Coronavirus may cost Chinese economy, extends its current Lunar New Year holiday

Over a dozen Chinese provinces has extended the current Lunar New Year holiday by more than a week. It is an attempt to curb the spread of the novel coronavirus that has killed hundreds of people and sickened thousands.

14 provinces and cities have announced that there is no need to start operations until second week of February atleast. As per news source, it represent almost 69% of China’s gross domestic product in 2019.      

All the key eastern manufacturing provinces have extended the holiday. They include Guangdong, home to the tech city of Shenzhen across the border from Hong Kong; Shanghai, home to China’s largest port and a newly-built Tesla Inc. plant; as well as Jiangsu, where Nike shoes are manufactured. Henan in central China, which has a large Foxconn plant making iPhones, also announced the extended break.

This extension comes along with other measures like quarantining whole cities that are set to disrupt supply chains and logistics. The novel coronavirus will give more severe blow to Chinese economy than SARS outbreak in 2003.

The longer holiday is also likely to be disruptive for China’s trade, hitting both exports, imports, and the companies that rely on that exchange. The 14 provinces included in the extended holiday were the source of 78% of China’s exports in December last year.

The Lunar New Year is disruptive even in normal years, as the country shuts down for a week as hundreds of millions of people travel to visit family. Industrial factories typically stock up on raw materials ahead of the holiday, in anticipation of a jump in activity after the break. That pick up is now being delayed.