The two large SARS outbreaks in China, first in Guangdong and then in Beijing, had a dramatic effect on China’s retail sector.

Figures released by the National Bureau of Statistics reported sales in April, when the true extent of the crisis hit the headlines, of 340.7 billion yuan. Although this was up on April 2002 by 7.7 per cent, compared to the figures for March and the first two months of 2003 – 9.3 per cent and 9.2 per cent respectively, the almost 2-percetage-point drop was significant.

In Beijing, figures from the local Municipal Bureau of Statistics show that retail sales in the Chinese capital stood at 14.5 billion yuan for April, an increase of 14.6 per cent compared with the same period last year. But this growth rate was 10-percentage-point lower than the first three months, indicating that SARS was having a negative impact on retail sector.

The sales of daily necessities in Beijing reached 8.96 billion yuan in April, an increase of 23.5 percent from a year ago. However, the sales volume of restaurants was 830 million yuan, down 4 percent, while sales of food and clothing were 3.65 billion yuan and 1.35 billion yuan respectively in April, which were close to the 2002 figures.

While SARS is obviously having a negative impact on China’s retail sector, quick recovery is likely to be seen if the fatal disease is under control in the coming months given the following factors:

• Determined to halt the spread of the virus, the central government shortened the week-long May Day holiday. In the past years, holiday spending has contributed significantly to total retail sales.

• Since the outbreak of SARS, people have been reducing the number of visits to shopping malls, supermarkets, convenience stores, restaurants and entertainment facilities. After this special period, however, many people, with the surplus disposable income accumulated during this period, may try to make up for their reduced spending.

• Consumers’ demand for durable and seasonal commodities should not change due to SARS. It might be suppressed for the time being but will be released after the disease passes.

It is almost certain that the SARS outbreak will affect China’s gross domestic product (GDP) growth this year. However, given China’s large foreign capital inflow, flourishing private investment and increasingly strong consumer spending, the blow to its retail sector should not be too great if the situation turns better in the second half of the year.

(Note: CS Beijing plans to issue an updated report once the May 2003 figures are available)