Investment decisions are being postponed due to the SARS crisis, Jasper Becker reports from Beijing
Everyone is supposed to be back at work in Beijing but not so you notice. One wanders lonely as a cloud through the giant Friendship department store watched by a host of idle shop assistants.
The jack hammers on the hundreds of building sites across city have fallen mercifully silent and the roads are empty - no one cuts you up rushing on the airport expressway.
Over-attentive waiters hover about in restaurants. No one dares cough and the owner, so glad to see a customer, earnestly solicits one's views on when the SARS plague will be over.
"If it is not over by the summer, I'll be bankrupt," Mrs Lin, owner of the three-storey Pink Loft, fretted the other night.
The government media keep pumping out reassuring statements by "noted Chinese economists" that China will surely maintain its "steady growth". Just look at the high demand for consumer goods like disinfectants and telecommunications.
Every foreigner who can is leaving town, and with travel throughout China on the wane investment decisions are being postponed until the summer is over. Hong Kong's Dragonair Airline, which serves mainland cities, says its now carrying just 700 passengers a day compared to 13,000 at the start of the year and it has grounded nine of its 21 aircraft.
Its rival, Cathay Pacific, is seeking to delay the delivery of seven new aircraft after cutting nearly half its flights.
Big Chinese state companies which were planning to lift spirits in the world's ailing financial service sector with large public stock offerings are holding off. China's giant People's Insurance Company is putting off its US$600 million IPO until the autumn, so are Sinotrans, Shanghai Forte Land Co and Soho China.
Standard & Poor's Corp is predicting that bank profits could slide by as much as 45 per cent in Hong Kong and 25 per cent in Singapore, if the slow down lasts to the end of the year.
Sales of computers in China, the world's second biggest market, is slowing so quickly that it is already driving down the prices of computer chips, which is going to hit some companies hard, like South Korea's Hynix Semiconductor, which were already struggling to survive in an overcrowded market.
Although the SARS impact on the Asian economies is being compared to disastrous plunge after the 1997 Asian financial crisis, pundits overseas are remarkably blasé about the impact on the world economy, even though China was touted in January as the motor of economic growth.
Mr Stephen Roach of Morgan Stanley has just trimmed his forecast for China by only half a point to 6.5 per cent for 2003. Others have cut their growth forecasts for Hong Kong by about one percentage point, Singapore slightly less, and Malaysia and Thailand by about half a percentage point on the assumption that the virus is brought under control by mid-year.
"SARS will dampen global growth this year, albeit marginally," said Mr Gerard Lyons, chief economist at Standard Chartered Plc in London.
In the nine Asian countries most affected by the disease, SARS will reduce combined gross domestic product by $16.5 billion, or 0.7 per cent, he estimates.
The Asian Development Bank forecasts economic growth in China, Hong Kong, South Korea and 38 other members countries to slow to an average 5.3 per cent this year from last year's 5.7 per cent expansion, despite the severe damage to airlines, hotels, convention centres and other businesses that rely on tourism.
Only JP Morgan Chase is alarmed enough to predict that the Chinese economy will actually shrink, and by 2 per cent in the second quarter after a 9.9 per cent rise in the first.
This seems closer to reality, at least as far as Beijing is concerned. Although both Singapore and Hong Kong have announced big fiscal stimulus packages, China is unable to do the same - it is already relying on a big government spending programmes to keep the economy ticking over fast enough to create the necessary jobs.
Another pillar of growth, foreign investment, is bound to fall steeply, as investors stay clear of China. The Guangzhou trade fair was badly hit with contracts signed down by three-quarters and Chinese businessmen also complain they fear going abroad to pursue business because they will be shunned or forced into quarantine.
Some hope that if Hong Kong and Singapore can curb the SARS outbreak, China should be able to manage it too. Others predict that the virus will fade away in the summer and reappear again in the winter as many other viruses do.
If business confidence does not return, and if the Chinese government does not regain its credibility abroad, the impact on the world economy may be slight - China is still not a big enough player. Yet the impact on domestic politics might be strong.
In 1997, the Asian financial crisis caused a political earthquake across the region including the downfall of the Suharto regime in Indonesia and the independence of East Timor. China escaped unscathed but it may not be lucky this time.