Coronavirus: how it affects the world
As China struggles to contain the highly infectious coronavirus, experts unpack the cost of the ongoing global emergency
THERE’S the old saying that when China sneezes, the world catches a cold. But these days the sneeze is rather serious – and the cold almost crippling in more ways than one. Thanks to the deadly coronavirus, image after image of Chinese cities looking as if they’ve come from an apocalypse movie are beamed across the globe.
Streets and transport systems, usually packed and bustling with millions of people, are eerily empty and quiet. Factories, shops, schools, restaurants and theme parks have been shut down.
And all over the world’s most populous nation, citizens are hunkering down in their homes – many forced to do so by the authoritarian Chinese government.
Hubei, a landlocked province in central China – once a crowded hub of activity with connections to every part of the globe – is now the quarantined epicentre of the coronavirus, officially named COVID-19.
At the time of going to print 1 775 people in China had died, with five deaths outside mainland China – one each in Hong Kong, the Philippines, Japan, France and Taiwan.
More than 71 440 are infected with the virus and it’s spread to at least 28 other countries.
Although it hasn’t yet spread widely outside China, many are feeling the effects of this serious outbreak.
Experts unpack what this means for China and the world.
Practically every economy in the world has felt the effects of the coronavirus, thanks to China’s large role in business. South Africa is no exception.
“China’s economy is a global behemoth,” Cornell University economics professor Eswar Prasad told Time magazine. “A shock to China’s growth will have major reverberations across the world.”
China is Africa’s biggest trade partner, with about 10 000 Chinese firms on the continent.
“South Africa is already seeing an impact in terms of global financial markets and, depending on the severity and longevity of the virus spread, the rand can continue to weaken, which will affect our economic growth and lead to problems such as increased interest rates and unemployment,” says Dawie Roodt, chief economist at the Efficient Group.
Tourism, the import of manufactured goods and the export of raw materials will take an immediate knock – and the effects could last for months, according to experts.
“South Africa exports a lot of minerals to China – iron ore, coal, platinum and more – and China’s demand for these depends on the health of the Chinese economy,” says Tony Leiman, an associate professor at the University of Cape
Town’s School of Economics.
“So there are many individual sectors that could be particularly affected. As an example, during the outbreak of severe acute respiratory syndrome [Sars], people in China stopped eating out, and as a result South Africa’s exports of rock lobster fell sharply.
“We also import a lot of finished goods from China. If clothing manufacturers in Wuhan have to hold back production, for example, and their exports to SA fall, local producers may have to pick up some of the slack,” he adds.
“With the increasing global worries about the potential spread, one could see a dramatic drop in Chinese visitors to SA, as well as a decline in trade between the two countries, which won’t bode well for our struggling economy,” Kutoane Kutoane, CEO of the state-owned Export Credit Insurance Corporation of South Africa, told IOL.
The rest of the continent will also feel the effects over the next few months. In the past two decades, China has funded massive infrastructure projects and invested billions of dollars across the African continent.
Angola, for example, exports 60% of its goods to the Asian powerhouse. Other affected exports include agricultural exports such as Namibian beef, Rwandan coffee,
Kenyan tea, and South African wine and citrus.
In Chinatown in Windhoek, Namibia, 20 stores have remained closed since the festive season because a travel ban meant the owners haven’t yet returned from China since the outbreak in January, a Namibian newspaper reports.
Eight daily direct flights from Africa to China have been halted, affecting the continent’s economic bottom line.
Global economic think-tank ODI predicts sub-Saharan Africa stands to lose up to $4 billion (about R60 bn) worth of exports “even without contracting a single case of coronavirus . . . even if reductions of 10-20% in global oil, copper and coffee prices only last a few months”.
The JSE All Share Index plunged by as much as 2,37% on 27 January, putting it at a six-week low.
In 2002/03, when 800 people across the globe died from Sars, which started in China in 2002, it cut the country’s GDP by 1,1%. China was then the sixth-largest economy in the world, with a 5% share of the global economy.
In 2020 it’s a different ball game. Now, they’re the second-largest economy in the world, worth about $15 trillion (R60tn) and with a hefty share of 16%.
The country is a major trading partner for the world’s largest economies. It imports more crude oil than any other country and its capital, Beijing, is the largest trader of merchandise in the world.
In short, the coronavirus is far more catastrophic than Sars.
“The spill-over will be much bigger because China has a much bigger role in the world economy now,” Warwick McKibbin, an economist at Australian National University, told Time magazine.
“The incomes of a lot of Chinese have risen, so the expenditure on travel and consumption of luxury type goods will potentially be impacted totally differently than it was in 2003.”
European furniture store Ikea closed its 30-odd shops in China and the doors of some 2 000 Starbucks outlets and hundreds of McDonald’s branches remain shut.
Yum Brands, parent company for major fast-food brands, including Pizza Hut and KFC, says customer traffic in China is down about 50% at its restaurants that are still in operation.
On the tech and manufacturing front, there’s also concern as the virus rages on. The world’s fifth-largest carmaker, Hyundai, closed its car factories in South Korea as it ran out of components made in China.
Nissan also closed one of its large factories in Japan for the same reason, and Tesla closed its Gigafactory 3 plant in
‘A shock to China’s growth will have major reverberations’
China, delaying deliveries on its Model 3 sedan. Electronics giant Foxconn, a supplier to Apple, also halted its manufacturing operations in China.
A long standstill could interrupt supply chains in the chemical, automotive, textile and electronics industries, say economists from the Allianz Group.
“International companies would no longer get the parts they need and would have to find other suppliers or shut down production,” adds Klaus-Jürgen Gern from the Kiel Institute for the World Economy.
BIG-BUCKS EVENTS SHUT DOWN
Another casualty of the spreading virus are live events around the globe.
The world’s biggest phone show, the Mobile World Congress (MWC), is no longer happening this year. It was to take place in Barcelona, Spain, from 24 to 27 February and generate 14 100 part-time jobs.
“The Groupe Speciale Mobile Association (GSMA) has cancelled MWC Barcelona 2020 because the global concern regarding the coronavirus outbreak, travel concern and other circumstances, make it impossible for the GSMA to hold the event,” says John Hoffman, CEO of the show organiser.
The Chinese Grand Prix, planned to take place in Shanghai on 19 April, has been postponed while the first official test event for the Beijing 2022 Winter Olympics – the Alpine Ski World Cup – has also been cancelled.
The Olympic women’s qualifying football tournament has been scrapped, and Chinese gymnasts pulled out of the Gymnastics World Cup in Australia.
The International Olympic Committee announced Jordan as hosts of the 2020 Olympics boxing qualifiers for Asia and Oceania after an event which had been planned to be hosted in Wuhan was cancelled.
As for the 2020 Summer Olympics, set to be held in Tokyo, Japan, in July – it’s anyone’s guess as to whether this will go ahead, given the large contingent of Chinese athletes at the Games and Japan’s proximity to China.
“Ideally after three months, we should’ve seen the back of the infection’s peak and the numbers of those infected go down,” Roodt says. “I doubt any large changes such as the cancellation of the Olympics.
“However, if the virus mutates and spreading isn’t managed, all bets are off.”
CHINA CRITICISED
China’s central bank pumped $83bn (R1,2tn) into its banking system to prevent a financial fallout. But it has still faced intense criticism following the coronavirus outbreak.
The Chinese government delayed springing into action after being warned about the potential implications of the virus on 30 December last year by 34-year-old Wuhan doctor Li Wenliang.
Instead of taking action, government authorities berated Li for “making false comments on the internet”.
The dedicated doctor died from the coronavirus on 7 February after contracting it from an infected patient.
Critics are quick to point out China could’ve prevented the spread of the virus if it took action much faster than it did. China’s president Xi Jinping has also been accused of going into hiding while the country is in turmoil.
The crisis “revealed the rotten core of Chinese governance”, says university law professor Xu Zhangrun. He described the outbreak as a “national calamity”.
WHAT’S BEING DONE
Leading Chinese respiratory expert and epidemiologist Zhong Nanshan predicts the outbreak may be over in China by April this year. But there’s no vaccine and no cure, despite ongoing efforts from the World Health Organisation (WHO).
The world watched in awe as a timelapse video was circulated, showing an entire hospital dedicated to dealing with coronavirus patients being erected in a matter of days in Wuhan.
They’ve even begun disinfecting bank
‘There’s no vaccine and there’s no cure, despite efforts’
notes using ultraviolet light or high temperatures, and the government is destroying banknotes from hospitals and public transport systems.
African countries such as Ghana, Madagascar, Nigeria and Sierra Leone have testing sites at the ready. And the WHO, in the hopes of improving early detection, has upped aid to 13 African countries – including SA – that had a high volume of travel to China. But it may not be enough. “Many disease-surveillance systems throughout African countries are weak, and most of the continent lacks diagnostic capability,” says Dr Ngozi Erondu of the Global Health Programme at the Royal Institute of International Affairs.
“Identifying most cases and controlling the outbreak could be difficult, especially in the poorest and most resource-constrained countries.”
SA’s health authorities have increased surveillance of travellers coming into the country from places that have reported cases of the virus. All passengers arriving at OR Tambo International airport, for example, are being screened for symptoms using a thermal camera. S