Epidemics represent a threat to human life and economy. Meanwhile, medical and non-medical approaches to fight against them may result in additional economic shocks. In this paper, we examine the economic impact of the 2003 SARS outbreak in China and associated government policies. Although the epidemic caused a substantial economic loss in the short term, the interventions for medical purposes positively impacted the economy of the severely affected regions through the increase in investments such as other fiscal stimuli. There is strong and robust evidence suggesting that the SARS epidemic and its associated countermeasure policies boosted local output by around 4% and industrial production by around 5%. The positive growth was mainly derived from the increase in investment and government activity, especially government expenditure. Besides that, lagged impacts were particularly pronounced to the economic system and lasted for longer even than the epidemic period in a biological sense. We attribute this to the relatively aggressive stance of policymakers in the face of the epidemic situation.