Moviegoers have been flabbergasted in recent weeks of news on the spread of the Coronavirus in China and Trans China. If you’re not a moviegoer just watch Steven Soderbergh’s Contagion (Outbreak), a movie made 9 years ago (2011) to see the pages of this movie about the spread of a deadly virus in the world with cold symptoms and with East Asian origin, Hong Kong. In our conspiracy-based mentality, the premise that “this is the work of foreigners” is quickly put forward. Here, it appears that the main accused in the United States of America.
Biological warfare, from chemical weapons to deadly viruses, is a historical fact. Here and there history can be traced back to countries using biological weapons against each other. An Iranian with a historical background of (TV Series) “My Uncle Napoleon”, if he has seen the movie “Outbreak”; if he knows that the source of the Coronavirus was in Wuhan province; if he knows that Wuhan province is the heart of China because it is a railroad junction that connects most of China’s major cities; if he knows all this, he will immediately trigger a major biological war against China.
Is there really a conspiracy? There is no conclusive evidence, just as in 2002 when the SARS virus had spread to China and resulted in the death of nearly 800 people – presumably the movie “Outbreak” was an exaggerated version of the event – some talked about the US biological warfare against China but later it was revealed that the origin of the virus was an animal in China and its occurrence was quite natural.
In the 21st century world, and with the vast interconnectedness of countries, it is naive to think that a virus is spread in China and the rest of the world is kept unaffected. That is why the World Health Organization has declared an emergency state (red alert) in the world. The time is gone for a city to be afflicted with the outbreak of plague but the rest of the world (cities or countries) remains unharmed. The economic cohesion of the countries of the world is also such that the sneezing of one, especially if he is an important one, would lead to others catching a cold. The globalized world is an interconnected world. Thus, a blow to China and its economy will damage the entire world economy.
Even if we were not conspiracy-minded, at least the economic impact of the Coronavirus can be accepted. After America, China is the second-largest economy in the world. In the past 40 years or so, China has taken a course whose average economic growth has reached almost 10%. According to the compound growth rules, this means that the Chinese economy has doubled every 7 years. According to the World Bank, during this period more than 850 million people accounting for 65% of the population have been rescued from poverty. What China has done in 40 years took the United Kingdom nearly 150 years to do.
The Mao road was a path of political imprudence and economic poverty in China, and the new leaders steered the country’s carriage to a new road. It was because of China’s Deng Xiaoping and his determination that the shackles of politics were removed from the economy and China was directed to another road. The dragon woke up and became the world’s second-largest economy with mass production of goods and services. Of the $85 trillion of global GDP, the US is the world’s largest economy with more than $20 trillion – 23 per cent – followed by China with more than $13 trillion – 15 per cent. This can be called a “Chinese miracle.”
For the past two decades, the United States has been the largest export market for Chinese startup industries. China’s exports to the United States, which now make up more than 20 per cent of China’s total exports, have provided the Chinese industry with an opportunity to both experiment with the big competitive market and add dollars to their dollars. The dragon was next to the eagle and had two former enemies, a partner and then a strategic rival.
The Dragon Is Crippled?
The Coronavirus has transformed some of China’s big cities into ghost towns. In the days of the Chinese New Year, there were many manufacturing and services sectors whose businesses were dull and they sustained losses. While it is not possible to calculate the exact amount of damage at present, the Coronavirus dealt a serious blow to the Chinese economy and will, for a long time, make China’s economy vulnerable. However, estimates of these damages can be made. For example, the Oxford Economic Institute, in its February 3, 2020 report, estimated that while the Chinese economy was slowing to 6% in 2019 compared to 2018, economic growth is expected to further drop to 5.5% due to the Coronavirus.
Other reports have cited numbers more or less similarly. So far, the jobs of more than 10 million people are at serious stake and the continuation of the crisis could lead to their unemployment. Another issue is the decline in purchasing power in China, which could deal a serious blow to the Chinese economy. China, which has been adopting a focus on domestic markets for many years after a long period of focusing on exports, is vulnerable to declining domestic demand.
In other estimates, China’s economic growth will be less than 2% in the next four months. The slowdown would mean a loss of $62 billion due to the Coronavirus. Almost most analysts believe that when China’s annual economic growth drops below 6%, the political alarm bells will be sounded. This means that 2020 may be the year of domestic political challenges for the Chinese government.
It is clear that if a country that accounts for nearly a third of global economic growth records a decline it would mean a cut in global economic growth – a rate lower than the average of more than 2 per cent since 2008, a drop in international stock indexes in the past month are signs of the decline in the global economy in the new year. In 2002, when the SARS virus spread in 17 countries with China as the origin. China’s with an output of $2 trillion accounted for about 5% of the global economy. China now accounts for a 15% share of the world economy with the Coronavirus posing a threat to its economy which means a greater threat to the global economy.
China, which has been involved in a trade war with the United States for the past two years and under a new agreement, must buy $200 billion more in US goods (read a loss of $200 billion) over the next two years, is facing a new crisis without having managed to resolve the previous one. The Coronavirus first targeted China’s tourism industry and then reached other manufacturing industries.
It is a mistake to imagine that the damage to the manufacturing industry was exclusive to China. General Motors, which in the past year sold more of its products in China than it sold in the US or Europe, has halted much of its production. According to the New York Times, the Ford Company, the other active company in China also closed down its factories ordered its top executives in China to stay in their homes and manage the works they can in absence of their workers.
China hosts much of the US strategic industries, including the semiconductor industry. China also hosts factories in many other countries, such as the largest toy factories in the world. On the one hand, China is in many cases the largest consumer of foreign goods. This means that the economies of many countries, from auto plants in Central America to garments factories in Bangladesh and Turkey, are in the production and consumption chains of China, and they will be more or less hurt if the Coronavirus crisis continues. Simply put, the spread of Coronavirus in China means a major disruption to the global supply and demand chain.
Black Chinese Swan?
Is there a conspiracy behind the spread of the Coronavirus? Almost all major international companies have at least one factory in China. This means the weakening of an economy that plays the role of a global factory will lead to the weakening of the same companies operating in this market: American companies, British companies, German companies, French companies, etc.
If we know that China buys a large portion of US government bonds, we will doubt it a country will deliberately turn off the engine of the Chinese economy. However, if more provinces in China become infected with the Coronavirus, one would have to wait for the more serious decisions of factory bosses who until then regarded China a paradise. For years, with the proliferation of artificial intelligence in factory production, China’s main advantage, cheap labour, has been lost, and before the Coronavirus, China’s market advantage for Western manufacturers had diminished. Several simultaneous developments, including the widespread and prolonged spread of Coronavirus in China, could lead to the relocation of some of the world’s leading factories from China to other countries, especially Thailand, Vietnam and Indonesia.
The Chinese political system is a system that gains part of its political legitimacy from economic performance. So far, the Chinese government has tried to make up for some of the losses through centralized public health management, allocation of nearly $13 billion to developing the Corona vaccine and other medical equipment and information dissemination in the economic field; it has also encouraged major banks to cut interest rates on loans given to small businesses and individuals in crisis-hit areas and also called for forgiveness of loans granted to businesses in those areas.
But they are insignificant in the face of economic, social and political losses. The Chinese government has had extensive experience in dealing with numerous crises. However, it remains to be seen how the government can curb the Coronavirus crisis. The weakness of the Chinese government’s management in this crisis and several other political and economic crises, including developments in Hong Kong, will have serious consequences for the country. China’s future is determined by the functioning of today’s public health system and its economic and political system. The future generation will find out whether the Coronavirus, the “Black Swan” of China, was an unpredictable and rare event but with enormous implications or not!