Morgan Stanley maintains that the challenge of viruses is among the most important at a political, social and image level that China has faced in recent decades.
The Middle Empire has achieved unmatched economic success, leading to the most massive alleviation of poverty in human history (800 million people who have left the condition in the last forty years).
It has conquered the increasingly solid status of a world power, but according to Morgan Stanley, it presents elements of fragility. The Corona virus is certainly not as alarming as malaria, which has killed 19 million people worldwide over the past 25 years, but risks triggering a psychotic effect and slowdowns in the world economy due to the blocking of trade between the areas placed in quarantine and the rest of the globe, the multi-national said.
And for China, an export-based economy this negative image could be a big headache. Suffice it to say that the epicenter of the contagion, Wuhan, is a nerve center in trade with the rest of Eurasia and also the centre for the 5G roll-out.
In 2016, the completion of a railway journey between the industrial center in the heart of the People’s Republic and the French city of Lyon caused a sensation. The city is a strategic node for land and air communications within China and between China and the rest of the world.
An airport with 25 million passengers a year, five highways and high-speed rail links between Wuhan, a city of 11 million inhabitants, and the other metropolises have laid the groundwork for a very large network. And its blockade would affect the Chinese and global economy.
So, according to Morgan Stanley, “the Corona virus epidemic in China could damage global growth in the short term”, as Italian daily La Stampa pointed out. “For example, by cutting Chinese growth up to one percentage point. Assuming that the peaks of contagion arrive between February and March, global growth could have decreased between 0.15 and 0.3 points in the first quarter of this year.”
The scenarios on the growth of Chinese GDP, however, vary between 0,5 and 1 percent in the case of a short-term peak and between 0,6 and 1,1 percent in the event of a peak of the epidemic in the second quarter.
The estimate is linked to the calculation of the reduction in the GDP of the Wuhan region, Hubei, whose economy is worth over 600 billion dollars (almost 4 trillion yuan) and whose population of about 60 million inhabitants, but also to cascading effects linked to the drop in exports, the effects on related industries and the decrease in the financial attractiveness of China due to the changed sentiment of investors.
A key date will be, in this sense, on February 3, the day of reopening of the Asian markets. The storm is more emotional than realistic: the panic effect caused by a disease, which has not yet reached the point of infecting the whole Chinese territory, has had an effect on the economy.
The Corona virus could become an added obstacle to China, as are the protests in Hong Kong.
