In this damning Editorial, the Financial Times resolutely directly slams and bemoans the woeful incompetence of the Chinese Dictatorship in confronting the catastrophic viral pandemic. But perhaps even more damning is the indirect damnation of the World Health Organization which is now the only institution in the world willing to defend and praise the Butchers of Beijing ! It is now entirely evident that the WHO must be disbanded and be reconstituted. In its clumsy efforts to control and suborn the WHO so as to exclude democratic Taiwan, the Chinese Dictatorship has only succeeded in totally and irreparably discrediting and delegitimizing the United Nations organizations that it seeks to corrupt and control!
Coronavirus has put globalisation into reverse Chinese Government response is perhaps as damaging as the virus itself
THE EDITORIAL BOARD
The new strain of coronavirus originating from the Chinese city of Wuhan has rattled markets as much as it has global health authorities. Chinese stocks opened 9 per cent lower on Monday morning, the worst opening for 15 years. Equity prices worldwide have felt the aftershocks and the long term yield on US treasuries briefly fell below the short term yield — a potential warning signal of global recession. Not even trained epidemiologists can predict how the virus will spread. The uncertainty and febrile atmosphere is taking a financial toll. Low interest rates, cheap money and hopes for the global economy after the signing of a “phase one” trade deal between the US and China had helped bid up equity valuations. With such optimistic pricing it does not take much of a hit to confidence for prices to take a dip — as they already did after last month’s assassination of Iran’s top general by the US.
Perhaps more worrying for the global economy and investors than the direct impact of the virus, however, has been the response from the Chinese authorities.
Shutting down large parts of what is now, on some measures, the world’s largest economy will have a knock-on effect elsewhere — particularly those countries with the strongest trade links. Hong Kong’s main index has fallen 5 per cent over the last five trading days while while the main Taiwanese index has fallen 7 per cent. The virus has now spread further than the much more deadly Sars virus which similarly began in China in 2002. The Middle Kingdom is now a much bigger part of the global economy. In 2002 it only accounted for 8 per cent of global gross domestic product; now it accounts for 19 per cent. Its role in the global economy has changed too, with Chinese factories a key part of global supply chains and Chinese tourists a bigger proportion of global flows. Industry, however, remains on the frontline.
Major manufacturing hubs such as Jiangsu, Chongqing and Guangdong have been shut down for “non-essential” businesses, prolonging a holiday for the lunar new year. Apple warned about the impact of the slowdown on its supply chain in its results last week. Car manufacturers Toyota and Honda have closed factories.
The knock-on effect has been easily visible in commodity prices. Industrial metal prices have fallen while gold has risen. Investors are seeking the apparent safety of precious metals while predicting that, with the world’s factory shut down, there will be less demand for raw materials. Copper prices have fallen 11 per cent since mid January. Oil prices have fallen by a similar amount. Service industries will feel the effects too. Coffee chain Starbucks and the fast food group McDonald’s have closed outlets in mainland China. British Airways, Lufthansa and others have cancelled flights to China. If the virus continues to spread similar cancellations and closures may be seen elsewhere.
Economists estimate the damage to China’s GDP at around 0.5 to 1 percentage point in the first quarter, a substantial hit to an already-slowing economy. The spread of the epidemic amounts to an experiment in deglobalisation. Barriers are being put up not to halt trade and migration flows but to stymie the spread of infection. The economic effects, however, are similar: snarled-up supply chains, lower business confidence and less international trade.
Policymakers can provide stimulus to support growth but can do little against the shock to economies’ capacity to produce goods and services. This leaves the global economy largely at the mercy of nature. How much worse the impact on global growth becomes will depend on how quickly the virus can be contained.
Coronavirus has put globalisation into reverse Chinese Government response is perhaps as damaging as the virus itself
THE EDITORIAL BOARD
The new strain of coronavirus originating from the Chinese city of Wuhan has rattled markets as much as it has global health authorities. Chinese stocks opened 9 per cent lower on Monday morning, the worst opening for 15 years. Equity prices worldwide have felt the aftershocks and the long term yield on US treasuries briefly fell below the short term yield — a potential warning signal of global recession. Not even trained epidemiologists can predict how the virus will spread. The uncertainty and febrile atmosphere is taking a financial toll. Low interest rates, cheap money and hopes for the global economy after the signing of a “phase one” trade deal between the US and China had helped bid up equity valuations. With such optimistic pricing it does not take much of a hit to confidence for prices to take a dip — as they already did after last month’s assassination of Iran’s top general by the US.
Perhaps more worrying for the global economy and investors than the direct impact of the virus, however, has been the response from the Chinese authorities.
Shutting down large parts of what is now, on some measures, the world’s largest economy will have a knock-on effect elsewhere — particularly those countries with the strongest trade links. Hong Kong’s main index has fallen 5 per cent over the last five trading days while while the main Taiwanese index has fallen 7 per cent. The virus has now spread further than the much more deadly Sars virus which similarly began in China in 2002. The Middle Kingdom is now a much bigger part of the global economy. In 2002 it only accounted for 8 per cent of global gross domestic product; now it accounts for 19 per cent. Its role in the global economy has changed too, with Chinese factories a key part of global supply chains and Chinese tourists a bigger proportion of global flows. Industry, however, remains on the frontline.
Major manufacturing hubs such as Jiangsu, Chongqing and Guangdong have been shut down for “non-essential” businesses, prolonging a holiday for the lunar new year. Apple warned about the impact of the slowdown on its supply chain in its results last week. Car manufacturers Toyota and Honda have closed factories.
The knock-on effect has been easily visible in commodity prices. Industrial metal prices have fallen while gold has risen. Investors are seeking the apparent safety of precious metals while predicting that, with the world’s factory shut down, there will be less demand for raw materials. Copper prices have fallen 11 per cent since mid January. Oil prices have fallen by a similar amount. Service industries will feel the effects too. Coffee chain Starbucks and the fast food group McDonald’s have closed outlets in mainland China. British Airways, Lufthansa and others have cancelled flights to China. If the virus continues to spread similar cancellations and closures may be seen elsewhere.
Economists estimate the damage to China’s GDP at around 0.5 to 1 percentage point in the first quarter, a substantial hit to an already-slowing economy. The spread of the epidemic amounts to an experiment in deglobalisation. Barriers are being put up not to halt trade and migration flows but to stymie the spread of infection. The economic effects, however, are similar: snarled-up supply chains, lower business confidence and less international trade.
Policymakers can provide stimulus to support growth but can do little against the shock to economies’ capacity to produce goods and services. This leaves the global economy largely at the mercy of nature. How much worse the impact on global growth becomes will depend on how quickly the virus can be contained.
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