By David Jones
The viral outbreak in China has led to one of the worst economic setbacks to Chinese economy affecting the global economy as well. The fear has been fuelled further, as there is no end visible to the epidemic and China is also not sure about the quantum of continuing spread. The heavy restrictions being imposed by China over the movement of people and all kinds of goods inside China only aggravate the theory that no one is sure about possible end to this epidemic.
The restrictions on the flow of people across cities, rural areas and regions, strengthening surveillance to quarantine suspects, isolation of patients and extension of New Year holidays created panic among the Chinese. The situation also escalated into state of confusion, fear and uncertainty both among the Chinese and expatriates. The common people have been suffering from shortage of medical supplies immediately after the spread and now even in getting groceries in the market is increasing the anxiety of common man.
The directions to close public spaces and restrictions on the movement of people imposed in communism style have aggravated the panic. On the other hand, more and more countries are banning or restricting the flow of people from countries where the epidemic has struck outside China in a big way. The situation has only spiralled the panic around the world, some criticising the handling of situation by China in initial stage.
The factories in China have almost come to a halt as migrant workers who went for the New Year celebrations have not returned to their work place impeding the production thereby China’s trade ability. The current export outlook of China has largely been shadowed by the continuing virus spread.
International Monetary Fund (IMF) has dragged China’s annual growth 0.4 percentage lower than the previous estimates and has also warned about the possibility of global economic growth reduction by 0.1 per cent this year. S&P Global Ratings has revised its Chinese 2020 growth forecast to 5 per cent down from 5.7 per cent saying the impact of Coronavirus outbreak could take a heavy short term toll.
According to David Kotz, an economist and Professor Emeritus, University of Massachusetts, the global economic scenario has not been promising in the last couple of years especially economic prospects recently for China and now the virus outbreak can lead to a global recession. He also expressed concern that there has been a lot of uncertainty in the global markets for a while and Coronavirus may be the last straw as of now.
While the Chinese authorities have been claiming that the negative impact of the virus outbreak will be short term, the failure of Bejing’s measures in minimising proliferation of disease has made the investors worried on two counts. The first one is, even about two months after the epidemic, the pile up of people infected with virus both in China and around the world is increasing.
Secondly, it has exposed China’s vulnerability to health hazard as there is no guarantee that such health related crisis will not be repeated in future. The handling of the crisis by China in the initial stages in the form of suppressing information flow and harassing the whistle blowers typically illustrates psyche of the Communist Party handling such a major crisis even in modern era.
Coronavirus has become a major public concern all over the world as the unfettered spread of virus has caused an exponential increase in the number of infected people in China and other parts of the world. Even the optimists who initially thought that the crisis would be contained and some V-shaped recovery would be possible have now conceded the fallacy. In fact, now they have been convinced that due to lack of professional handling of crisis especially in initial stage the whole world is infected with the disease having the origin of China. Keith Lerner, Chief Market Strategist, Sun Trust Advisory Services has expressed the worry `no one is sure how far this will go’.
The social media is now filled with hate language against Chinese especially in the absence of reliable Chinese government information. The slogans otherwise considered racists like `No Chinese Allowed’ in public places like restaurants are seen in many parts of the world pointing to the anger and seriousness of countries affected by the crisis.
The locals in Zaisan district in east Kazakhstan region bordering China protested on Feb 19 against housing Corona virus infected patients from China in Zaisan district. They ransacked one of the local hospitals earmarked for Chinese patients. However, local authorities denied that the quarantine facilities were for Chinese and convinced them that it was meant for Kazakh patients returning from China.
The current uncertainty poses significant risks to economic growth and the equity markets which indicate the potential damages the epidemic carries affecting the whole world. In the United States, S&P lost an estimated $1.7 trillion in market value in the first two days of market opening in the third week of February. In London FTSE 100 index fell two per cent, the worst slump in one year.
Similarly, the DAX index in Germany, Paris CAC 40 and Japan bench mark Nikkei 225 index among others have experienced crashes. Investors around the globe are now worried over the possibility of Coronavirus turning into pandemic and kneecap the global economy following China’s epic failure to contain the outbreak as new cases are emerging on daily basis not only in China but around the world.