China – Coronavirus Outbreak

China – Coronavirus Outbreak

The 2019 novel coronavirus (COVID-19), popularly known as ‘coronavirus’ has caused widespread concern since being identified in Wuhan, China in late December. The outbreak has been characterised by misinformation and differing precautionary actions taken internationally but has importantly highlighted the risks posed to public health infrastructure in a globalised world. The effect of these factors has not only posed a serious challenge to the Chinese Communist Party’s competence in tackling public health threats but has also put a significant strain on global value chains. Eyes are now transfixed on how the outbreak will develop over the next few weeks.

The outbreak 

A cluster of pneumonia cases mid-December at Wuhan Central Hospital raised concerns amongst medical staff when it was discovered that the virus showed similar symptoms as Severe Acute Respiratory Syndrome (SARS-Cov). The supposed source of the outbreak is Huanan Seafood Wholesale Market where the virus is likely to have transferred from infected animals to humans. Though the cause is disputed due to several factors, including the long incubation period the novel coronavirus has which makes it extremely difficult to isolate the specific moment someone contracts the virus. 

Some specialists propose that the first few patients may have even contracted the disease as early as mid-November last year. There are now over 73,000 cases reported in 28 countries. It is hard to gauge how severely the virus will spread and how the ramifications of the outbreak will manifest themselves in the coming days, weeks and months. Graphic 1 provides a list of cases and deaths as of February 18th, 2020.


Total Cases and Deaths: COVID-19

COVID-19: Total cases and deaths, 18/02/2020 Graphic Courtesy: South China Morning Post

Impact on the global economy

The global value chains that have been so crucial for global economic growth over the past decade are at serious risk. The countermeasures put in place to control the spread of the virus have targeted transport infrastructure and individual movement within communal environments. This has resulted in factories being shut down and workforces being forced to stay at home. The globe’s manufacturing hub of the Pearl River Delta and Southwest China have therefore been ground to a halt. The industries that depend on this area for production will start to see the effects further down their value chains. The semiconductor industry and fashion industry, in particular, will see these effects.

Domestically, Wuhan’s geographic positioning as a central link to major population hubs throughout China is worrying. Not only can migrant workforces, that are crucial to China’s manufacturing base, not travel, but they cannot work either. There is a serious concern that if the outbreak were to spillover outside of Hubei province and infiltrate the major export and commercial hubs of Beijing, Shanghai, Guangzhou and Hong Kong the global economic slowdown will be exacerbated by the lack of trade with China.

Internationally, the reaction to the risks posed has been varied in severity. Air travel was clearly highlighted as a high-risk factor for spreading the virus globally, and thus, the vast majority of countries have now ceased or heavily restricted flights to and from China. Some countries have imposed tighter and varied border controls to mitigate the coronavirus threat.

For example; Russia, Taiwan and Malaysia have implemented visa restrictions; Kazakhstan has closed the border for all excluding rail freight; and Mongolia, North Korea and Hong Kong have closed many if not all ports of entry to and from China. Trade and business continuity will face serious dilemmas as these travel restrictions are enacted, as both freight and personnel are unable to move freely, reducing the global rate of production output.

Financial Markets have definitely felt the effect the depletion of production and travel has had on China and subsequently global trade. Due to China’s high demand for key industrial commodities that are vital for the country’s vast construction industry prices of copper, iron ore and crude oil has dropped. Equally, consumer-facing and manufacturing companies, such as apple, that are integrated within China’s supply chains have seen a drop in their share price also. National currencies that are heavily dependent on China as a location for production have also weakened, highlighting just how important China is a driver for world economic growth.

Political pressure on China 

From the onset of this novel coronavirus outbreak, the Chinese government has been under severe international scrutiny, especially after China’s response to the SARS-Cov outbreak back in 2003 was heavily condemned as inadequate. This time around China has been far swifter and stricter in their response, with the Communist Party keen to demonstrate how comprehensively it can deal with major domestic and international public health threats.

The restriction of movement and ‘city lockdowns’ the government has issued are a clear indication of how much power the communist party commands over public infrastructure across the country. The combined population of the cities who have been put under ‘lockdown’ is now in excess of 60 million. Pop-up hospitals that have been built in Wuhan in a matter of days to provide the extra facilities needed to support the struggling Chinese healthcare system. Both these examples of government authority and decisive action are impressive and express the seriousness to which the government is taking in dealing with the virus.

However, misinformation has been a significant issue throughout the outbreak. It has caused an atmosphere of uncertainty and panic amongst the international community. The suppression of Dr. Li Wenliang stands as an example of this and raises questions as to whether there is more information that ought to be made known to other countries and international bodies who are attempting to help China combat the effects of the outbreak. 

Social media censorship has yet again appeared as an issue with posts containing personal experiences about the outbreak and Party criticisms being quickly removed or entire accounts being deleted. Propaganda continues to be an instrument the communist party is quick to rely on when engaging the public in a crisis or challenge to its competency to lead the country such as this. Beijing will hope by disseminating ‘people’s war’ narratives across the nation that people will endure the restrictions put in place to try and defeat the disease. 

Recovery and future outlook

In terms of medical recovery, the severe crackdown on movement will have prevented the scenario from being as critical as it could have been. Having said that, however, the infection rate has risen over the past few days, and the amount of deaths has just surpassed the deaths caused by the SARS-Cov.  

The World Health Organisation has increased efforts into developing vaccines, therapeutics and diagnostics and will continue to mobilise the international medical network until these answers are found. It is very hard, however, to predict at this point in time how much longer the counter-measures will be in force. The inflexion point is yet to be reached, and until it is, it’s difficult to see China’s manufacturing and export hubs being up and running at full capacity any time soon.

In terms of an economic recovery, it is important to consider the increased size and orientation of the Chinese economy. After the financial crisis, China sought to orient its economy towards services and internal demand in order to become less dependent on manufacturing and exports. In reaction to the economic impacts of SARS-Cov, China relied on a surged manufacturing-led rebound which it is less able to do now and shows the increased vulnerability of the Chinese economy now to such disruptions. 

Accordingly, the economic recovery will most likely take a longer period of time than expected as China seeks to recover from the disruption and continues to deal with trade tensions with the US. The short term recovery depends on how quickly people can return to work and for production to resume. It will also depend on a degree of international cooperation in trusting the disease has been dealt with sufficiently for the travel and border restrictions to be lifted. 

In the medium term, predictions forecasted by the firm Oxford Economics claim China’s growth rate for the year could fall from 6% to 5.6%, given that the virus is dealt with quickly. Although not too drastic it is likely a regional economic sharp slowdown will occur in the following months before China’s production picks up again. However, these speculative predictions are likely to change daily as new information about the novel coronavirus outbreak emerges.

Categories: China, Risk Pulse

About Author

Charles Williams

Charles Williams is from the UK and graduated from Loughborough University with a BA in International Relations and has just completed his MA in International Political Economy from King’s College London. He is a keen traveller and having studied and travelled in China and Taiwan specialises in China’s international relations with a particular focus on the Belt and Road Initiative.