• Thursday, March 28, 2024
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BusinessDay

Manias, panics, pandemics and world economics

China’s economic resilience

The Coronavirus, (COVID-19), began in the in Chinese industrial city of Wuhan in December. It has brought the Chinese industrial juggernaut to a virtual standstill. Schools have been closed down, public transport systems have been halted and businesses have closed shop. Some 780 million Chinese – about half of the population – have been placed on travel restrictions or on quarantine. The contagion has spread to 64 countries, including Nigeria. Among the worst affected are South Korea, Japan, North Korea, Singapore and Italy.

Coronaviruses are said to be zoonotic in origin, i.e. they tend to be transmitted from animals to humans. Symptoms include respiratory problems, fever, cough and breathing difficulties. In severer cases, it can lead to pneumonia, severe acute respiratory syndrome, kidney failure and eventual death.

There have been all sorts of speculations as to the origin of this new mutation. The popular theory is that it began from a live animal market in Wuhan, where anything from bats to cats, snakes, pangolins, monkeys, cockroaches, worms and dogs are sold for food. The other theory is that it is an accident on the scale of the nuclear disaster at Chernobyl, from a bacteriological laboratory that is actually stationed in Wuhan. Yet another theory, propounded by an anonymous Chinese senior military intelligence officer, is that it was an attempt to smuggle the virus to a foreign power, which somehow, spilled by accident.

According to the latest data, a total of 86,993 cases were identified globally, of which 2,979 deaths were registered while 42,363 are said to have recovered. China, has taken the heaviest toll, with 79,827 cases, out of which 2,870 deaths were recorded while 41,854 were said to have recovered.

Nigeria recorded its first case on 27 February, through an Italian national who arrived Murtala Mohammed International Airport in Lagos. We understand that the health authorities have quarantined the man and have been rounding up all the people known to have interacted with him in one way or the other. A few days ago, 4 Chinese nationals newly arrived via Ethiopia, were apprehended in Wase, Plateau State. They have been quarantined for allegedly exhibiting symptoms of the virus.

According to WHO, the fatality rate so far has been around 2.0 percent of all recorded cases, as contrasted with SARS, which killed 10 percent of all infected individuals in 2003 and MERS, whose fatality rate in 2012 was as high as 35 percent. The really worrisome aspect is the velocity of COVID-19 which took only 48 days to infect the first 1,000 victims, as contrasted with MERS which took 93 days and SARS which took 130 days.

Experts caution that it will take several weeks before we fully understand the epidemiology of the current scourge, given its incubation period 14 days and the fact that new diagnostic kits are still being developed. An expert in disease control, William Shaffner of America’s Vanderbilt University, was quoted as saying, “All the experts, myself included, tell the public that there is much we don’t know about this virus and we are learning as we go along.”

There is also controversy as to whether what we have is a “pandemic”. Globally, the WHO, has the sole authority to determine if an epidemic has become pandemic. They have described the coronavirus so far as a disease “with pandemic potential”.

Other experts disagree. Professor Jimmy Whitworth of the London School of Hygiene and Tropical Medicine, has argued that “many people would consider the current situation a pandemic, we have ongoing transmission in multiple regions of the world”. Nathalie MacDermott of the UK National Institute for Health Research believes we are “we are teetering on the balance of a pandemic”.

The economic consequences so far have been devastating. Entire cities have been shut down in Asia and Europe. At least 20 global airlines have stopped all flights to China. The price of oil has fallen below $50 per barrel, for the first time since the summer of 2017. International financial markets in London, New York, Frankfurt and Tokyo have taken a big hit. An estimated $5 trillion, amounting to 11 percent of listed companies, have been wiped off. The flight to safety has been compared ominously to the crash of 2008, as investors move assets into government bonds and gold.

The highly respected Bank of England Governor Mark Carney was quoted as saying that global economic growth this year “would be lower than it otherwise would be, and that has a knock-on effect on the UK”. He also hinted at interest-rate cuts to restore business confidence. US Fed Chairman Jerome Powell, on his part, took the unusual step of issuing a statement to reassure Americans that there is no cause for panic; promising to “use our tools and act as appropriate to support the economy”.

The current scourge, according to one analyst, is “unsettling supply chains, sapping sales of some products, throwing travel into chaos, freaking out the stock markets, and intensifying fears of a global recession”. Industrial shut-downs are disrupting global supply chains. Aviation, international trade, capital flows and tourism will suffer. According to the consultancy firm, Oxford Economics, if the situation deteriorates to the level of a pandemic, world growth will dwindle to zero or even negative.

Nobel laureate Michael Spence estimates a 2-4 percent fall in China’s economy, with a possible rebound only if the virus is contained. But he also warns of a prolonged declined if things get worse, “owing to business failures, declining employment, faltering private investment and weak or late policy responses”.

One saving grace is China’s economic resilience, thanks to its prodigious digital economy that accounts for as much as 35 percent of retail transactions.

Firms located in China are also more likely to move their supply chains out of the country; a trend that has already begun due to the country’s changing comparative advantage and rising labour costs.

Evolutionary biologists tell us that life on this planet has been a titanic war between Homo Sapiens and viruses. Every decade comes up with one eruption or the other. What we must do is boost resilience, strengthen health systems, engage civic communities while enhancing surveillance and risk management systems.

Medical science is yet to find a real cure for the coronavirus. The best advice centres on prevention through regular washing of hands, covering mouth and nose when coughing and sneezing, thorough cooking of meat and eggs and avoiding close contact with anyone showing symptoms. The virus does not survive beyond a certain degree of heat. People with robust immune systems also have better chances of survival — lots of fruits and vegetables, including lemon and avocado. Exercise and frequent drinking of water will allow your system to flush out any pathogens, whereas a dry oesophagus will give the virus a fertile eco-system to invade the lungs, with deadly consequences.

I recently met the Chinese Ambassador to our country, Zhou Pingjian; a brilliant economist and consummate diplomat. I expressed our heartfelt solidarity with the government and people of China. I reminded him that China has suffered worse calamities in its history and that she will emerge stronger and more prosperous from this one.

China is our biggest trading and investment partner today. Already, there is evidence that Nigerian retailers with links to China are beginning to feel the pinch. Falling oil prices and a slowdown in capital flows will further dampen economic growth in Nigeria

Nigeria, if truth be told, is rapidly becoming a failed state. But we are also a resilient people. We have proven to be people who can rise to the occasion when the imperatives of national survival dictate it. We surprised the world when we responded victoriously to Ebola in 2014, thanks to the efforts of patriots such as Stella Ameyo Adadevoh and her medical colleagues. Lagos State Government also played its part, as did our federal government. If we did it before, we can do it again!