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What Does SARS Mean for China?

Since November 2002, Severe Acute Respiratory Syndrome (SARS) has infected over 7,300 people in 30 countries and has killed 514. Beyond the human toll, it is wreaking significant economic damage across Asia. The Asian Development Bank estimates that East Asia could lose nearly 28 billion dollars in income and output if SARS is not controlled by September. Under such a scenario, aggregate 2003 GDP growth in China, Hong Kong, South Korea, and Taiwan would be cut from 5.6 percent (pre-SARS) to 4.7 percent, while growth in Southeast Asia would drop from 4.0 percent to 2.5 percent.

To date, Hong Kong is among the worst hit. Credit Suisse First Boston forecasts the economy is on course to contract 4.56.5 percent this quarter, threatening to derail plans to lower its critically high budget deficit. Taiwan’s economy, battered by a quadrupling in cases since April 20, is reportedly contracting 1 percent during the current quarter. In Singapore and Thailand, 2003 GDP projections are being lowered 0.51.5 percent.

Nowhere is SARS having more impact than on mainland China, where the disease started. By May 9, over 4,800 cases and 230 deaths had been reported there. Yet its greatest impact may be on China’s breakneck economic growth and antiquated political system. The epidemic’s slow but seemingly unstoppable progression, and Beijing’s long concealment of the truth, are exposing economic and political fault lines by simultaneously weakening the economy, damaging the government’s credibility, and threatening social stability.

Table of Contents

What Does SARS Mean for China?
Neil J. Beck