As China’s leaders scramble to contain the COVID-19 epidemic, the global community braces for impact to China’s people, equity and bond markets, and economy.
A virus is spreading across China, causing disruption, severe illness and even death. In addition to the tragic human cost of an epidemic, widespread disease can cause significant macroeconomic damage. We estimate the potential impact of the Wuhan coronavirus on China’s GDP growth.
China’s currency depreciated this week, with the exchange rate rising to more than 7.0 renminbi per US dollar, unnerving investors worldwide. Here’s the good news: we don’t think the decline is as worrisome as it may seem.
The latest spike in trade tensions between the US and China raises the stakes for the G20 meeting in late June. It also has some investors questioning how China will manage growth as well as fiscal and monetary policy to keep stability through these uncertain times.
The trade war between Washington and Beijing has tipped China’s currency onto a path of destabilization. If hostilities escalate, China may let its renminbi (RMB) fall further. For investors, that could mean more volatility and tighter financial conditions.