the world, where the infection is obviously in the process of spreading right now.

Chinese Virus Last Longer than SARS

Furthermore, Stephen Roach already expected that the disruption from COVID-19 would last longer than the damage SARS wrought 17 years ago. He said this due to the Chinese and the world economy are now developing more slowly compared in 2002 and 2003, when severe acute respiratory syndrome hit.

“The upside of any V-shaped recovery is likely to be shallower than it was 17 years ago,” he stated.

The governments are already rolling out stimulus on packages to assist in coping with the economic part of the outbreak. Still, Roach told people that it was ludicrous to think that fiscal and monetary policy might be able to capture the downside of physical measures made to contain the spread of the epidemic.

Roach even emphasized that these kinds of measures are basically insensitive to policy action.

On the other hand, he suggested that the fiscal and monetary policy could try to stabilize the markets, which is particularly important. But above all, they must attempt to underwrite the upside of this subsequent recovery once economies such as China and elsewhere went back to work. Roach revealed that they are only playing for the other side of the virus-related impacts, and not on the downside.

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