Issue of the Week: Disease

What if, now that the first airports have been closed, China also shutters its ports? This would disrupt countless supply chains around the world, both big and small. And what if, after the initial coverup and subsequent quarantine of cities with populations in the millions, the Chinese lose confidence in their government?

The epidemic has already shown just how vulnerable our interdependent 21st century economy really is. China boasts the world’s largest manufacturing industry. Yet many of the assembly lines aren’t running. The government extended the Lunar New Year holiday by a few days in an effort to combat the spread of the virus. Meanwhile, preschools, schools and universities remain closed indefinitely. This suggests that factories in China will also remain closed for the time being.

A Globalized Virus

Experts are divided on when the virus will reach its peak. China’s best-known epidemiologist, Zhong Nanshan, has said he expects new infections to reach their high point in early February, whereas experts in Hong Kong and London say they think it will be closer to April or May. Manufacturers of everything from electronics to textiles are likely facing shutdowns of several weeks.

Tech giant Apple, which has a production facility in Wuhan, quickly began looking for alternate suppliers “to make up any expected production loss,” CEO Tim Cook said last week. The French carmaker PSA, which has several factories in Wuhan, is facing a similar situation.

China exports more than 80 percent of that which it produces -including industrial and consumer goods, raw materials and food – by sea. If the ports were closed, it would lead to a massive disruption of global trade comparable to a stop in oil deliveries from Saudi Arabia. To a certain extent, China has “swing capacity” in the manufacturing industry. An interruption in production could bring a large part of the global economy to a standstill, although this still seems a long way away.

Globalization has lifted millions of people in countries like China, Indonesia and Vietnam out of poverty. It has provided people in industrialized nations with cheap televisions and laptops not to mention clothing and textiles, yet at the same time, it makes the world more vulnerable to all sorts of disruption, from terrorist attacks to natural disasters – and epidemics.

A panel of experts from the World Bank and the WHO wrote of a “world at risk” when they examined the economic consequences of a serious global health emergency last year. A pandemic like the Spanish flu, which killed as many as 50 million people between 1918 and 1920, would depress global economic output today by around $3 trillion (2.7 trillion euros), the experts calculated. Even a comparatively mild epidemic could cause damages adding up to more than 2 percent of GDP. “The world is not prepared for a fast-moving, virulent respiratory pathogen pandemic,” the report states.

Chinese President Xi Jinping, has compared the virus to a “demon,” thus stirring up one emotion that spreads even more quickly than the virus itself: fear. In Malaysia, South Korea and Singapore, hundreds of thousands of people have signed petitions demanding entry bans for Chinese. In France, people of Asian origin have taken to Twitter to complain about discrimination, using the hashtag #JeNeSuisPasUnVirus (“I am not a virus”). Some people have even refused to be served by Asians in supermarkets. In France, there had been six confirmed cases as of Tuesday, Feb 4. In South Korea, there had been 15; in Malaysia, 10; and in Singapore, 18.

Increasing Interdependence

The story of the coronavirus is about more than just medicine and China. It is a lesson on the increasing interdependence – and the political, economic and social dimensions – of today’s world. It is a story about the globalization of danger.

Wuhan, a city of 11 million people in central China, remains at the center of the crisis. For Christian Drosten, the director of the Institute of Virology at Berlin’s Charité university hospital who also helped discover the SARS virus, one thing is certain: In Wuhan, the place where it all began and where new infections and deaths have been increasing from one day to the next, the coming weeks will show whether the new virus can be stopped – or whether the world will simply look on helplessly as the virus jumps around from country to country and continent to continent.

Drosten says the decisive factor in the fight against the new coronavirus won’t be a few hundred additional doctors or a hospital that was built in just over a week, but residents’ everyday behavior. “SARS could only be stopped in Hong Kong in 2003 because people consistently stayed home out of fear,” he explains. If people stay away from one another, they can’t spread their germs.

What epidemiologists refer to as “social distancing” – i.e. minimizing contact with other people, avoiding unnecessary walks or travel, working from home, etc. – is more effective than anything against dangerous new viruses, Drosten says. If the number of new infections in Wuhan were to decrease in the coming weeks, it would certainly be due to people’s behavior there.

Disciplined Residents

Weeks have passed since the outbreak of the virus and it’s still not known where exactly it originated in Wuhan. One guess that gained wide traction – that the virus originated at the Huanan seafood market – is now being called into question again. “The virus was immediately and rapidly transmissible from person to person,” Drosten says. “That’s why I could imagine it being an infected person rather than an animal that spread the virus at the market.” The virus could have even originated at another market altogether and could have spread from there to the Huanan seafood market.

So far, the city’s residents have strictly heeded the call to stay home. “People are only going outside to run errands that are absolutely necessary,” says Han Li, 62, a resident of Hamburg who was surprised to learn on Jan. 23 that the city in which he was staying had been quarantined. Until last Saturday, he had been holed up in a hotel in the city center, waiting for the German government to fly him, his wife and around 90 other German citizens out of Wuhan.

In Wuhan, the government’s transportation ban and curfew have been highly effective. The streets are all but deserted. On New Year’s Eve, many residents could be seen and heard at their windows or on their balconies, singing the national anthem and shouting words of encouragement to one another. “Wuhan!” they yelled. And: “Jia you!” which literally means to “add oil” but is used as an expression of support. It’s the same battle cry that protestors in Hong Kong have been using for months.

Last week, WHO Director-General Tedros Adhanom Ghebreyesus praised Chinese leaders for their discipline, though it has really been the medical professionals and residents of Wuhan and the 15 worst-hit cities in Hubei Province who have been the most disciplined.

“We appreciate the seriousness with which China is taking this outbreak, especially the commitment from top leadership,” Tedros said during a meeting with Chinese President Xi Jinping. He went on to say that he was “very encouraged and impressed by the president’s knowledge of the outbreak and his personal involvement in the response.” And he responded to criticism of his lavish praise for the Chinese leader by insisting that he “would praise China again and again.” Beijing’s actions had “helped prevent the spread of coronavirus to other countries,” Tedros said. He also noted that China had been proactive in alerting the German authorities after a woman infected with the disease had returned to China following a visit to Bavaria.

Welcome Praise

Xi had no trouble accepting the praise. Flanked by a floor-to-ceiling painting of a mountain landscape, Xi nodded approvingly as Tedros commended him for his engagement in fighting the virus. It was welcome reinforcement for Beijing. It may sound counterintuitive, but the crisis actually provides a useful opportunity for the Chinese government to make the case for its system of rule. As if to say, “You in the West may call our measures draconian. We call them efficient.”

In fact, what China is asking of its people would be difficult to imagine in any other country. For Europeans, it may be reminiscent of some blockbuster movie about a natural disaster. More than 50 million people are trapped in Hubei province. That’s more than the entire population of Spain. Major cities including Beijing and Tianjin were quick to suspend long-distance bus services.

Travelers who returned from Wuhan were urged to quarantine themselves and report their body temperature to the authorities twice a day. In Beijing’s subway stations, security guards in white full-body suits could be seen scanning every passenger with infrared thermometers.

“We will definitely overcome this disease,” Xi said during his meeting with Tedros – just as long as his policy was “precisely implemented.” His words conveyed confidence, but they were also a warning: If containment wasn’t achieved quickly, it would only mean that someone hadn’t sufficiently implemented the directives from Beijing.

There’s a Chinese proverb that goes, “Heaven is high and the emperor is far away.” Basically, it means that the idea of the central government having absolute power over every last city, town, village and farm simply isn’t true. High-ranking provincial leaders enjoy considerable freedom – say, to ignore processes and rules. Harvard professor Elizabeth J. Perry has called this a “guerilla policy style.” Economically, this approach has produced bold experiments that have contributed to China’s rise.

The flip side, however, is that the central government often doesn’t have an exact picture of what’s going at the periphery – and that China’s regional leaders are often held to account if something goes wrong in their jurisdiction. This could be one reason why the authorities in Wuhan waited so long to sound the alarm. On Jan. 1, the city government closed the Huanan market and the police initiated “legal action” against eight internet users who had “spread rumors” about a new viral disease, including the doctor who had been called in by the health commission the day before.

Almost three weeks later, and only a few days before Wuhan was sealed off, the city administration held a New Year’s banquet. Some 40,000 people reportedly helped themselves to bowls of shrimp and hot and spicy duck necks. Later, the mayor of Wuhan said it had been assumed at the time that the virus was not being transmitted from person to person. But he did admit to doing too little for too long. He has since offered to resign.

Administrative failures like this are especially threatening to a regime that does not derive its legitimacy from elections, but instead rules repressively and then points to the achievements of its style of governance. Social media in China have been flooded with expressions of displeasure, testimonies of human suffering and eyewitness accounts – but it’s usually the provincial authorities that are held responsible and rarely the central government.

A Sharp Jump

As the crisis first unfolded, the debate over it was extremely open by Chinese standards. Since Xi’s public statement about the virus on Jan. 20, he has been trying to present himself as being in charge of containment efforts. Public health took priority, he said, adding that it was “extremely crucial.” At the same time, he suggested “strengthening the guidance of public opinion.”

So far, the strategy seems to be working. Indeed, the spectrum of what can be said is narrowing again. Particularly drastic reports from Wuhan are being expunged more quickly now than at the beginning of the outbreak. But criticism cannot be completely silenced. This became apparent when a video uploaded by a chief physician went viral last week.

The doctor, Zhang Wenhong, said he wanted to give his overworked colleagues in the infectious diseases department at Huashan Hospital in Shanghai a break. Instead, he said he would send Communist Party members like himself into the sick wards. “Didn’t the members of the Communist Party take an oath to put the interests of the people above everything and not to let difficulties stop them? So, I say: Now march forward, comrades, and do your best.”

China’s Foreign Minister Wang Yi surprised doctors last week with his statement that the epidemic was “generally controllable and curable.” Indeed, the virus continues to spread at a high rate. The number of infected jumped sharply over the weekend. As of Tuesday, China alone had recorded more than 17,238 confirmed infections.

A Race Against the Clock

On Thursday of last week, after the virus had spread to a total of 24 countries, WHO declared an international public health emergency. “We must all act together now,” Tedros said. WHO’s primary concern at the moment is that the virus could spread to countries that don’t have good health systems. The organization did not, however, call for further travel restrictions, with Tedros saying on Monday that there was no need for measures that “unnecessarily interfere with international travel and trade” in trying to get ahead of the virus. Instead, he called for the rapid development of vaccines and medicines. Researchers around the world are racing against the clock to come up with a vaccine. But it will take time – at least three months for human testing of any vaccine to begin.

No drug has yet proven to be effective against the virus, either. There are plans for doctors to start experimenting with different drugs in the hope that something may prove helpful. If the virus were to spread uncontrollably, the world would have few means of protecting itself, and the result would be far more infections and deaths than seen up to this point.

What has been particularly worrying is that it is not yet clear what scientists and doctors are up against. Even though the gene sequence of 2019-nCoV has been decoded and Australian researchers have succeeded in growing the virus in the laboratory, it is not clear how contagious or how deadly the new pathogen really is. “At the moment, we’re dealing with things as they come,” University of Marburg virologist Becker says, summing up the situation.

“It is extremely difficult to make any reliable predictions for a virus that only recently came into the human population,” explains David Heymann of the London School of Hygiene and Tropical Medicine, who helped fight the SARS outbreak for WHO back in 2003. Technology, for its part, can only help in determining the characteristics of the virus. So, epidemiologists are now focusing on the careful study of so-called clusters, groups of sick people, and trying to find out how these individual cases correlate with each other.

That’s why experts are attaching great importance to the early cases that have emerged in Germany. In contrast to Wuhan, where it is now often difficult to trace who actually contracted the disease from whom, the chains of infection can still be tracked very closely in this country.

In Bavaria, a 33-year-old employee of Webasto, an automotive supplier, contracted the virus from a Chinese colleague who had traveled to the company’s headquarters in the village of Stockdorf near Munich for a training event.

The initial findings in the German case are both reassuring and disturbing. Contrary to initial reporting on the case, the colleague from China likely did have early symptoms when she infected the first Webasto employee and possibly also a second. The first employee, in turn, infected the third and fourth, before getting diagnosed himself. Even after he felt completely healthy again, the man still had a large amount of the virus in his saliva, meaning he was possibly still infectious. So, it may be that simple exposure to a person who doesn’t appear to be very sick or to a person who appears to be fully recovered is enough to get infected – making it difficult to prevent the global spread of 2019-nCoV.

As of Tuesday, a total of eight Webasto employees had tested positive for the coronavirus, and two children of one employee had also come down with it. Together with two people who had returned to Germany from Wuhan and were infected there, the total number of infections in Germany has risen to 12.

The health of the first four who fell ill in Germany quickly improved after they suffered brief fevers. “The four are in great shape now, with no symptoms, no fever and no cough,” Clemens Wendtner, the senior physician attending to the patients at a hospital in Munich, announced at a press conference on Wednesday.

“More Difficult than We Thought”

Elsewhere, though, the virus struck harder, even among younger people. In Wuhan, a 36-year-old man died after getting infected. And in France, the condition of an infected male around the age of 30 deteriorated.

And yet, it’s not unconceivable that the infections will ultimately be contained. “We will still have to wait a bit to see whether the strict quarantine measures imposed by the Chinese government will work,” says Marion Koopmans, professor at the Erasmus Medical Center in Rotterdam. It would definitely be a good sign if there were only a few more cases in the coming days in the affected countries outside China.

It’s becoming more likely, however, that a pandemic will emerge in which the virus will spread around the world. Stephan Becker, director of the Institute of Virology at the University of Marburg, says, “In any case, containing the virus will be more difficult than we thought.” Lee Hyuk Min, a professor at the Yonsei University College of Medicine in South Korea, points to another aspect. “I don’t want to provide any estimate on how many people might get infected,” he says, “but this outbreak could last for several months.” He fears the virus could spread unnoticed for a long period and cause considerable damage, especially in developing and emerging countries.

But even if a pandemic does ensue, it wouldn’t automatically be catastrophic, because mortality is often overestimated at the beginning of epidemics. Public health authorities are currently estimating a mortality rate of between 2 and 4 percent for the coronavirus, compared to around 10 percent for SARS and 35 percent for MERS (the Middle East Respiratory Syndrome that first emerged in 2012).

Fears of New Financial Crisis

Meanwhile, many people whose assets and jobs are dependent on China, the world’s second largest economy, are greatly concerned about the situation. They’ve been living in fear of an unforeseeable event with grave consequences since the last financial crisis.

At the beginning of last week, international financial markets grew increasingly nervous. After the Shanghai Composite Index, China’s most important stock index, lost almost 5 percent of its value within days, stock prices in many countries dived. Then, on Monday, the index fell again by 7.7 percent, its worst day since 2015. At the same time, the value of all assets traded on the stock exchange under the “safe” label rose: gold, U.S. bonds, German bonds. Securities traders in London, Hong Kong and New York issued warnings about the risk of a crash.

After a brief recovery midweek, Monday’s plunge of the Shanghai index showed that the situation on the markets remains volatile. Investors, bankers and economists still remember all too well the impact of one of the most momentous waves of disease from China: the SARS pandemic of 2002 and 2003.

Back then, global growth declined by around 1 percent. Economists estimate that the costs this time could be even higher, given the speed at which the pathogen is spreading and because of the country’s increased weight in the global economy. At the start of the new century, China produced 4 percent of the world’s economic output, but now it accounts for a whopping 16 percent.

China has become the main trading partner of the U.S., the European Union and most of its Asian neighbors, exporting goods, services and capital around the world and it is responsible for about one-third of global economic growth.  China had long been the “world’s factory,” but it has since developed into a central research laboratory and trade platform.

As a result, the economic consequences will be proportionately large if, in its battle against the pathogen, the government in Beijing seals off entire regions, restricts travel and impedes the movement of goods, and extends school or factory holidays. The decisions may only apply regionally, but their effects will be felt by ship owners in Taiwan, electronics manufacturers in Seoul and fashion houses in Milan.

In the worst-case scenario, the corona epidemic could lead to a global economic downturn, warns American economist Stephen Roach, who spent years running the Hong Kong branch of Morgan Stanley, the investment bank, in Hong Kong.  He argues that this risk is even greater because the global economy is already in a slump due to the many trade conflicts and political crises. “A big shock to a weak economy,” he says, “can end in an unexpected recession.”

In fact, many industries are already expecting permanent losses that they won’t be able to wipe off their balance sheets, even if Beijing does manage to get a grip on the crisis quickly. In the tourism industry, for example, tour operators, hotel owners and airlines are expecting massive slumps because, in many places, China’s middle class already comprises a large part of the clientele.

Before the SARS pandemic, only a few hundred thousand Chinese traveled to Japan each year. Today, that figure has grown to more than 8 million. China is even more important for classic tourist destinations like Thailand or the Philippines, as well as for the aviation industry, which has increased its number of routes to China in recent years.

When airlines like British Airways suspend all flights to Beijing and Shanghai, and corporations around the world announce that they are reducing the number of business trips, it causes massive losses. The cost of SARS to the travel and tourism industry alone was more than $10 billion. Experts estimate that the novel coronavirus could cause far greater damage.

If China travels, trades or produces less, then the country also requires fewer raw materials. That, at least, is the view taken by traders on the international commodities exchanges, who have sent the prices of copper, nickel, corn and soya beans down in recent days.

The fact that the oil price fell to a new low could be a boon to the global economy – at least if it stays that way. But the oil-producing countries in OPEC are determined to drive prices back up again. The organization said in a statement it is determined “to take all necessary measures.”

The business community, retailers and politicians are still counting on the epidemic being contained in a relatively short time. If that happens, it would just leave a small dent in the data collected by economists and statisticians.

But if the virus spreads for weeks or months, as almost all epidemiologists predict it will, the damage will also amass quickly – especially for companies that have significant dealings in China. Apple, which is based in the U.S., produces parts for its computers and smartphones in Wuhan, the center of the epidemic. And Starbucks, the American coffee chain, operates around 4,300 stores in China, half of which are currently closed.

An Impact on the German Economy

If the crisis continues, it would also have an impact on the German economy, which is more deeply intertwined with industrial China than that of most other Western countries. For Germany’s mechanical-engineering sector, China is the second most important market. One in four BMW sedans is sold there, and VW earns more than a third of its annual profits in the country. Volkswagen has already sent a large share of its workers in China home. Meanwhile, Continental, a German auto-parts supplier, has issued a ban on business travel to China.

The damages for Lufthansa, Germany’s biggest airline, could also be massive. The company has four direct flights a day to Shanghai and Beijing, and then there are those operated by two of its subsidiaries, Austrian Airlines and Swiss. If you calculate 12 flights with up to 300 passengers per plane, that would be 3,600 guests a day. “With average revenues of 1,000 euros per passenger, that would mean a loss of up to 3.6 million euros a day,” estimates Hamburg-based aviation expert Heinrich Großbongardt. During the SARS pandemic, when China’s importance in the airline industry was significantly lower, there was a 35-percent slump in global air traffic.

Auto-parts company Schaeffler has temporarily suspended all of its manufacturing in China. The Bavarian firm employs around 13,000 workers at eight factories in the country. They primarily manufacture parts for the local carmakers – Chinese companies like Geely or German ones like VW. So far, at least, the financial consequences have been limited because of the Chinese New Year holidays. But Schaeffler has since extended its suspension of production until Feb. 10.

The company has a sales office in Wuhan with six employees. Just over a week ago, the company banned its employees from traveling to or from China, and administrative staff are currently working from home. The company is also investigating the extent to which production downtimes at suppliers will hinder its own manufacturing once it restarts.

But one thing is certain: If the epidemic continues to spread, it could become very expensive, given that the company has annual revenues of 2 billion euros in China. The company’s European business has only been marginally affected, as only about one-tenth of Schaeffler products manufactured in China are exported.

A Test of Patience

For trade in China, the virus is becoming a test of patience. “We’re expecting enormous bottlenecks,” says a major logistics company that organizes imports and exports for retail groups and industrial companies. “Nothing is being produced because the workers aren’t allowed to go to the factories.” People in industry are nervous because they fear serious delays. An internal analysis by the company has found that shipments from China to the West are still at least a week away and everything is delayed.

The delays are expected to hit discount stores and home-shopping channels particularly hard, since 90 percent of the products they sell are consumer goods offered at sale prices. There have already been inquiries about whether good can be transported via Hong Kong, but the city lacks freight capacity.