The coronavirus was declared a global emergency by the World Health Organization (WHO) on 31 January. The outbreak continues to spread outside China, as the death toll of the new virus surpasses that of SARS by a few hundred. The coronavirus will have a strong impact on economic output, at least in the first quarter of 2020. Given China’s integration into the world economy, supply chain managers across the world have to cope with logistical challenges and look to alternative supplies to meet production targets. Sadly, in some media, the spread of the virus has triggered a tide of anti-Chinese sentiment. The WHO has praised China’s measures to combat the virus and is in close cooperation with Chinese authorities.
Like with Severe Acute Respiratory Syndrome (SARS), the World Health Organization declared a global emergency after the outbreak of the novel coronavirus (2019-nCoV) in January this year. SARS was declared a global health emergency in March 2003 and was largely contained by July 2003. During the SARS outbreak, 349 people died in mainland China and another 425 internationally. This was out of 8,089 reported cases of contraction, making the SARS mortality rate 9.6%. The global hit from SARS was an estimated $40 billion. China has relatively quickly recovered from SARS. The death toll of the new coronavirus has already surpassed SARS, with over 1,000 deaths out of the approximately 42,000 reported cases at the time of this article. The mortality rate, however, is significantly lower, at 2.1% Only in Hubei province the mortality rate exceeded 5%, given capacity bottlenecks in the first weeks.
The first evidence of the virus was found on 1 December 2019. It took several weeks until a series of effective policies were implemented. The death of Dr. Li Wenliang who contracted the virus while working at Wuhan Central Hospital triggered a wave of mourning by netizens. Chinese academics called upon the authorities to apologise for reprimanding the young doctor. Dr. Li was among the first who had sent out a warning but police told him to stop “making false comments” before the Government eventually changed its course of action and stepped up communication efforts.
In January 2020, China started to put 46 million people on lockdown to contain the coronavirus that was spreading from Wuhan, a city of some 11 million people located in the Hubei province. Regions in Zhejiang province followed later. The drastic measures in Hubei were taken to prevent the spread of the virus during the Chinese Lunar New Year festivities, during which hundreds of millions of people travel throughout the country. Other government policies have included free medical care for infected patients, free ticket cancellations, rumour control, and the extension of the Lunar New Year holiday. Free apps for self-screening and public education on self-quarantine and face mask use rapidly became available online. China erected additional hospitals and transferred medical staff to Hubei province in record time. One of the main challenges of the coronavirus is that symptoms can appear as late as two weeks after infection.
The coronavirus will have a strong impact on China’s economic output in the first quarter of 2020. The country’s annual growth rate will be affected, bringing GDP growth down to around 5% in an optimistic scenario, based on assumptions that full production could resume in most regions by late February/early March. The political leadership will do its utmost to communicate the effectiveness of its response during the annual March meeting of the National People’s Congress, which will be attended by around 3,000 delegates from all over the country. The World Bank announced that it will revise its global growth figure due to the coronavirus and called for countries worldwide to strengthen their health surveillance and response systems.
The outbreak of the virus has a significant impact, as China’s share of global economic output has quadrupled since 2003. China is the biggest market for vehicles and semiconductors, the leading exporter of clothing and textiles. Many companies have temporarily shut down their production sites. China is by far the largest production base for PCs and mobile phones. Companies like Lenovo point to the already high level of automatisation processes at production sites that prevent worse scenarios.
The travel and tourism industry, however, is seriously affected. May airlines stopped their flights to China, and the United States and other countries imposed entry restrictions. Chinese travellers make up the largest spending group in international tourism.
Western business in China is also affected. Since the outbreak of coronavirus, Starbucks has closed more than 2,000 locations across China – half of its total presence in the country. The Economist Intelligence Unit (EIU) assumes in its base line scenario that the virus will be under control by the end of March and China’s first-quarter GDP growth will drop to 4.1%. That would put full-year growth at 5.4%, down from its pre-virus forecast of 5.9%. However, the EIU acknowledges that “there is probably more downside risk than upside risk to this forecast”.
The strong economic impact of the virus is due to its novelty, its rapid expansion and China’s concerted and focused efforts to stop a global pandemic. Measles emerged again in 2018 infecting nearly 10 million people worldwide and claiming around 140,000 lives. The infection rates and death toll of the novel coronavirus also looks small compared to the flu. From both Influenza A and B, the US had an estimated 4.6 million flu cases, 39,000 hospitalisations, and 2,100 deaths from flu were recorded in 2019.
Additionally, the coronavirus is hitting China during a time when the economy has yet to recover from the trade conflict with the US. The mass street protests in Hong Kong have also left their traces. Decades of globalisation have made large corporations across industries confident about the opportunities of the growing Chinese market and its deep integration into the global economy. Most experts, however, remain confident, that China will quickly catch up with production targets. They point to China’s recovery from the SARS crisis and the Wenchuan earthquake in Sichuan province, that latter of which had a death toll of close to 70,000 people. Until today, the reaction of the financial markets to the outbreak of the virus has been relatively moderate.
Sadly, in the media, particularly social media, we are witnessing some unpleasant initiatives in the context of the coronavirus outbreak. In Malaysia, more than 400,000 people have signed a petition calling for a ban on Chinese travellers, urging the government to ‘save our family and our children.’ A French newspaper carried a front-page headline warning of a ‘Yellow Alert’ before apologising amid national criticism. Chinese and other Asiana initiated a social media campaign countering such offenses. In Germany, the leading political magazine Der Spiegel put a controversial image on its front page that provoked anger among some Chinese. The Mercator Institute for China Studies, Europe’s biggest China think tank, used the opportunity of a prime-time television spot, featuring an analysis of the situation in China, to focus on the political discontent of its citizens.
No doubt, it is certainly possible to identify critical voices in such a crisis situation that requires some drastic measures. However, most reports from China, including from foreign nationals, do not agree that Chinese citizens are directing their anger about the coronavirus mainly against the government for the current situation. The WHO praised China’s efforts to combat the virus, including its cooperation with WHO and other countries. The WHO is also cooperating with Chinese and international search engines and social media to ensure that critical information is listed first and fake and inappropriate ‘panic news’ is quickly identified and removed.
In a positive scenario, the crisis could make people and politicians more sensitive and aware of what is at stake in a globalised world, in a world which is described by leading Chinese political leaders and intellectuals as “a community of shared future for humankind”. The coronavirus is demonstrating once again that prompt action, early communication, rapid response mechanisms, effective health policies, and international cooperation are of utmost importance in addressing a crisis situation – particularly in an age of rapid globalisation and physical connectivity.
Most experts are confident that China will analyse lessons-learnt and step up efforts to develop even more effective disaster preparedness strategies, including rapid response systems. In view of mounting public concern and China’s strong export orientation, the political leadership is aware what is at stake for the country’s future.