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September 19, 2020

Coronavirus Outbreak: Investors lose 32 Lakh Crores in China

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Concerns over the impact of coronaviruses led to a huge sell-off in China’s stock market on Monday. The Shenzhen Composite Index declined by 8.5%. This is the highest in 13 years. The Shanghai Composite Index fell 7.7% to a one-year low. It is also the biggest decline in four years. The fall of both indices resulted in a loss of $ 445 billion (Rs 32 lakh crore) to investors. China’s stock market regulator has said that companies affected by market downturns will be given a waiver in the time schedule to declare 2019 annual and 2020 quarterly results.

The central bank raised Rs 12 lakh crore in the system, yet the currency declined

China’s currency also declined sharply on Monday. The yuan fell 1.5% to 7 yuan per dollar. China’s central bank tried to stop the decline by increasing the cash in the system, but to no effect. The Central Bank had said on Sunday that $ 173 billion (Rs 12.36 lakh crore) would be pumped into the banking system through the purchase of short-term bonds, so as to increase the credit capacity of banks and keep the currency market stable.

Banks reduced interest rates so that the affected people do not face financial difficulties

Monday was the first day of trading in the stock market after the New Year holiday in China. Although the market was to open on Friday, the government extended the holiday. There have been more than 17 thousand cases of coronavirus infection in China. Central and local governments have so far released an amount of $ 12.6 billion (90 thousand crore rupees) for the treatment of victims and spending on medical equipment.

The government is taking several steps to reduce the impact of coronaviruses on the economy. In more affected areas, major banks have reduced loan interest rates so that people do not have financial problems. The Bank of China has said that if people lose their employment, they will be given more time while giving relief at the moment in payment of the debt.

Economy: Rs 2.29 lakh crore loss expected in three months

China’s economy, which suffered the loss of trade war last year, has been put at risk by Coronavirus in the new year. Economic activities are declining rapidly. Companies have to stop production. Last week, the American company Apple announced the closure of its 42 stores in China by 9 February. Electric car company Tesla has also temporarily closed a new Shanghai plant. How much economic damage will result from coronavirus effects is difficult to predict right now. But, according to some economists, China’s GDP growth could decline by 2% in the current quarter. If this happens, GDP will suffer a loss of $ 62 billion (Rs 2.29 lakh crore). China’s GDP growth was just 6.1% last year due to the impact of the trade war with the US. This is the lowest in 29 years.

Risk of unemployment rate reaching a record level

China’s economist Zhang Ming says that the employment situation is already bad because of the sluggishness in the economy. The effects of coronavirus will worsen the situation. Among the 29 crore immigrant workers, there are many who come from village to town every day for construction and manufacturing related work or other jobs with low wages. However, they will find it difficult to get jobs due to the closure of factories.

More than one crore workers in Hubei province may have to lose employment, as the impact of coronavirus in Hubei is the highest, with the people there increasing the risk of infection. According to Zhang, the unemployment rate in China may reach record levels in the coming few months. In general, it ranges between 4% and 5%. Vegetables have already become expensive, in the coming days, there is a danger of getting things needed daily and expensive.

Risk on the global economy as well; 17 years ago, a similar virus caused a loss of 2.85 lakh crores.

The world market share has been affected by the effect of coronavirus. The Indian market’s leading index Sensex fell by 458 points on February 27. The coronavirus is becoming a serious health problem for China as well as the whole world. According to the BBC report, experts believe that the spread of this virus can cause sluggishness in the global economy. The global economy suffered a loss of Rs 2.85 lakh crore in 2002-03 due to a similar virus-saver acute respiratory syndrome (SARS). Coronavirus infection will break the world’s supply chain. Prices will rise as traffic is affected. China is one of the world’s largest markets. Therefore, there will be a rapid impact on the world economy.


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