Coronavirus and its strategic impact

The 30th of January the World Health Organisation (WHO) declared the current coronavirus crisis in China and abroad as a public health emergency. This gives the mandate to the WHO to issue guidance, travel restrictions and recommendation on how best facing this viral outbreak. In fact by the same day, more than 9.700 cases have been confirmed of which 98,7% in continental China, with only two digit confirmations in four Pacific countries. Confirmed deaths are 213 (204 concentrated in the Hubei province) and fortunately 187 (116 again in Hubei) are the recoveries. The virus has spread with three digit confirmations in 13 provinces of China on a total of 23 provinces, four big municipalities, five autonomous regions and two Special Administrative Regions. To put things in perspective, the 10th most deadly disease, according to WHO statistics, is cirrhosis with 1,2 million dead in 2015 and increasing mortality

The dimension of this crisis should be examined at three levels: information and disinformation; economic impact; health implications.

Information and disinformation is a critical dimension at least in the short term because the level of transparency by Chinese authorities is closely connected to spread of uncontrolled or outright propaganda fake news that have an impact not just of the image of the Chinese government but on highly speculative sectors. Stock markets, financial markets and energy markets show very strong decreases in values and volumes, as OPEC is considering further cuts to restore an already low barrel price.

Among the real economy sectors tourism and air travel are the most crisis prone in this regard, especially because Chinese tourists are becoming an important market segment and because the Lunar New Year festivities are a high expenditure period. As shown by past epidemics like the SARS (2002-2003), the worst period are the 90 days after the official recognition of the problem. After six months the shock is generally absorbed by populations, decision makers and markets.

In global economic terms the estimated cost of the past SARS epidemic was between $50-100 billion, for what these estimates can help; the assessed direct damage to the Chinese GDP was around 1%. Toda the Hubei province weights on the national GDP just 3% and it is still early to assess in a reasonable way that will be the negative effect on Beijing’s economy. Assuming that would be 1,5%, this means anyhow a considerable drop from the actual 5,9% estimate of the World Bank. In other words, China is still rising, but the epidemic will slow it by at least one year.

Perceptions apart, this crisis shows that public sanitary systems need to be upgraded considerably in China and other countries because new mutant viruses put a considerable strain of the resources of several big and medium countries while risking to ravage more fragile ones. Global epidemics are just the other side of global transportation and market systems, two realities where nation states have still some limitations