We estimate that containment measures in China are likely to cost -3pp to Q1 GDP y/y growth, with -1.8pp due to lower private consumption. Drastic measures still in place in the Hubei province (which represents c.4.5% of China’s GDP) along with general prudence and social distancing in the rest of China are weighing on household consumption, particularly discretionary spending. For example, high frequency data show that property transaction volumes were c.70% below their usual levels in the sixth week after the Lunar New Year.

One month after containment measures were implemented, a turning point was seen in the epidemic in China. The focus is likely to have turned towards restarting economic activity. We find that the Chinese economy is still operating c.25% below its usual levels. The number of ‘active’ cases, i.e. the number of people still sick and potentially contagious, has been declining since 18 February (19,016 on 8 March vs. peak at 58,016). Daily data on traffic congestion and coal consumption suggest that the Chinese economy overall is still operating c.25% below its usual level, in the sixth week after the Lunar New Year. Industrial production, retail sales and investment data for January-February released on 16 March will provide a better picture of how much the COVID-19 outbreak hit the Chinese economy.

We expect full resumption of Chinese economic activity by the end of April. Authorities will restart the economy gradually, in order to contain the risk of seeing renewed acceleration in the contagion of COVID-19 as migrant workers return to their place of work, and as the epidemic in the rest of the world worsens. As of 5 March, Chinese authorities confirmed 36 imported cases of COVID-19 from abroad, i.e. c.40% of new cases over ten days across China excluding Hubei.