Severe acute respiratory syndrome (SARS) has caused great concern worldwide. It has not only claimed people's lives, but has also damaged an already stagnant world economy. But how has it affected China's economy? How long will the impact last? Prestigious Beijing-based Caijing magazine published their report.

Several industries severely influenced

The five-star Grand Hyatt Beijing in Chang'an St has a usual occupancy rate of 80 percent in March. However, the rate was sharply slashed in April this year following the spread of SARS.

At the beginning of April, a total of 10,000 people cancelled their advance bookings in China International Travel Service (CITS), while 7,000 from China Youth Travel Service. Guangdong International Travel Service has almost stopped its cross-border travel service.

The seven-day Labor Day holiday is one of the three "Golden Weeks" in China, significantly boosting China's tourism over the past several years. The revenue from the Labor Day holiday usually accounts for 40 percent of the year's total. However, to avoid the fast spread of the epidemic, the State Council promulgated a notice that shortened the holiday to 5 days, and called for no travel. Therefore, it's estimated that the majority of travel agencies will suffer huge losses this year.

Zhou Keyu, a manager at Guotai Jun'an Securities, pointed out that SARS might cancel some high-level business trips, lower their working efficiency, and accordingly, cause a negative impact on some investment projects. He added that the psychological obstacle couldn't be removed in the short term.

It's believed that if the epidemic can't be controlled or people lose confidence, spending and investment will be greatly affected. The decreasing demand, on the contrary, might also slow down China's economy.

All those surveyed thought that the most affected industries would be tourism, transportation, and restaurants. In addition, entertainment, hotels, medicine, computers, Internet, trade, banking, securities, and insurance will also be influenced. However, it's still difficult to accurately calculate the losses and the impact on the macro-economy.

Impact on China's investment environment

Will the impact on foreign direct investment (FDI) and trade last for the long-term or short-term?

Zhang Liqun, a researcher at the State Council Development Research Center, tends to support the latter view. He said that China's fast economic growth, low labor cost and huge consumption market are extremely attractive for foreign investors, thus trade will recover gradually.

Zhou Keyu believes that if the epidemics were controlled in two months, the impact on foreign investment would be too little to calculate. However, if the epidemic last more than half a year, the influx of foreign capital in the region where SARS prevails would be greatly affected. Zhou added that the influx of foreign investment would not be significantly changed, for SARS was not one of the decisive factors for investment. He predicted that the growth rate of actual foreign investment was still around 10 percent.

"The SARS impact on FDI and trade is only short-term, for China is a huge economic body," said Hu Zuliu, chief economist of Goldman Sachs, Asia.

Ma Jun from the Deutsche Bank thought that although the government opacity had damaged its international image, investors from the Organization for Economic Cooperation and Development (OECD) who have had offices in China for many years, say their investment decisions will not be much influenced.

Ma said that the epidemic might cancel foreign investors' visits to China or delay their business talks. However, the decisive factors are the Chinese market and labor costs instead of how long the epidemic might last. In short, "The impact will be quite limited if the epidemic is controlled this month."

(China.org.cn by Tang Fuchun, May 6, 2003)