I should begin this column with the disclaimer that my role at the Observer is to write a column about business and not politics. So any attempt to read between lines in this article is redundant, as my stated intention is to talk only about the economic impact of the coronavirus spreading in China and through the rest of the world.
At the moment of writing this column I am seated at the business lounge of Changi Airport Terminal 1 in Singapore, waiting for my flight to Bangkok. I am looking at the departures display and I can see that currently 5 flights to some part of China, namely Chongqing, Shenzhen and Guangzhou, have been cancelled. Although Singapore has already confirmed 10 cases of Wuhan coronavirus, the atmosphere in the airport is relatively normal. Perhaps just a bit slower than usual at the queues to check in and check documents. Also, the largest majority of the group staff and crew, as well as probably the majority of the passengers, are wearing a breathing mask to avoid contamination.
Presently there have been around 50 documented cases of Wuhan coronavirus being reported in this region, Southeast Asia, which is about 3 to 5 hours flight to China’s main cities.
A few minutes ago, the New York Times has issued an article featuring the latest numbers update. They reported 9,800 confirmed infection cases and a total toll of 200 deaths, representing a mortality of 2 per cent. I have just referred to some statistics with regards to the mortality rate of SARS, which plagued Asia more than 15 years ago, and the percentage of people dying was 9.6 per cent. Right now, and bear in mind that coronavirus has not peaked yet, SARS has been almost 5 times more deadly than the current Wuhan virus.
When it comes to the naming of the virus, coronavirus takes its name from the Latin word Corona, which translates in English as crown. When the virus was first described and detailed in the 1960s, the “crown” of sugary-proteins that projected from the envelope surrounding the particle gave the inspiration for the naming. So there is not only one coronavirus, but many variations. However, the one originated in Wuhan, Hubei province, in China, is the one that is currently terrorising the world. It is important to highlight that China had multiples of such health threats over the past couple of decades. Some might also remember the bird flu and the swine flu alerts a few years ago to mention the most relevant.
Every alert comes with both rational and irrational reactions. In this case, because Wuhan is a quite large city (over 11 millions) and it is part of Hubei province (60 million people or roughly 4 per cent of the population of China) and quite productive too, the concerns about economic repercussions are extended. Moreover, many American (and non) brands are heavily exposed to the crisis, as their production is quite dependent on the province and more specifically on the city. McDonald’s, Starbucks and Walt Disney, to start with, but also H&M, Pepsico and IKEA, are all producing some of their products in Wuhan.
The province is also quite famous for heavy industry production: Honda, United Airlines, American Airlines as well as Delta, all produced in Hubei. Based on past comparable emergency situations, the impacts to the economy may extend well past 12 months. In the case of SARS, for instance, between the first and the last case reported there were 18 months. But for Wuhan coronavirus, experts are saying that the prompt reaction of the Authorities and the immediate response of health organisations might be forcing the peak to happen very soon, and the aftermath to stretch for about 6 months only.
2020 is a crucial year for China’s economy. In fact this is the 5th year out of the 5 years plan launched in 2015, and everyone’s reputation is at stake when it comes to delivering results. Hence, it is likely that the Chinese government would work extra hard to make sure that finance and economy shall not be impacted for too long. International observers are suggesting that China might consider easing the trade war tariffs. For now, some of the measures in place to mitigate the risk include the “lockdown” of the Hubei province and the holiday extension for Chinese new year celebration.
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