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Wuhan impact on China: With a formidable GDP of $14.37 trillion, the country will recover and bounce back in business

Anurag Viswanath
coronavirus, coronavirus impact

Even the sky is crying (Lao Tian Ku Le), say Wuhan residents. Wuhan, a city of 11 million, is a city besieged, wrecked by COVID-19, and in the last few days by snow, hail and thunder. But for the Xi-Modi informal meet in Wuhan in 2018, the tier-two backwater hardly figured on the layman's mind. But today, the ripple effect of Wuhan can be felt in not only in China but also East Asia, Southeast Asia and the world.

Wuhan, the capital of Hubei province, was long known for its car factories and the Wuhan Iron and Steel Corporation (WISCO). Today, Wuhan has come to be known as the epicentre of the COVID-19 outbreak that has infected 75,000 people and killed 2,000, mostly in China. More than 1,700 medical personnel have been infected and at least six have died. The dead include 'whistleblower' Dr Li Wenliang, the 34 year-old doctor in Wuhan who first sounded off the alarm about the mysterious illness on China's social media, only to be grounded by China's Public Security Bureau (PSB). Dr Li died on February 7. Another senior doctor, Dr Liu Zhiming, the director of the Wuhan Wuchang Hospital, died on February 18. Despite COVID-19's lower fatality rate (2%), casualties are greater than SARS (2002-03; fatality rate 10%), which claimed more than 700 lives worldwide.

Ripple effect on mainland China

COVID-19, which can spread human-to-human, has brought Wuhan to a grinding halt with empty streets, malls and restaurants, the splendid MRT which tunnels underground across the Yangtze river stalled, the Wuhan University campus that visitors flock to enjoy springtime cherry and plum blossoms quiet, the famed lakeside deserted.

China's President Xi Jinping 'issued demands to prevent and control' as early as January 7. But the 58-million-strong Hubei province was quarantined weeks later, on January 23. The outbreak coincided with China's Lunar New Year (holidays) and China's largest internal migration. Every new year, 250-300 million migrants (workers, students) in big cities such as Shanghai, Beijing, Tianjin and even Wuhan travel out and in for the customary new year reunion dinner with family. Wuhan's estimated 5 million migrants had already travelled out, some as far as to Beijing. Some had travelled as near as Xiaogan, a city of 4.8 million people (60 km away from Wuhan) and to Huanggang, a city of 7.5 million (75 km from Wuhan). Today, Wuhan, Huanggang and Xiaogan are the worst-hit cities.

When the quarantine was announced, Wuhan's three districts-Wuchang, the seat of learning; Hankou, the city centre; and Hanyang, the industrial zone-went into lockdown. As did the whole province. Inadvertently, Wuhan migrants had carried the disease to other provinces, some had turned 'super-spreaders'. This resulted in a China-lockdown that covered an estimated 760 million people.

Overnight, volunteers, neighbourhood committees in urban areas (every neighbourhood is manned by one) and village committees went into overdrive, checking temperatures, erecting barricades and even going as far as allowing only one family member to step out.

The situation raised several questions about human error, lack of transparency and, not the least, the competence of a paternal, 'top-down' system. Despite the fact that the Party Secretary of Hubei (similar in powers to a chief minister in India) was fired, the damage had been done.

Ripple effect: Tourism, aviation, retail and services industries

In an increasingly urbanised China (60%), population mobility has fed the dynamism of the domestic and global economy-factories to shipping, aviation to oil industry, services sector to tourism to the global supply chain.
The first obvious impact was felt in pharmacies in the region as the N-95 masks flew off the shelves, from Tokyo to Hong Kong to Singapore. Then followed panic buying of essential goods. Robbers ran away with toilet rolls in Hong Kong. Singaporeans began to hoard rice and noodles until the government stepped in to reprimand its people.

The second obvious impact was on tourism since Beijing banned group tours on January 27. Several countries such as Singapore curbed arrivals and transit of visitors from China. Singapore feels the pinch with dropping sales, empty malls and empty hotels. Even airport terminals have shushed. "When China is down, we're down," said a Singapore taxi driver waiting it out for customers. "Earlier, customers waited for taxis at the casino and airport, now I am waiting for customers," he said ruefully to this author.

What is happening in Singapore has amplified in the world. Russia has closed its 4,000-km border and suspended tourism; North Korea, which receives Chinese tourists, has closed its 1,400-km border. Airlines have ceased operations. In Hong Kong, Chinese tourists constitute 80% of tourists, each spending $905 per person in 2018, a tap that is drying up. Thailand, which depends on tourism for 20% of its GDP, is expected to take a hit. Macau's casinos have shut. Chinese tourists are scarce in Europe, too.

The cruise industry has received a massive setback. Diamond Princess, a British cruise ship, set sail with 3,700 passengers and became the largest cluster of infected people outside mainland China with 621 cases. Five countries refused to allow US cruise ship MS Westerdam with 2,257 passengers to dock, until Cambodia allowed it.

In the last decade, Chinese tourists have been growing, from 129 million in 2017 (Global Times, Beijing) to 150 million in 2019 (Financial Times, London), a 13% increase. With Chinese tourists gone for now, the flood has become the trickle.

Ripple effect: Global supply chain and oil prices

Wuhan's optical and laser production, car parts and car assembly plants, aircraft and machine tools stand disrupted. This has affected global supply chains.

In Wuhan and other parts, quarantine and preventive measures such as mass-gatherings have obstructed workers from going back to factories. Japanese carmaker Nissan, Italian-American company Fiat Chrysler, French carmaker Renault and South Korea's Hyundai have been affected. Hyundai has stopped production lines and British company Jaguar Land Rover (JLR) is reported to be bringing parts from China over to the UK in suitcases. Foxconn, China's biggest private-sector employer with a million employees which assembles Apple iPhones, remains in part limbo, with its large facilities in Shenzhen and Zhengzhou resuming production partially.
Oil prices have plummeted. China, the largest oil importer, imported 10.78 million barrels a day in December 2019, but Bloomberg reported that demand has dropped by as much by 3 million barrels a day.

China means business

Nothing lasts forever. If oil prices, which have gone up in the last week, are any indication (Brent crude was up $1.58 to trade at $59.33 a barrel), prices are stabilising. SARS took about six months to subside and MERS about two months. COVID-19 appears to be 'peaking' and is expected to subside by summer.

Of course, China is in a different place now. During the SARS outbreak, China accounted for 4% of global GDP; today, it accounts for four times as much. Moody's Analytics and Barclays says global economic growth will be reduced by 0.3%, while Oxford Economics predicts by 0.2% in 2020. Estimates for China's first quarter GDP in 2020 hover at 5.4%, well below 5.9%. In other words, while there has been disruption, this is temporary.
China, with a formidable GDP of $14.37 trillion, will take the dent, recover and bounce back in business.

The writer is Singapore-based Sinologist, and adjunct fellow, Institute of Chinese Studies, Delhi