The outbreak of severe acute respiratory syndrome (SARS) is unlikely to divert China from the path of economic growth, economists said.

The SARS outbreak has impacted on a string of industries in the country, including tourism, civil aviation, catering and exhibitions.

The government curtailed the May Day holiday to contain the spread of SARS, leading to major losses in the tourism sector. The holiday, dubbed "golden week," used to yield around 40 per cent of the tourism sector's annual income.

At last month's China Spring Export Commodities Fair at Guangzhou, one of the country's major trade fairs, the number of participating companies and the trade volume both declined compared to previous years.

The repercussions of SARS are expected to gradually spread to China's export and foreign investment sectors.

However, economists maintain that China's gross domestic product (GDP) growth will not be below 7 per cent this year, and that the virus will not ruin the fundamentals of the economy.

A recent Asian Development Bank report downgraded China's prospective growth by only 0.2 percentage points in the wake of the SARS epidemic, holding that China's GDP will still increase by 7.3 per cent this year.

The World Bank also predicted that the Chinese economy will maintain a strong momentum of growth despite SARS.

"Some sectors have suffered from the disease, but the problem is not serious enough to thwart overall economic growth," said Sheng Hong, president of Beijing Unirule Economic Research Centre.

Although SARS has curbed business activities, domestic consumption will not shrink because the disease is unlikely to change consumers' plans to buy key commodities such as cars and housing, he said.

The number of home and car buyers grew in recent years as the income of urban residents increased quickly.

Sheng noted that the sales of food and basic living necessities will not decline either.

In addition, consumption of telecommunication services and medical products such as masks and disinfectant, has risen dramatically since the outbreak of SARS.

"Sound domestic demands are essential to offset a possible slide in exports and foreign investment," said Zhao Xiao, a researcher of the China Economy Research Centre under Peking University.

Given that foreign investment makes up less than a third of all kinds of investment and net export accounts for only 2-3 per cent of GDP, problems in these two aspects will not reverse the tendency of economic growth, he said.

"Domestic demand is decisive," said Zhao.

He said a lasting economic growth is guaranteed as long as the country still enjoys massive State investment, a consumption boom and an urbanization drive.

Although international business exchanges are influenced for the time being, the Chinese market does not lose its attraction given its competitive labour force and vast market potential, Zhao added.

"A small cup of water is not likely to put out raging flames," Zhao said, "this is what SARS is to our economy because the inner dynamic of the economy is so strong."

Hu Angang, a professor of economics with Tsinghua University, said the government will be able to overcome the SARS crisis with ample funds.

China's financial revenue in the first quarter this year reached a record 520.6 billion yuan (US$62.9 billion), which is equivalent to the country's annual revenue in 1994.

Hu noted that most affluent coastal regions, including Shanghai, Jiangsu, Zhejiang, Shandong, Liaoning and Fujian, did not suffer major losses, which is good news for the overall health of the national economy.

Moreover, many affected fronts of the economy are expected to resume normal operation soon as the government's efficient anti-SARS measures has gradually erased panic and increased public confidence, said Hu.

However, some analysts worry that things could get worse in the following months if the epidemic is not curbed.

"Currently only the service sector is hit by SARS, but the repercussions will gradually appear in agriculture and the manufacturing sector if the situation continues," said Zhao Jinping, a researcher at the State Council's Development Research Centre.

He said the 9.9 per cent GDP growth rate of the first quarter may not reappear in the second quarter because of SARS and the cooling of some "overheated" industries.

"But, generally speaking, the decline will be within an acceptable range and there will not be economic stagnation or recession," said Zhao.

Some economists suggest that the government increase public spending and offer support to industries badly hit by SARS, such as catering and transport.

(China Daily BIAN YI 14-05-2003)