Is the Coronavirus the Black Swan of 202

原创 st0012  2020-02-06 08:47 

Commentary Is it too early to start thinking about how the global outbreak of the coronavirus will affect the world’s economy? With the Dow falling 454 points for a 1.6 percent decline on Jan. 27, it’s reasonable to think that more disruptions could be on the way. And though we don’t know yet the scale or duration of this deadly disease, if the 2003 SARS outbreak is any indication, then economic stresses are unavoidable. The question is, how bad could it get? As China enforces the biggest quarantine in history, with 17 cities at a standstill, such a massive event can’t help but influence economic metrics. Mandating that millions of people to stay home as a way to prevent further spread of the virus means that people are not working, nor are they out shopping. That’s adding salt to an already wounded Chinese economy. Furthermore, although millions of people have taken the week off for the Chinese New Year celebrations, Chinese authorities are extending the time of absence to Feb. 9. Schools will remain closed for even longer, with sporting and religious events cancelled. Nobody in those cities are going anywhere. Of course, the virus’ two-week incubation period, when it is also contagious, makes a delayed return to work a sensible precaution. That’s a big factor, too, because the SARS virus was not contagious during its incubation period. At the very least, China should expect a contraction in its consumer spending from these actions. The economic damage could be up to a one percent drop in China’s 2020 GDP, according to Economist Business Intelligence Unit figures. But that estimate is based on the impact that the SARS virus outbreak had on a much smaller Chinese economy. China’s economy is much larger today; but then, the Coronavirus is bigger, too. The current situation may, in fact, have the potential to become much worse that the SARS episode. For one, its virulence is accelerating as it mutates to become more adaptable to human beings. No one yet knows how 1号电竞 much that will raise its level of contagion or danger to human life. Secondly, as noted above, it is contagious during its two-week incubation period. And, according to China’s most celebrated virologist Yi Guan, they have already missed the golden window of containment for the coronavirus. Containing it will be much higher cost; and could take much longer. Third, China is working around the clock to add or free up 100,000 hospital beds in Hubei Province—which is ground zero for the outbreak—to address the anticipated need. None of these factors bode well for a quick resolution. Indeed, some are already saying that the spread of the coronavirus will lead to a worldwide recession. That could be the case, although it seems premature to be calling it a certainty. One of the reasons that we don’t know is because China has not been forthcoming on providing critical information. For example, they have yet to divulge the actual number of infected people and how many have actually died from the virus. There are other big questions that need answers. The Chinese Communist Party (CCP) has yet to provide the world with a credible source of the virus. Was it from the close proximity of multiple species of wild animals in the large, open market in Wuhan, or the Level 4 bio-weapons lab 20 miles away? At the same time, other regional economies dependent on China will likely feel the economic pain from the outbreak. Some are already feeling it. Unfortunately, the positive news of the Phase One deal with the United States is already forgotten, overshadowed by this evolving health crisis. If the crisis continues to expand, the Phase One deal may be over before it even begins. The positive impact of the relocation of supply chains out of China into neighboring countries has also been undercut by the emergence of the coronavirus contagion. With confirmation of cases in Taiwan, Thailand, Japan and South Korea, travel and trade level are shrinking a bit in the region. At the outset, I mentioned the 1.6 percent drop in the Dow as a potential precursor of things to come. That could well be. The outbreak may just be the last and unforeseen brick that breaks the back—or just the confidence—of the global economy. We’re not there yet, but perhaps on the way. We’re seeing global capital markets spooked, travel restrictions being put in place and information being withheld, especially from China. Uncertainty grows in such a climate. And as the virus continues to gain strength, cases appear in more countries and nations evacuate their people from infected areas, today’s trading partners may not be partners tomorrow. That isn’t a positive global economic climate in which to promote growth. In such instances, fear—well-founded or not—overrides greed, and that means a slowing global economy could be just ahead. No one saw this coming and at this stage, no one sees it ending, either. For China, if not the rest of the world, the Year of the Rat, may well turn out to be the Year of the Black Swan. James Gorrie is a writer and speaker based in Southern California. He is the author of “The China Crisis.” Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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