Wuhan Coronavirus Risk Briefing

Summary

A novel coronavirus is swiftly emerging as a global health risk that will have significant economic, social and political repercussions. The 2019-nCoV, or the Wuhan coronavirus, undoubtedly has access to every corner of the planet – and it is unfolding in a new age of information that will heighten the fear factor. Moreover, novel viruses tend to be more disruptive on a mass psychological level than other health threats, such as coronary heart disease, strokes and flu-associated respiratory diseases, which have for decades killed millions more people on an annual basis than any emergent disease the world has faced in modern times.

No matter how events play out in the days and weeks ahead, the risks to human health and to global trade are real and need to be closely monitored. Appropriate measures and precautions will have to be undertaken by all individuals and businesses with exposure to China – and in 2020 that is virtually everybody and every business.

Confidence in China as a place to do business has been diminishing for some time, amid a trade war with the US, escalating labor costs, accusations of corporate intellectual property theft and the prioritization of made-in-China business. It is more than likely that China’s latest crisis will see increased corporate flight from China – a process that is already underway – to less risky and less centrally controlled markets in Southeast Asia and elsewhere, as China unveils itself as a less than reliable player on issues of global health and business.

This is by no means the end of the world as we know it. But if not contained in China – and that seems increasingly unlikely by the day – it could very well eclipse the 2002-2003 SARS outbreak as a black-swan reminder of the old cliché that when China sneezes the world gets a cold.

Background

In early December, a trickle of suspected pneumonia patients began to seek treatment at hospitals in Wuhan, a city of 11 million in central China’s Hubei Province. Some had contact with the Wuhan South China Seafood Market, which also happened to sell a wide variety of wild game, including civet cats – long considered a disease vector for the 2002-2003 SARS outbreak, even if bats are considered by most virologists to be the primal coronavirus reservoir.

As reports began to circulate out of China on December 31 about a novel coronavirus called 2019-nCoV, the seafood market was fingered as the site of what is called a zoonosis – a virus jumping from one species to another; in this case from an as yet unknown animal source to humans. But by late January, a report penned by a large number of Chinese researchers that appeared in Lancet called the seafood-market vector theory into question. In short, 13 of the first documented 41 December cases had no contact with the market.

“That’s a big number, 13, with no link,” Daniel Lucey, an infectious disease specialist at the University of Georgetown, told Science magazine.

The infectious disease specialist added that it suggested the virus had been “silently circulating,” with at least limited human-to-human transmission before it came to the attention of health authorities. “The virus came into that marketplace before it came out of that marketplace,” Lucey said in the same report.

By mid-January, Chinese government health officials had confirmed that human-to-human transmission was taking place, also confirming that frontline health workers had been infected. With every passing day since then infection and mortality rates have risen and some 50 million people have been put on lockdown in central China. By January 28, China had 5,974 confirmed cases of 2019-nCoV – surpassing China’s total number of SARS infections in 2003 – and 132 were reported dead. Dozens of cases have been reported in Hong Kong and 16 countries worldwide. No health experts doubt the number of infections and countries dealing with cases will continue to trend upwards in the days and weeks ahead.

The Fear Factor

In October 2019, the United States Johns Hopkins Center for Health Security held a “pandemic tabletop exercise” called Event 201. It modeled a novel coronavirus pandemic that within six months went global and killed 65 million people. In a statement, John Hopkins subsequently clarified its simulated outcome: “Our tabletop exercise included a mock novel coronavirus, [and] the inputs we used for modeling the potential impact of that fictional virus are not similar to nCoV-2019,” the center said.

John Hopkins caveats aside, novel viruses tend to be more disruptive on a mass psychological level than other health threats, such as coronary heart disease, strokes and flu-associated respiratory diseases, which have for decades killed millions more people on an annual basis than any emergent disease the world has faced in modern times.

In the case of SARS, which emerged from southern China’s Guangdong Province in November 2002, some 8,000 people were ultimately infected in 37 countries and some 800 of them died (by contrast, the 2009 swine flu – H1N1 – may have killed upwards of 500,000 globally). But, the disruptions to international travel and trade caused by SARS were disproportionately high, with an estimated price tag of USD 40 billion globally, knocking 1% off China’s GDP growth in 2003.

As a report on the economic fallout from SARS noted after the epidemic, fear of a novel epidemic initially leads to a “substantial decline in consumer demand.” It is an economic hit that is more substantial “in regions that have much larger service-related activities and higher population densities, such as Hong Kong or Beijing … The psychological shock also ripples around the world, [and] not just to the countries of local transmission … because the world is so closely linked by international travel.”

The fact is that the world is more closely linked by international travel today than it was in 2002-2003 during the SARS outbreak, and China is far more internally connected – via high-speed rail, highways and air routes – than it was 17 years ago. Moreover, more than 200,000 Chinese travel overseas every day now. That is six times more than when SARS panicked the world.

In other words, short of a China-wide lockdown, 2019-nCoV, or the Wuhan coronavirus, undoubtedly has access to every corner of the planet. According to some reports, it is infectious during its asymptomatic incubation period, which can last up to 10 days or longer, making it very difficult to detect, although at the time of writing the World Health Organization (WHO) denies any evidence to support that.

Wuhan mayor Zhou Xianwang said in a press conference on January 26 that about 5 million residents, or slightly less than half the city’s population, had left the city before the lockdown. Some traveled to other parts of China, some to destinations abroad such as Hong Kong, Thailand and Japan. Around 20,000 flew from Wuhan ahead of the lockdown to Bangkok, the South China Morning Post reported.

In a January 27 press conference, Gabriel Leung, Chair Professor of Public Health Medicine at the University of Hong Kong (HKU), said he expected the next epidemic cluster to break out in the southwestern Chinese municipality of Chongqing (population: 30.5 million) followed by major urban centers such as Beijing and Shanghai. He advised “draconian measures” such as limiting mobility and cancelling mass gatherings, schools and carrying out “flexible work arrangements.

Economic Spillover

As an epidemiological event, SARS caused six months of panic, but it was far from an “apocalypse bug.” What it did provide, however, is an outbreak case study of how a novel coronavirus can hitch a ride around the world – and how it might impact business. In May 2003 travel numbers in China dropped 40% year-on-year, hotels and the retail sector and GDP growth at the peak of SARS, quarter-on-quarter, fell to 3.5% from 12%, Wang Tao of Swiss bank UBS told The Economist. It is thought to have knocked an average of 0.5% off Southeast Asian economic growth.

That was 2003. As already noted, the Chinese get around now more than they used to. In 2003, China’s high-speed rail network – now the world’s most extensive, at around 35,000 km, covering nearly every province in China – was in early development. Domestic air travel has tripled since 2008, and the expressway network has been expanding by 20% annually since 2000, in line with private car ownership, which has increased around five-fold since 2007. China’s interconnectedness today would have been as unimaginable to the average Chinese fretting about SARS in 2003 as the fact they would be paying for noodles with a mobile phone in 2020.

At present, with ever-escalating infections in China and farther, scattered infections dotting the global map, it would seem unlikely that 2019-nCoV will busy itself with infecting China alone. But it is China alone that is in crisis mode – and all eyes are on Wuhan and Hubei Province.

China watchers have taken to calling Wuhan the Chicago of China (Pittsburg also gets the occasional mention) in reference to its importance as a manufacturing and transportation hub. In terms of transportation it takes the prize in terms of water, land and air in inland China. It is also China’s sixth most populous city depending on your choice of metrics – but in the Top 10 by any measure. It is a key city in the world’s second biggest economy. Its importance to the automobile and logistics sectors is an immediate risk for the Chinese economy and to Japanese automakers such as Honda and Nissan, which are heavily invested there, as to the many other foreign businesses invested in the city. One international business consultancy, claims there are some 6,000 foreign-invested businesses in Wuhan with a total capital investment of USD 22.5 billion.

But in the immediate-to-short term, Wuhan’s logistics centrality to inland Chinese commerce is likely to spell the biggest risk.

“Complicated supply chains and just-in-time production could mean that production outages in Wuhan factories have broader spillover effects,” Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings told Bloomberg.

Isolating Hubei and surrounding inland Chinese provinces, meanwhile, could be a serious threat to the automobile, aviation and high-tech mechanical and electrical manufacturing sectors, Ahmed Rahman, Lehigh University, Pennsylvania, economist told the Associated Press.

“Its central role in facilitating exchange between the Chinese hinterlands and the rest of the planet cannot be overstated,” Rahman said. “Arguably, out of all the regions of China, closing off Wuhan may be the most disruptive to the global economy.”

Beyond Wuhan and Hubei, many businesspeople in the region recall SARS and the panic it stoked, fearing a rerun on a greater scale. Hong Kong, where months of protests have already put the economy into recession for the first time in a decade, undoubtedly stands the most to lose, due to its proximity to mainland China and its population density. Anyone who claimed the protests were a worst-case scenario is likely to be soon stood corrected. But Thailand, South Korea, Japan and Taiwan are also obvious frontlines.

A Taipei-based source in the international education sector told Access Asia, “We’re now out of China so the impact will be lessened, but obviously any curtailment on movement of people will have a massive knock-on effect.

“During SARS our numbers plummeted and I expect they will this time as well, not just China but from the surrounding region, particularly as fear and paranoia set in. No students traveling to universities will do immense damage to university finances, let alone ancillary businesses like hotels and airlines.”

The source added, “This is true for everyone. People I have spoken to here [in Taiwan] are scared to return to China, even though they have to, post-Lunar New Year, to run their factories. They’re also worried whether staff will return to work, whether local or Taiwanese.

The effect on smaller firms could be tough, especially for those already knocked by the recent trade war.”

Countdown to Uncertainty

A Lancaster University report released on January 23 mathematically modeled larger than so-far-reported infections, also noting difficulties in detecting cases due to the disputed “fact” that the Wuhan coronavirus can be asymptomatic and infectious at the same time – and for 10 days or longer. The writers of the report suggested, “If no change in control or transmission happens, then we expect further outbreaks to occur in other Chinese cities, and that infections will continue to be exported to international destinations at an increasing rate … We predict the cities with the largest outbreaks elsewhere in China to be Shanghai, Beijing, Guangzhou, Chongqing and Chengdu.”

The report writers added, “The countries or special administrative regions at greatest risk of importing infections through air travel are Thailand, Japan, Taiwan, Hong Kong, and South Korea.”

However, Tomas Jensen, a Copenhagen-based emergent disease specialist told Access Asia Group that predictive models such as the one from Lancaster university “sometimes need to be built with sparse data and therefore they generate results with quite large confidence intervals, so they should be interpreted with a lot of caution.”

Jensen added: “Coronaviruses are very common causes of uncomplicated colds. There’s a handful of members of this virus family that we see all the time. They also mutate quite often and have the capacity to exchange genetic elements, which means that the 2019-nCoV could become more transmissible.”

He suggested that mortality rates – to the extent they are available – can be misleading in the short term. “Even if patients don’t die, they get sicker than with the common cold, so more patients require admission to a hospital for supportive treatment,” the source said. “The bigger picture risk, therefore, in my opinion, is that it will overwhelm health systems, and that may cause many deaths indirectly because resources are withdrawn from support for other diseases and illnesses, though of course this novel coronavirus will result in direct deaths as well.”

Speaking to Time in a video interview, Yuen Kwok-yung, a Hong Kong infectious disease expert who dealt with SARS, said, “Super-spreading events must be happening; otherwise we wouldn’t see numbers jump so high.”

Yuen added, “Don’t be complacent. If you make the wrong decision at this stage in time, like what has happened in Wuhan, why not Hong Kong or other cities become Wuhan? Perfectly possible.”

In short, the risk facing Northeast and Southeast Asia – indeed, possibly the world – rhyme in many ways with the risks faced during SARS, another breakout coronavirus. For the moment, the questions of scale and mortality rate are the key unknowns that the global health community – and business – is grappling with among many other unknowns.

A fog of business and social uncertainty has descended upon China’s inland manufacturing and logistics heartland. The Chinese people are increasingly distrustful of government statistics and containment measures. The world would be wise to follow their questioning lead.

This is by no means the end of the world as we know it. But if not contained in China – and that seems increasingly unlikely by the day – it could very well eclipse SARS as a black-swan reminder of the old cliché that when China sneezes the world gets a cold.

It is a cliché that needs updating. Today when China sneezes the world takes a pay-cut and a painful squeeze on business profits.