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China´s economy severely affected by falling stocks as Coronavirus spreads

Widespread concern regarding the rapidly spreading the coronavirus has caused a significant drop in Chinese shares as the markets reopened after the extended Lunar New Year holiday.

The Shanghai Composite index plummeted by almost 9 per cent to a one-year low as commodity prices also fell by their daily limits.

Sectors that were impacted the most included manufacturing, materials and consumer goods, whereas understandably, healthcare shares soared.

As the death toll from the epidemic reached 361, the heightened worry in investors wiped more than $400billion off the value of China´s stocks in the first trading session Monday.

China´s central bank has announced several new strategies in order to reduce the negative economic impacts caused by the outbreak. The People´s Bank of China (PBOC) reduced short-term interest rates to relieve some economic pressure. The bank is also injecting an extra 150 billion yuan ($22million) into the economy to ensure there´s enough liquidity in the banking system.

Financial regulators in the country have expressed their beliefs that the effect on China´s already struggling economy will be “short-term”. However, analysts say that the virus could potentially harm growth if it remains for a prolonged period.

A number of cinemas and factories have closed their doors in an attempt to contain the spread of the virus. High-profile companies such as Foxconn, Toyota, Starbucks, McDonald´s and Volkswagen are just a few of the corporate giants to cease production and close outlets across China.

The country saw economic growth of 6.1 per cent last year, the slowest in around three decades. This was partly due to its prolonged trade war with the US, and even though a partial trade deal eased tensions earlier this month, most tariffs remain in place.