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At time of writing, 29 January, Chinese authorities had
confirmed nearly 6,000 cases of the novel 2019 coronavirus,
2019-nCoV, and 132 deaths.
The new coronavirus 2019-nCoV is probably more
contagious than severe acute respiratory syndrome (SARS) and
continues to spread rapidly, although key details of its nature are
still unconfirmed by the WHO. The pathology,
contagiousness, clinical spectrum, and incubation period of
2019-nCoV have still not been confirmed by the World Health
Organization (WHO) or China's National Health Commission (NHC).
An article published on 24 January stated that the first
suspected case occurred on 1 December - one month before the NHC
issued statements about the virus - and was not associated with the
live animal and food market in Wuhan (the capital of Hubei
province) that was traced as the source by Chinese authorities.
Academic researchers assess that 2019-nCoV is more contagious than
the 2002-2003 SARS virus, with a reproduction rate of 2-3 (that is,
an infected individual infects up to three others). There were
approximately 3,000 officially diagnosed cases globally at the time
of writing. However, researchers at Lancaster University estimated
on 24 January that more than 190,000 people could become infected
by 4 February.
At time of writing, the WHO still assesses that it lacks
sufficient evidence to declare 2019-nCoV a Public Health Emergency
of International Concern (PHEIC) - a declaration that would
accelerate national-level efforts to create a vaccine and would
likely trigger stricter travel restrictions. On 28 January,
researchers at the University of Melbourne announced they had
recreated 2019-nCoV. This should aid the development of
early-diagnosis and, eventually, a vaccine.
Travel restrictions to, from, and within more Chinese
cities is likely in the coming days. Cities with large numbers of
suspected cases and those along the Yangtze River and with
high-speed rail connections are at greatest risk. Within
China, travel across provinces is being strongly discouraged by
local governments. Flights from Wuhan and other parts of Hubei
province have been suspended and are likely to remain so until the
rate of new cases falls to near zero.
Most Asian countries have already blocked travel from Hubei
province and are likely to extend this to other Chinese regions
with high numbers of cases: Anhui, Chongqing municipality,
Guangdong, Henan, Hunan, and Zhejiang have each reported more than
100 cases. The central government swiftly banned travel to, from,
and within major cities in Hubei after categorising 2019-nCoV as a
"level one" public health issue, alongside bubonic plague and
cholera. This likely reflects official commitment to containing the
virus rather than knowledge of its fatality rate. Additional cities
are very likely to be isolated in the coming days. Areas along the
Yangtze River, such as Chongqing municipality and neighbouring
Sichuan province, are at greatest risk. Large cities in provinces
with direct high-speed railway connections such as the
Beijing-Guangzhou railway, which links Beijing municipality,
Guangdong, Henan, Hubei, and Hunan provinces, are also at risk.
2019-nCoV may trigger force majeure clauses by Chinese
counterparties in provinces that have experienced reduced business
because of US-China trade disputes. Thirty
provincial-level regions have enacted the level one designation to
date, giving the State Council powers to implement response
measures and information dissemination. This includes emergency
measures such as extending public holidays, mandatory quarantines
if individuals are suspected to be infected, and partial or
complete closure of roads and public transport services.
The central government's power also extends to rules and
regulations governing corporate behaviour. Companies are likely to
face stronger oversight over actions that could adversely affect
employment and the price of essential items. If 2019-nCoV spreads
further, local governments may ask offices and production
facilities to again postpone reopening, with public holidays for
the Lunar New Year already having been extended to 2 February.
Chinese companies may consider declaring force majeure to terminate
or breach the terms of agreements with their commercial partners to
minimise economic loss. This risk is particularly high for
companies with agreements containing unclear force majeure
provisions that Chinese partners could exploit. Counterparties
based in localities with slow economic growth, or that have
experienced strong adverse impacts from trade diversion during the
past year due to US-China trade disputes, will be particularly
prone to local political pressure to limit losses.
The estimated economic impact of SARS was an
approximately 1% reduction of China's 2003 GDP. Using this
as a benchmark for the potential maximum economic impact of
2019-nCoV, China's real GDP growth in 2020 could be reduced by 1.1
percentage points from IHS Markit's current baseline forecast of
5.8%. Like 2019-nCoV, SARS was a coronavirus and its outbreak
coincided with the Lunar New Year holiday. The epidemic lasted
roughly six months (January to June 2003, although the first case
was suspected in November 2002). The worst affected Chinese regions
were Guangdong province and Beijing. These together accounted for
about 15% of mainland China's 2002 GDP. Hubei, which is the region
that has been worst affected by 2019-nCoV so far, accounted for
less than 5% China's 2019 GDP.
However, China's economy is more vulnerable today, with
productivity and overall economic growth falling and the effects of
the US-China trade conflict. Travel bans, heightened public health
measures, and the current extension of the Lunar New Year holidays
to 2 February - there was no extension during the SARS outbreak -
will significantly impact household consumption, but will affect
production less as factories are seasonally idle during this
period. Income from international tourism has become less
significant for China's economy since the SARS outbreak.
Mainland China's international tourism receipts in 2002 totaled
USD20.4 billion, or 1.4% of GDP; in comparison, the international
tourism receipt for 2018 totaled USD40.4 billion, just 0.3% of GDP.
But the effect of mainland Chinese tourists travelling
internationally is much more substantial. China's outbound tourism
expenditure in 2002 totaled USD15.4 billion; by 2018, such
expenditure had surged to USD277.3 billion (2019 data is only
reported through the third quarter).
Mainland China's impact on the world economy is also
much larger now than during the SARS outbreak, meaning the slowdown
in Chinese growth may be a significant drag on global
growth. Mainland China's economy was the sixth largest in
the world in 2002, accounting for 4.2% of world GDP; it is now the
second-largest economy in the world, accounting for 16.3%.
Similarly, mainland China is now the second-largest importer in the
world, accounting for 10.4% of the world's goods imports, compared
with 4.0% of the world's imports in 2002.