The BBC did a study in 2018 called ‘Pandemic’, a social experiment which simulated what would happen if a lethal virus arrived in the UK; the results of which were shown in a documentary this week. What was most interesting from the documentary, however, were the interviews gathered from passers by on the street. They were asked what they thought had biggest single cause of human death to date. The answers were as one might expect: war, poverty, climate change, natural disasters; not one individual guessed the correct answer: Spanish Influenza.
Spanish influenza killed around 100 million people worldwide in 1918. Today we have another pandemic on our hands – coronavirus – which as we speak is spreading from country to country across the globe. As I write the death toll stands at 1370, with over 60,000 confirmed cases. Originating in Wuhan, China, in a wild animal market, the virus which made the leap from animal to human has now spread to a total of 28 countries so far. But with global travel being what it is today, it will be a hard act for other nations to avoid succumbing to it.
Aside from the human cost of the disease, there are, of course, the economic repercussions. China is the world’s second largest economy (according to GDP) and the rest of the world has become increasingly dependent on its goods. Beijing is the biggest global trader of merchandise and is catching up with the US in terms of commercial services also, with a 18% surge in 2018. In recent years more and more businesses have learnt to source widgets and components from China and are increasingly opening up their own factories on the mainland. It is also a country which has benefited from its access to raw materials, much of which travels to China before being used in manufacturing.
With tens of millions of people in lock down across China, deserted metropolises have taken on an almost apocalyptic character, with streets devoid of life, and businesses – from large car manufacturers to independent coffee shops shut indefinitely. Factories which were shut down for the two weeks around Chinese New Year may still not open this weekend.
Take Wuhan itself, the centre of the outbreak. It is a city of around 11 million people, and an important hub of industry in the region, attracting a great deal of foreign investment. Two top-10 universities are based there, and it is the country’s third largest education and scientific centre. With the city brought to a standstill, it would be naive to think it wouldn’t have a serious impact on productivity, and the economy as a whole.
One of the main industries to suffer globally as a result of the outbreak is of course, travel and tourism. Cancelled flights and hotel bookings in and around China, and the decision of several airlines to cut back services has hit a sector which normally booms over Chinese New Year. Chinese tourists, now stranded at home, usually account for a massive chunk of international tourism. In fact, the Chinese are the greatest source of direct increase in global tourism income for over 200 countries and regions across the world. It has been estimated that China contributed around 26.7 % to the increase in tourism spending worldwide from 2000 to 2017, and 45.7% from 2010 to 2017 in the aftermath of the global financial crisis. These figures speak for themselves: China’s economy booms and so does everyone else’s. When the opposite is the case, we should be worried.
Granted, the Chinese government is clearly doing its utmost to stem the spread of coronavirus. Masks are now obligatory in several provinces. Residents are receiving letters through their door reminding them that if infected, a refusal to present themselves to the authorities could lead to a 3 to 12 year prison sentence. Anyone with a temperature is immediately isolated.
As for the economic measures, Chinese President Xi Jingping has decided to slash tariffs on US imports and has made borrowing cheaper for businesses as well as consumers. But such measures will not compensate for the damage done already by the virus. A larger stimulus package based on fiscal policy may have to be unleashed if the government really wants to resuscitate the economy.
China’s economy was already struggling somewhat after Trump’s 2019 trade war. Growth last year was only around 6%, compared to a higher rate of 10.2% in 2010. At the moment, predictions for future growth lie between 3.7% and 5%. A lot will depend on what happens in the coming next few weeks, and subsequently, how quickly things can return to normal. The world will be watching and waiting.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.