SARS will have a significant negative effect on domestic spending, warned Qi Jinmei, a senior economist at the State Information Centre.

Since the outbreak of the disease, in Beijing alone, more than 1,440 tour groups of 40 or more people have postponed tours, revealed the local tourism bureau.

Occupancy rates have dipped to as low as 20 percent at hotels catering for foreigners in the capital.

At this time of year, the hotels are normally doing a brisk trade, with occupancy rates in some as high as 90 percent.

In the southern island province of Hainan, the number of tourists accepted by major tourism agencies fell by 6,300 during the first quarter of this year, said the local statistics bureau.

In a bid to minimize the spread of the virus, the central government has decided to cancel the week-long May Day holiday.

But, in recent years, spending during the holiday week contributed greatly to overall annual retail sales, Qi said.

More seriously, the disease has began to have a negative impact on the purchase of food and other daily necessities, Qi said.

"They are unwilling to leave their homes. If the disease is not effectively controlled, nationwide retail sales are likely to drop by 2 percentage points," she said.

Qi predicted earlier that China's retail sales will grow by 10.2 percent in 2003.

Zhang Liqun, a senior research fellow at the State Council Development Research Centre, said SARS was likely to have some impact on retail sales, but this was not expected to be that large.

"Retail sales will drop by less than 1 percentage point, because the outbreak of the disease will be periodic and short term," he said.

Experience in South China's Guangdong Province suggests that the SARS outbreak will last about three months, he said.

After that period, people may buy more goods to "make up" for reduced spending, he said.

People are still buying daily necessities from chain stores.

"They have to eat every day, although they may not eat in restaurants," Zhang said.

But sales of products such as clothing and shoes, which are not badly needed, will be affected, because people will be less keen to indulge in window-shopping.

"The general trend for retail sales will be stable," he said.

According to the National Bureau of Statistics, China's retail sales reached 349.5 billion yuan (US$42.1 billion) in March, an increase of 9.3 percent compared with the same month in 2002.

For the first three months, retail sales were 1,110.9 billion yuan (US$133.8 billion), a year-on-year increase of 9.2 percent.

The bureau said the booming sales were mainly due to increased spending on food and tourism due to the week-long lunar new year festivities in February.

(China Daily April 28, 2003)