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The coranavirus, the epidemic which at time of writing is largely contained to China but has already traveled to a number countries on all five continents, is rattling the luxury product markets. Comparable to the SARS epidemic that first struck in the same part of the world in 2003 and 2004, its global economic effects are likely to be larger because China’s share of the global economy is considerably bigger today, and also because economies are much more interlinked than they were 17 years ago.

Thus far, while the financial markets have reacted relatively strongly, analysts say the general ripple effect is not yet out of the ordinary. But the timing for both the stock and commodity markets is poor, in part the crisis hit at the same time as the Chinese New Year, which is an important consumer shopping period, and also at a time when sentiment was high, because of the recently announced U.S.-China trade deal and the generally positive macro backdrop. 

Another problem, which will take some to me to make its effects felt, is the growing isolation of China, both internally and externally, with city center and public transportation shut down and most major airlines suspending flights to the country. How this may impact import and exports, not to mention trade shows in the region, is still not completely clear, but there almost certainly will be several.

One impact that has just been reported is that the organizers of the HKTDC Hong Kong International Jewellery Show have just announced that the show, which was scheduled for March 4 to 8, has now been delayed until May 18 to 21.


The concerns in luxury markets about an ailing Chinese market are obvious. In 2019 Chinese consumers held a 35 share of the of global luxury goods market and were responsible for about 90 percent of its growth, according to consultancy Bain & Company. In 2003 at the time of the SARS crisis, China represented only about 7.5 percent of world GDP. Today it represents upward of 20 percent.

And growth was expected to continue. Chinese spend massively during the New Year holiday, with overall spending having earlier been estimated to be between $150 billion and $160 billion. 

This the Year of the Rat, and global luxury brands have been developing developing special merchandise for the occasion, among them Gucci, which has created a special collection of Mickey Mouse merchandise in conjunction with the Walt Disney Company.

Chinese stores, which accounted for some 90 percent of growth in the luxury category in 2019, are largely shut down at the moment.

In some respects, given the general level of comfort of Chinese consumers with online shopping may mitigate the effect that shopping malls and high streets have fallen silent. But it is worth noting that, according to the Wall Street Journal, on the dominant Chinese social media platform WeChat, some of the Chinese professional shoppers who buy luxury goods abroad for others back in China have switched from advertising high-end luxury products to advertising disinfectant.

The coronavirus struck at a particularly critical time, the start of the Year of the Rat.


There are a number of important factors that at this stage are unknown. Will the effect of the coronavirus be temporary? Also will the quarantined area be limited to China, or will it spread to other countries, as national authorities struggle to contain the spread of the illness?

According to the research department at Rabobank in the Netherlands, based on the experience with SARS experience, a temporary impact of around 1 percent to 2 percent on GDP is a reasonable estimate. But this could be is largely offset by higher growth in the second half of 2020, assuming that the coronavirus is brought under control within a reasonable period of time.

“What happens beyond the first quarter depends on the severity of the virus outbreak, the Chinese government’s ability to contain it, and government stimulus to make up for the economic damage,” the bank wrote in its report.

If the crisis is short-lived, luxury companies are generally positive about the chances for a rapid recovery. Lost sales lost sales can be made up in the run-up to summer said Nick Hayek, CEO of the Swatch Group AG, as reported by the Wall Street Journal.

Bernard Arnault, CEO of LVMH Moët Hennessy Louis Vuitton, agreed that the economic effects of the outbreak “wouldn’t be terrible” if the crisis will have receded by March. But, he added, “If it lasts two years, that would be another story.”