CNBC reports that Morgan Stanley analysts wrote in a Wednesday report that China's economic growth in the first quarter could fall to as low as 3.5% if the spread of the new coronavirus is not contained fast enough for manufacturing production to resume to normal levels.

Manufacturing activities around China have been disrupted as authorities shut down cities in a bid to contain the virus, now called COVID-19. While factories have started to come online, checks by Morgan Stanley analysts found that production had only reached 30% to 50% of normal levels as of last week.

Morgan Stanley analysts said they expect manufacturing production in China to reach 60% to 80% of the usual levels by the end of this month, and be back to normal by middle to late March. But they warned of uncertainties surrounding the virus outbreak.

"Based on the evidence that production activities are currently resuming at a very gradual pace, we think that the current situation would be more in line with the scenario of 'gradual normalisation,'" the analysts wrote in the report.

"Given the uncertainties around the spread of the virus, we are watching the risks of transitioning to a scenario of 'extended disruption,'" they added.