Markets continue to fall on ‘the cusp of the pandemic’

Business & Technology

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SupChina illustration by Derek Zheng

The Dow and S&P 500 both continued to fall today, CNBC reports, after Monday and Tuesday saw the worst two-day drop on record. “Traders appeared to be buying and selling stocks in volatile fashion after each new report concerning the virulent coronavirus, its spread outside China and its potential impact on global growth.”

“I think it’s fair to say we are on the cusp of the pandemic,” Peter Marks, head of the Center for Biologics Evaluation and Research at the U.S. Food and Drug Administration, told Bloomberg (porous paywall). “Is it definitely going to happen? No, but there is significant concern, as of overnight we have cases on six continents.”

Yesterday, February 25, was the first day with more new cases outside than inside China, the World Health Organization said, per NPR. These include the first infection in Algeria — the second case on the African continent — and an infection in Brazil, the first in Latin America. The global total now stands at 81,322 infections, 2,770 deaths, and 30,322 recoveries — with China accounting for about 96% of cases as officially reported.

The “positive trend” of epidemic control is “expanding,” Chinese leader Xí Jìnpíng 习近平 said today, per Xinhua, but the situation in Hubei Province and its capital, Wuhan, remains “complex and grim.” Xi added that “the risk of a rebound of the epidemic in other regions can not be overlooked.”

We do not know how “complex and grim” the situation really is, and neither does the World Health Organization. The Washington Post reports that though the WHO has repeatedly requested “disaggregated” data from China on the health of frontline medical workers, an important indicator of the severity of the situation in Wuhan and elsewhere, it has not received any “details about health care workers.”

As the threat of COVID-19 becomes more unpredictable outside of China, some Chinese cities are taking extra precautions. The Wall Street Journal reports (paywall):

A number of Chinese municipal governments are imposing stricter health screenings on people entering China and, in some cases, even quarantine measures on those arriving from coronavirus-afflicted countries. These controls come after Beijing waged a concerted campaign urging other governments not to impose restrictions on travel to and from China, saying such measures were out of line with World Health Organization guidance.

The measures primarily target arrivals from South Korea and Japan, and have been announced for the city of Beijing, as well as “major cities in eastern Shandong Province, as well as the northeastern provinces of Liaoning and Jilin.” However, “the Chinese government hasn’t signaled any plans to limit or block international travel to and from other epidemic-hit countries, such as suspending flights or barring entry.”

Earlier this week, China’s tourism ministry had also “warned its citizens against traveling to the United States, saying that Chinese tourists have been treated unfairly in the country due to excessive prevention measures over the coronavirus outbreak,” per Reuters.

An uncertain start to economic recovery?

Bloomberg reports:

A range of early indicators of China’s economy in February confirm that the coronavirus outbreak has crippled production and consumption, as factories remain below capacity and transport is curtailed.

Five of the eight indicators tracked by Bloomberg dropped in February from January, with two indicators of business confidence plunging to the lowest on record.

The Economist adds:

To gauge whether production is resuming, [economists and investors] examine an array of daily figures, including coal consumption, traffic congestion and property sales. All have started to rise (see chart). But all remain far below the levels indicative of a healthy economy.

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Foreign firms expect revenue to plummet: Of British businesses in China, “nearly half [are] predicting revenue will be cut over 10% and more than a quarter [are] expecting it to decrease more than 20%” over the year, according to a survey, Caixin reports. The U.S.-China trade war and the COVID-19 epidemic are a “double whammy” that will hurt foreign businesses in general, Paul Sives, chairman of the southwest branch of the European Union Chamber of Commerce in China, added per the SCMP.

The latest stimulus measure to encourage workers and companies to return to normal activity, per the SCMP, is an “additional 500 billion yuan [$71.1 billion] for small business lending on top of 300 billion yuan [$42.6 billion] approved earlier in February.” Yesterday, a senior official from the Ministry of Industry and Information Technology had said that only 30% of small businesses had been able to reopen, and that smaller businesses were seeing more disruption than large businesses.

Local officials are in a difficult position: Many “privately complain that President Xi Jinping has put them in an impossible position, demanding they keep growth on track while also ensuring the virus doesn’t spread,” reports the Wall Street Journal (paywall).

—Lucas Niewenhuis