Xi vows China will beat virus - as economists slash forecasts

Beijing

PRESIDENT Xi Jinping led a chorus of voices in Beijing expressing optimism about the Chinese economy this year, but market economists are not so confident with numerous banks cutting their forecasts for the year.

The official Xinhua news agency reported that the Chinese leader told Indonesian leader Joko Widodo in a phone call on Tuesday: "We have the ability and confidence not only to defeat the epidemic, but also to accomplish the set goals and tasks for economic and social development. I believe China will be more prosperous after overcoming this epidemic."

That message was repeated across Chinese media, with a senior government-affiliated economist saying that the effect of the outbreak was temporary and would not stop China from reaching the target of doubling gross domestic product and per capita income from 2010 levels.

Cai Fang, vice-president of the Chinese Academy of Social Sciences, wrote in Wednesday's People's Daily: "It will not have a long-term impact on the supply of production and productivity, nor will it even affect the whole year or weaken the potential growth capacity of China's economy." China can reach its targets as long as economic growth this year is about 5.7 per cent, he wrote.

In contrast, economists at numerous investment banks have cut their forecasts for growth this quarter and for 2020 over the past few weeks. S&P Global Ratings said growth this year could be as low as 5 per cent, and with many people still unable to return to work due to restrictions on movement and firms, it is unclear when the situation will improve.

"The unknown features of 2019-nCoV, such as uncertainties about the incubation period, false negative results in testing and undetected channels for contagion, suggest the turning point is still days, if not weeks, away," Citigroup economists including Yu Xiangrong wrote in a report to clients this week. Citigroup has lowered its growth forecast twice in the past two weeks.

Mr Xi said the authorities are at an important juncture in fighting the virus, which has killed over 1,000 people since emerging in December in Hubei province and fuelled fears of a broader slowdown for the world's second-biggest economy.

He urged officials to work together to contain the virus at a rare meeting of top leaders earlier this month, saying the outcome would directly impact China's social stability.

Federal Reserve Chairman Jerome Powell told lawmakers that the US central bank was closely watching the fallout from the outbreak and singled it out among the risks threatening the American and world economies.

"In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy," he said.

At least some parts of government in China are beginning to show that they have got the message from the top about the importance of the economy. Officials in the province of Zhejiang said yesterday that their focus has shifted from all-out efforts to prevent and control the outbreak towards containing the epidemic while ensuring the economy's operation.

Even as countries around the world suspend air travel to the mainland, stop cruise ships from docking and quarantine people arriving from China, Mr Xi said in the phone call that his nation would strengthen cooperation on prevention and control measures with others, including Indonesia.

"We hope that countries in the region will work hard to maintain bilateral exchanges and cooperation while making reasonable prevention and control efforts," he said. BLOOMBERG