China economy enters vicious circle as business cuts crush demand

Survival measures by cash-strapped companies mean less money in consumers' wallets

20200420 people in Beijing

A woman wearing a face mask cleans the entrance of a shop in Beijing on April 17. The coronavirus outbreak has hit China's domestic demand hard. © Reuters

COCO LIU and NIKKI SUN, Nikkei staff writers

HONG KONG -- Lured by thriving tourism in his hometown Chongqing in Southwestern China, Li Yi last year used a big chunk of his savings to start a bed-and-breakfast business. But two weeks after his venture kicked off, Li's BnB overlooking the Yangtze River was hit by the coronavirus outbreak, which has killed nearly 4,700 people in China and infected tens of thousands more.

After no income for two straight months, Li was more than excited to reopen his business in April -- but he soon realized another challenge lies ahead.

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