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The Wuhan coronavirus is also an economic plague for China 

A 100 yuan banknote – the most popular paper money item used in mainland China featuring Mao's face covered with a respiratory mask. Image by Oiwan Lam, used with permission.

When an epidemic coincides with the spending spree that traditionally accompanies the Chinese New Year festivities, a country's economic health also comes under strain. Chinese government rhetoric is deeply embedded with promises of economic prosperity for its growing middle class, and looming fiscal insecurity, the likes we are seeing during the Wuhan coronavirus outbreak, is likely to have far-reaching social and political effects.

GDP growth as ‘state religion’

The most significant event of the past four decades has been the transformation of China from an underdeveloped country to the world’s top economic powerhouse. This statement is widely used by the Chinese government and the Chinese Communist Party (CCP) to claim loyalty and support from its 1.3 billion population. China started its economic reforms in 1979 and for decades boasted an impressive GDP growth, with frequent double-digit figures. Since Xi Jinping became the leader of China in 2012, the figure has oscillated between 6 and 8 percent. It must be noted that the reliability of data provided by Chinese official sources requires scrutiny given the political sensitivity attached to those figures as part of the ‘social stability’ narrative widely used by Chinese officials in speeches and statements. 

The basis for the CCP’s grip over the country is a social contract that can be summarized by ‘prosperity without freedom’. In other words, as long as the 400-million strong middle class grows and enjoys comfortable living standards, the Party will not be seriously challenged for the many accounts of corruption, manipulation of justice, increasing censorship of media and information.

This explains why the GDP growth is viewed as a national indicator of the fulfillment of the ‘social contract’ and why any derailment causes great anxiety for the government and the Party, but also for citizens who typically react by online protests, rarely offline demonstrations, and for the wealthier by moving capital or entire families and businesses abroad. 

The Wuhan coronavirus is a plague for tourism and the film industry

While world markets have reacted nervously to news of the Wuhan coronavirus outbreak and many are predicting consequences for Chinese global trade and investment, the Chinese economy is the most directly affected. Some industries are already showing signs of a major slow-down. 

Long considered a luxury, domestic and international tourism has boomed in China as the growing middle-class sees travel as one of the marks of social success. The Chinese New year period represents a peak in domestic travel as tradition demands that families gather across generations. For the 2020 celebration, 3 billion trips were expected, yet the government has now restricted movement and many scared citizens have abandoned their travel plans. 

As Ting Lu, a tourism expert with Nomura Asset Management notes, the first time the Chinese domestic tourism industry was hit was after the 2002-2003 SARS epidemic: 

“China’s real GDP growth dropped by 2 percentage points from 11.1% in the first quarter of 2003 to 9.1% in the second quarter, before recovering to 10% in the third quarter of that year. Growth was largely dragged by the tertiary sector, especially by two major subcomponents of GDP: (1) transport, storage, and post, and (2) hotel and catering services”

The film industry, estimated to be the second-largest movie market in the world, is also being hit hard by the timing of the outbreak. Releases for the major blockbusters of the year are always scheduled to coincide with the long Chinese New Year holiday — lasting anywhere from 10 days to two weeks — as people have time to visit the cinema. This year, the release of top movies have been postponed indefinitely. Besides film studios, including Hengdian studio, considered the largest in the world, over 70,000 cinemas have been shut down to prevent the spread of the virus. This also has political consequences on the Chinese film industry which is strictly controlled by Party ideology which imposes quotas on foreign movies as they often gain a much larger audience than domestic movies. 

The following tweet includes a photo of the official announcement that the Hengdian film studios will be closed due to the Wuhan coronavirus alert.

The domestic economy will most likely be affected. It is too early to have figures now, but suffice to say that the Chinese New Year is a massive shopping season, with special offers, outside eating, and the offering of gifts. While a lot of shopping takes place online, deliveries have been halted or slowed-down given the risks of the coronavirus. 

Wuhan is also a major industrial hub, as Benny Liu, co-chairman of KPMG operation in China explains:

“Wuhan serves as a critical industrial, research and education base, and integrated transport hub for the nation.  Wuhan’s GDP growth was 7.8 per cent in 2019, 1.7 percentage points higher than the national average, local government data showed”.

Indeed Wuhan hosts many top 500 company offices and plants. 

In this context, slogans and statements delivered by central and local government officials might not suffice to reestablish trust in the ability of the government and the Party to honour the ‘social contract’. As Xi Jinping himself said at a crucial Party event, the 19th CCP Congress in 2017: 

“What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.”

Check out Global Voices’ special coverage of the impact of the Wuhan coronavirus.

5 comments

  • Obviously, the common people could be surprised to acknowledge why a
    virus epidemy is capable to affect a nation’s GDP? Indeed, the world has
    suffered from the break out of quite a few epidemies’ concerns, such as
    Aviary flu, Ebola, Hiv Aids,.. but this time, 2019 nCo-V and its formely 20
    03-2004 strain known as SARS (Severe Acute Respiratory Syndrome)’re
    susceptible to cause worldwide threat. Because of widespreading’s fast
    contamination, of the high number of sufferers within a short delay, and
    an awful decrease of the productivity, from where, the nation’s economy
    (massive restriction of tourists, illness vacation of workers, drop of CPI).
    It seems that 2019 nCo-V expands more rapidly than SARS yore, in PRC,
    only within a short delay, since the end of december 2019, 304 deaths (
    among ten thousands affected people) were registered, in 30 provinces
    of PRC (chinese mainland), most in Wuhan province, all over the world,
    nearly 30 countries (SARS, 774 deaths, 8,000 ifected, PRC 10% deaths,
    37 countries, 2002-2004). In Việtnam, roughly 10 affected in 6 weeks.

  • Following my latest report about corona virus sent to you as posted above,
    i would add that the death toll of this evil within 24 hours has giddily climbed
    up. The chinese mainland registered 425, 17,000 suspected cases, while its
    closest neighbor, Viêt Nam, 10 sero positive, 73 placed under investigation,
    all returned home from PRC, among whom, a woman married to a chinese
    sufferer was contaminated by her husband, so, the suspicion of probable
    inter human transmission has been confirmed! Meanwhile, according to the
    scientists, corona virus belongs to the group of ARN viruses, like Ebola, or
    Hiv Aids, so, a treatment by anti Hiv ARV drugs may use to cure corona,
    what the chinese doctors did, with pharmaceuticals such as KALETRA (or
    ALUVIA) whose chemical components contain Anti ARN protease , like
    Lopinavir and Ritonavir, and were promised by Bif Pharma AbbVie, north
    Illinois, which grant a donation worth CNY (10 millions RMB) roughly $1.3
    million. For that i owe a deep congratulation to a close friend, a việtnamese
    physician, that the World Bank Group knew well, to have contributed in
    Hiv Aids’ fighting by fulfilling a detailed survey of ARV’s pharmaceuticals
    around the world. A great thank to him with best friendship.

  • I have read with much interest the two reports of Dr Jim Young Kim, posted
    successively on February 3rd and 4th, 2020 about the the corona epidemy
    which cause at this moment a dramatic havoc in a lot of countries. Lately,
    the newest information related that a Wuhan’s doctor, Li Wenliang, was
    killed by 2019 nCo-V despite his awareness about this flail, what makes me
    remember the case of WHO’s late Dr Carlo Urbani, dead of the same sick,
    roughly 20 years ago on March 28th, 2003 in Thailand after a contact with
    SARS’s patient coming from the chinese mainland at the FV hospital in Ha
    noi on March 11th. I’m very embarrassed by Dr Jim Young Kim’s praise and
    with modesty recognize being the author of a survey involving pharmaceu
    ticals used for AIDS’ treatment ordered by the HCMC’s health department
    in person of its director, late Dr Dương Quang Trung in mid 90’s. I ignore
    that my work could serve to treat corona virus, though corona virus and
    retro virus belong to a same group, RNA virus. The latest news reported
    that Kaletra (composed of Lopinavir and Ritonavir) has been focused to
    treat corona’s sufferers in Thailand. I am very happy to learn it, and want
    to share that a same as Kaletra, Aluvia, too, contain Lopnavir and Ritona
    vir, produced by AbbVie’s german packager in two colors pink and red.

  • Following to my latest post hereabove submitted, the Wuhan corona virus
    as chinese economic plague is henceforth regarded as a real fact. Zhu Min,
    a senior IMF’s official, appointed as former deputy managing director (2011
    -2016), at present head of the National Institute for Financial Research at
    Beijing Tsinghua University, admitted on February 22nd, 2020, that it has costed within the two first months of this year US $196 billions (CNY 1.38
    trillions for 1 USD = 7.021 Yuans or RMB). Remember that at the start of
    the epidemic, the PRC’s authorities decided to inject in the inland economy
    CNY 12,000 billions (US $171 millions). That’s 10.15 fold higher the amount
    injected. Besides, the same chinese figure bemoans than the cars sales of
    PRC has lost US $1 million for the above quoted duration, which is worth
    one fifth of the early revenue. Indeed, after a long new lunar year leave,
    taken along with a begrudged furlough for fear of corona contagion amid
    workers, the drained firms fill in again except those run with FDI, mostly
    joint ventures (Audi, Benz-Daimler, Ford, Honda, Jaguar, Toyota, Volkwa
    gen, Volvo,…). Another plague, tourism. With the Corona havoc, chinese
    tourists desert european major cities as Fussen in Germany, Oxfordshire
    in Great Britain, Paris in France, Torino in Italia (Lombardia which heavily
    suffers from the evil) which recorded so far 5 deaths. Yesterday, paying
    a visit to the emergency headquarters of WHO in Geneva, the UN Secre
    tary general, Antonio Guttierrez on February 24th, 2020 promised to al
    locate US $675 millions to help WHO dealing with Covid-19, a somewhat
    paltry amount in comparison with the US $196 billions’ losses that PRC
    has collected as stated Zhu Min. In the mean time, the Corona death toll
    continues to climb up (2,696 of whom 2,663 chinese) as stock markets
    tumble and gold price strongly raises.

  • Updating the nCoV-19’s casualties, the latest records reported that new
    cases counted 82,419, the death toll, 2,808 (2,747 of whom are chinese).
    More countries outside the mainland have been affected, at first, many
    european ones, 14 ( Austria, Belgium, Croatia, Finland, France,Germany, Great Britain, Greece, Italia the outbreak’s hearth with 11 deaths so far,
    Rumania, Russia, Serbia, Spain, Switzerland (WHO’s headquarters). The
    south america which is thought immunizes till now, has registered its 1st
    case in Brazilia. Despite the chinese state’s appeal its workers to return
    to their occupation, this mobilization seemed to be heard chiefly by state
    laborers as FAW (First Automobile Works) Group Corporation, created in
    1953 in conjunction with USSR (producer of Zil vehicles) after a long new
    lunar year leave and a corona’s begrudged furlough for fear of contagion.
    In regard to foreign firms run with FDI capitals, as the 697 ones in Shang
    hai or 5,791 others in Guangdong, they’ll back to work slower. Meanwhile,
    financial corporations bewail the most due to bad debts which can triple
    (CNY 2,400 billions, roughly US $341,535 billions). The three top banks
    of Singapore as DBS ( Development Bank of Singapore, a multinational
    ltd, which has a representative office in HCMC, at 65 Lê Loi, 11th floor,
    district 1), UOS (United Overseas Bank of Singapore, at Central Plaza, 17
    Lê Duân, district 1, HCMC), UCB (United Chinese Banking limited , at Saig
    on Tower, 29, Lê Duân blvd, 7th floor, suite 708-709, district 1). DBS thus bemoans that the Corona’s crisis, if it lengthen till mid’ 2020, can much damages their revenue,(as much as US $2 billions). In the contrary, some
    others make money thanks to Covid-19, as Morgan Stanley, investment
    bank and financial services at Manhattan, NYC, reveals that it purchased
    E*Trade on February 20th,2020 for US $13 billions!

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