Andrew Sheng and Xiao Geng: China’s COVID-19 Moment

2020-03-02 IMI

This article first appeared in Project Syndicate on February 26, 2020. Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong. Xiao Geng, Member of IMI Academic Committee; Professor, Peking University HSBC Business School; President, Hong Kong Institution for International Finance. HONG KONG – Last October, the 2019 Global Health Security Report included a stark warning: “National health security is fundamentally weak around the world. No country is fully prepared for epidemics or pandemics and every country has important gaps to address.” Just two months later, a new coronavirus emerged in Wuhan, China — and quickly demonstrated the accuracy of the report’s assessment. The virus, now called COVID-19, was first discovered in China’s Wuhan municipality but was not taken sufficiently seriously by the authorities in the early weeks. Multiple mistakes were made, including the failure to comprehend the virus’s speed of transmission, compounded by the delay in informing the public about the outbreak. In fact, some who first warned of the disease — most notably the ophthalmologist Li Wenliang — were reprimanded by local authorities. (Li subsequently died of the disease.) It was not until Jan. 20 that the government acted, after another doctor, Zhong Nanshan — a hero in China’s fight against the 2003 outbreak of another coronavirus, severe acute respiratory syndrome (SARS) — alerted the public of the seriousness of the new virus. Wuhan and neighboring cities in Hubei province — with a total population of some 58.5 million people — are now in lockdown. Across China, as many as 700 million people are largely confined to their homes. China’s government subsequently mobilized more than 200 medical teams from around the country, including from the military, to help contain the disease. It also built three new hospitals and nine temporary hospitals with unprecedented speed. And it gave provincial-, municipal- and county-level governments strict instructions on improving public hygiene, isolating possible victims and sharing experience and expertise. China’s unprecedented responses appeared to have slowed the spread of the disease domestically. But densely populated Wuhan is a transportation hub, home to central China’s biggest airport, from which roughly 30,000 people, on average, depart daily. This means COVID-19 can and has spread around the world rapidly, testing the public health response capacity of countries far and wide. As of Thursday, there were more than 82,000 cases on every continent except Antarctica, and at least 2,800 deaths (a 3.4 percent mortality rate). Hubei province accounted for the most cases, and 95 percent of the fatalities. South Korea is now second to China for COVID-19 infections, with more than 1,700 confirmed cases. The government has placed the country on the highest possible alert — a move that allows for lockdowns and other containment measures. The southeastern city of Daegu, where cases are concentrated, has essentially been under a state of emergency. Japan, with more than 220 cases (plus around 700 from the Diamond Princess cruise ship) is third on the list. The virus was also gaining ground in Europe, with over 650 cases confirmed in Italy as of Friday. The country has quarantined at least 50,000 people. Hopes that a pandemic can be averted are dwindling fast. All of this is taking a serious economic toll, as global supply chains are disrupted and services halted. Moreover, Japan’s economy — already under pressure from another consumption tax hike and the fallout from Typhoon Hagibis — seems likely to contract even further. In South Korea, a key hub in global supply chains, Samsung Electronics has suspended smartphone plant operations in the city of Gumi after an employee tested positive for COVID-19. After Apple warned that its quarterly revenues will take a hit, owing to slowed iPhone production and the closure of Apple stores in China, global investors are getting nervous. In the United States, the S&P 500 dropped nearly 3 percent at the start of trading Monday. With the outbreak still escalating, the global damage will run deeper than supply chain disruptions. The sudden reduction in production and services is driving a shift in consumption patterns and business operations in China toward e-commerce and telecommuting — a trend that may be mirrored in other affected countries as the virus spreads. The economic effects of this shift — including changes in Chinese demand for travel, tourism services and luxury goods — will reverberate globally for months to come. But the more profound effect of the COVID-19 lockdown is on Chinese social dynamics. An unprecedented number of Chinese, up to half of the population, have been trapped indoors for more than a month, with time to reflect on the disease’s consequences for life, family and society. However difficult the lockdown has been, they have been able to count on their government to deliver power, water and online services reliably. Of course, the government has also faced plenty of criticism on social media for its early attempts to suppress critical information. But it has since allowed more open debate and feedback, as in-depth reports by Caixin magazine have shown. The COVID-19 crisis has shaken the belief that economic prosperity can compensate for social well-being. Death in one-child households terminates the whole generational lineage, something unprecedented in Chinese family history. As a result, Chinese may reorient themselves toward health, home and family, after years of rising travel and offline consumption. The global media frenzy, some tinged with coronavirus-fueled xenophobia, could reinforce China’s self-reflection and self-strengthening impulses, particularly in sorting out domestic public health, social security and governance issues. Already, COVID-19 has led to swift domestic damage control and a massive reorientation of priorities, such as innovative ways of dealing with business cash flows, survival of small and medium-size businesses, job disruptions and restoring key supply chains. But even when the virus is contained, escalating geopolitical rivalries, technological disruption, climate change and the likelihood of new pandemics loom. So, beyond tackling the current crisis, Beijing should be working on long-term resilience-building reforms in education, health care, the social safety net and internal feedback mechanisms. The public expects no less. The same is true worldwide. At a time of unprecedented global interconnectedness, our biggest challenges are shared. Every country must work to build its resilience, or no one will be safe.

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Andrew Sheng and Xiao Geng: China’s COVID-19 Moment

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