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1 [1] (March 2, 2020)

handle is hein.crs/govcozr0001 and id is 1 raw text is: FF.ri E.$~ & p\w -- , gnom go mppm qq\ , q I aS 11LIANJILiN, Updated March 2, 2020 COVID-19: U.S.-China Economic Considerations The novel coronavirus outbreak (COVID-19) is slowing economic activity in China and raising concerns about potential U.S. supply chain vulnerabilities in a range of sectors that rely directly and indirectly on China-based suppliers. These sectors include medical supplies, pharmaceuticals, auto parts, microelectronics, and strategic raw materials. Similar to the outbreak of severe acute respiratory syndrome (SARS) in China in 2002-2003, most cases so far are concentrated in China, but the current number of infections is already an order greater and every Chinese province is affected. U.S. senior officials have expressed concerns about the completeness and timeliness of the information China is reporting, complicating assessments of the scope, trajectory, and economic impact of the outbreak. The Chinese government has also imposed tight content controls on media reporting and placed Sina Weibo, Tencent, ByteDance, and other Internet firms under special supervision of the Cyberspace Administration of China, further limiting coverage of the outbreak. Figure I. COVID-19 Regional Case Map Source: New York Times, Coronavirus Map: Tracking the Spread of the Outbreak, March 2, 2020. The coronavirus is hitting China during an economic downturn as the government grapples with U.S. tariffs and China's counter tariffs, rising consumer inflation due in part to domestic pork shortages resulting from African swine fever, and efforts to rein in local government spending and shadow lending. China's economic growth could go negative in the first quarter of 2020 and fall below 5% for the year, with more serious effects if the outbreak continues beyond March. In a sign the slowdown could last past March, the Chinese government cancelled several spring meetings: the State Council's China Development Forum, the National People's Congress annual legislative session, and the Canton Trade Fair. A key factor affecting the economic outlook in China is the ability of businesses to resume operations after the Lunar New Year was extended from late January until February 10, 2020. Business reopening has been uneven across sectors and locations in China. Many firms are awaiting government approvals to reopen and are facing difficulties in meeting new operating requirements, such as providing masks for employees. Foxconn, a Taiwan electronics firm that produces for Apple, has applied to reopen in early March. Resumption of transportation and travel appears to be a major obstacle. Chinese media has reported on employees struggling to return to work amid transportation shutdowns and contagion concerns. The American Chamber of Commerce in Shanghai reported on February 17, 2020, that most companies surveyed do not yet have sufficient staff to run a production line and face numerous logistics constraints. Almost half of the companies surveyed report that their global operations are already affected by the outbreak. These companies expect demand to be lower over the next several months. The Chinese government has locked down cities in China's provinces of Hubei (e.g., Wuhan, Ezhou) and Zhejiang (e.g., Wenzhou, Hangzhou, Ningbo, and Taizhou). In total, an estimated 90 cities across China face some form of restrictions. The Chinese government has leaned on online delivery services and the military for logistics support, and is restricting consumer activity across multiple cities. Domestic and global transportation links have been significantly curtailed with ramifications for trade. Air services face reduced capacity with the canceling of passenger travel and restrictions on pilots and flight staff on cargo flights to third countries. Cargo operations in China depend on port staffing and are reportedly operating at significantly reduced capacity. While most businesses typically plan for a shut down during the Lunar New Year, including some stockpiling, companies are now likely to experience more serious shortages. Cargo shipments from China to the United States typically take approximately three weeks; slowdowns in maritime shipping could affect a wide range of industrial and consumer goods. The Chinese government is trying to encourage economic activity, but restrictions on business reopening, travel, and transportation are hampering its support efforts. Unlike other types of economic slowdowns, government stimulus cannot generate real economic activity on its own if business operations remain partially or completely shut down. The Chinese government is issuing economic support measures such as tax exemptions and special- purpose bonds. City governments in Beijing, Qingdao, Shanghai, and Suzhou are offering small- and medium- sized businesses in hard-hit industries support to reduce loans and delay payments for rent and social security. With a priority on social stability, localities are also offering preferences to companies that retain workers. In early February, China's central bank pumped $57 billion into the K~:> 'S * '*; *N