China’s Novel corona-virus has only begun to change the world

Chinese wearing facemask

Locked down
China’s corona-virus has only begun to damage

the global economy

It will affect industries from Airlines to Zoo Visitors

Jan 30th 2020

Let’s begin in SHANGHAI

THE YU GARDEN, a 16th-century complex of pavilions and ponds in the heart of Shanghai, is all gussied up for the Chinese new-year holiday. Its walkways are bedecked with colourful lanterns, its stalls laden with dumplings, its entrances flanked by dozens of security guards to handle crowds. Just one thing is missing: people. Fearful of coronavirus, they are staying home. “I’ll be doing well if I make a few sales today,” says Li Xinming, manager of a silk-scarf shop. Last year Yu Garden attracted 700,000 visitors during the holiday week, peak season for it and its merchants. This year, Mr Li says his losses might wipe out his earnings for months to come.

The question for China, and for the many companies and countries around the world linked to its economy, is whether Mr Li’s travails are indicative of a much broader problem. The obvious reference point is China’s battle with SARS, another coronavirus, in 2003. Growth slowed sharply at the height of the epidemic but rebounded swiftly after it was contained. Other recent epidemics have reinforced the impression that economists should not be overly worried, so long as good doctors are on the job. Neither avian flu in 2006 nor swine flu in 2009 dimmed the global outlook.

The Chinese are not telling the truth. The truth coming out is 15% of people are carriers with few or no symptoms, and 15% will die. 15% of 7 Billion People = 1,050,000,000 (that is 1 Billion + 50-Million people. It may affect animals too. We don’t know that yet. IF the information I’m getting is correct everyone is in for a lot of misery this year.

Even flint-hearted investors are wondering whether the new epidemic might be worse. Stocks in Hong Kong have fallen more than 5% as reported infections have steadily increased. Tremors have also rippled through global markets.

The concern is both the severity of the virus,  and how to bring the outbreak under control. And disruption in China, the world’s second-biggest economy, has global consequences. “It’s not the disease, it’s the treatment,” wrote analysts with Gavekal Dragonomics, a consultancy. The World Bank has estimated that as much as 90% of the economic damage from epidemics stems from people’s fear of associating with others, which leads offices and stores to close. In China, this is being magnified by the government’s policy of isolating affected areas and limiting interpersonal contact throughout the country. While public-health experts debate whether this is the right approach, economists will count the costs.

The most direct impact is being felt in Hubei province. This gives us an example of what to expect world-wide as the virus spreads.

First Wuhan, its capital, was placed under quarantine. Then the rest of the province, home to 59m people, was locked down, too. Apart from food trucks and medical supplies, little can enter its cities and villages, and few are permitted to leave. Such a large-scale isolation is unprecedented as a public-health strategy. Economic activity of just about any kind, short of hospital care and movie streaming, has ground to a halt. Hubei generates 4.5% of China’s GDP, so the lack of business there will be felt all across the world’s economy.

Other cities in China may not be under quarantine but that is what life feels like for their residents. Instead of getting together with family and friends, attending temple fairs and going to restaurants—all, depending on where one lives, staples of the holiday—people have shut themselves in. The government has encouraged them to avoid crowds; many need little prodding.

That will cause a reduction of consumption. Every food producer, every flower seller, everyone selling or providing any sort of goods item or service will feel the loss directly.

The extent of the damage will depend on how long it takes to stop the virus. I don’t it will be stopped. I think it will “burn through the population” leaving a huge death toll and those left alive will pick up the pieces of their broken lives and learn to pray more often – at least in a form of self-defense. Even if now they believe God and Bible Prophecy are mythology they may be inclined to question WHY they think this is so.

Some industries are being hit especially hard. The holiday accounted for 9% of China’s box-office revenues last year. This year almost all of the country’s 11,000 cinemas are closed. Spending on domestic tourism during the new-year week reached more than 500bn yuan last year, about 8% of the annual total. This year, fearful of the virus, people have cancelled trips.

There are also worries about how the virus will affect factories and offices. Several major economic centers, including Shanghai and Guangdong province, have extended the new-year holiday by a week, telling companies to wait until February 10th to restart. Chinese businesses are always slow to get back up to speed after the holiday. The extra week will make them slower, even if some firms such as Tencent, a tech giant, let employees work from home. Moreover, tens of millions of migrant workers, back in their hometowns for the holiday, may wisely wait for the epidemic to recede before crowding onto trains and buses to return to their jobs.

We all will feel this.
One crucial difference compared with SARS is China’s importance for the rest of the world. In 2003 China generated 4% of global GDP. Last year, it was 16%. The slowdown in consumption and the disruption to production will not stop at its borders.

Countries accustomed to big-spending throngs of Chinese tourists face a brutal stretch. China’s government has ordered all tour groups to be suspended until the virus is contained. In Thailand, authorities expect the number of Chinese visitors will fall by 2m to 9m this year, reducing tourism revenue by some $1.5bn. Share prices of airlines have plunged; past epidemics have caused huge, if temporary, drops in passenger traffic, and China is the world’s biggest outbound international travel market.

Companies that have hitched themselves to China’s fast-growing middle class are also vulnerable. Starbucks has temporarily closed more than half of its 4,292 cafés in China. Footfall in those still open is scarce, with some posting signs that patrons may only enter if they are wearing face masks. Sales of masks are, indeed, a rare bright spot for companies such as 3M. Disney closed its resort in Shanghai for the new-year holiday, one of its busiest weeks of the year (adding insult to injury, China has just entered the Year of the Rat and the Chinese term for rats also refers to mice, a fine marketing opportunity for a brand built around them).

The closure of factories will cascade through the global economy. Wuhan itself is a manufacturing hub, especially for the auto industry. Nissan, Honda and General Motors, among others, have plants there. Bloomberg ranks Wuhan 13th out of 2,000 Chinese cities for its role in supply chains. One local company, Yangtze Optical Fibre and Cable, is the world’s biggest maker of the wires that carry data around the planet.

Even if the work stoppages elsewhere are milder, they, too, will be a risk for a wide range of sectors. Some are vitally important; roughly 80% of active ingredients for all medicines come from China. Others are less so; China supplies nearly 90% of the world’s plastic flowers.

Many companies were already working to reduce their reliance on China’s factories because of its trade war with America. The virus is a powerful reminder that, politics aside, a diversified base of suppliers is a good insurance policy. But the past year provided a lesson in how difficult that is; despite the tension with America, China’s share of global exports actually increased. Companies will struggle to find substitutes for its manufacturing muscle.

Adding it all up, the Chinese economy is in for a grim start to the Year of the Rat, and this will cast a shadow globally. Chen Long of Plenum, a consultancy, thinks China’s growth could slouch to 2% year-on-year in the first quarter, its weakest in decades, down from 6% in the final quarter of 2019. But he expects a strong rebound when the country gets back to normal. People long cooped up will flock to shops and restaurants. Factories will rush to make up for lost time. To give the recovery a push, officials will increase infrastructure spending.

What if he’s wrong? What if 15% of the skilled population is dead or too traumatized to even think clearly about working in a crowded office and filing on and off mass transportation vehicles?

The unknown is when normality might resume. In Yu Gardens, Mr Li could not wait. With business way down, he has laid off the three assistants in his silk-scarf shop. They will wonder for weeks if they have a job or must search elsewhere. This is typical for businesses in China. It’s going to become typical everywhere the virus spreads.

The death toll from the corona-virus has only just begun to be counted. The whole world will pay a price for believing myths and lies.

Hate me if you will for saying this, but someone must have the courage to say what many don’t want to read or hear. I don’t care. God is REAL, HIS words are truth. We ALL must ask ourselves WHY we believe the Bible is a myth, particularly if we have never studied it, or studied lessons explaining it.

Dr. Stephen Newdell

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