2020 should have marked the last year of a great campaign on poverty alleviation for China and the overall enhancement of the global economy. However, it was abruptly fraught by the novel Coronavirus that has affected millions of lives, and paralyzed economic trade and international transports on a tremendous scale. Despite the fact that China has coordinated with appropriate administrations and departments to dispatch a number of doctors and raise a measure of subsidiaries’ daily supplies for the public, coupled with cosmopolitan assistance in dealing with a shortage of masks and uniforms and technical support in terms of vaccine research and development, we seemingly do not stand at the verge of the recession of Coronavirus. Let’s take a look at the specific consequences Coronavirus has had upon economy, culture, politics, and tourism, along with the measures taken by a multitude of countries and unions as an attempt to control the situation.
With Coronavirus sweeping across Europe, the European Central Bank is about to drive down interest rates by about 10% to sustain economic activity and retain the normal operations of government,though the severe European debt crisis demanded the budgets of each country within the Union to cut costs significantly. Italy, the country most severely affected by the epidemic, specifically has the approval to expand policies that combat the current situation. As for Asia, Japan and South Korea have especially contributed to the manufacturing of microchips, semiconductors, and factories built in China. The gradual recovery of industries, in conjunction with the establishment of factories in Vietnam, shows that the overall economy of Japan and South Korea is in control, as long as the epidemic does not exacerbate. Similarly, the Federal Reserve System(FED) of the United States reduced interests but was still unable to hold back the incessant plummet of US stocks, a very crucial indicator of the political achievements for a president and a campaign year. Assuming the spread of Coronavirus and the degree of panic among the public declines, economic policies will likely focus on pinning down the aggregate economic increment and bringing inflation back to the expected level-2%. Therefore leading to the reset of interests by the FED.
However, the above conclusions rely on optimism that the novel Coronavirus will deteriorate and gradually fade away. But the truth of the numbers show that infected people across the world are still increasing acutely. Especially with the escalating panic in Europe, the above expectations might prove false and present opposite outcomes. If so, Italy whose GDP ranked fourth in the UN will seek more subsidiaries from the UN, who is already under the burden of a high level of debt ratio. This will breed the seed for another European debt crisis as the epidemic will undoubtedly spread among France and Italy. Germany, a country counting on the manufacturing of cars as a pillar industry, is also rendered more vulnerable due to the epidemic. What’s worse, another primary sector-exports-are faced with the vulnerable beginning of 2020 as well. For that matter, Germany, as the first economic promoter in the UN, will be also swamped, and will fail to reverse the economic recessions occurring in Europe. In addition, tourism is being sabotaged to unprecedented degrees, with nearly ten billion dollars lost every day. It is evident that the effect of lowering interest, no matter the extent of its cut, will be limited, considering the interest rates of Europe have reached 0.5 points — the lowest ever in history. With the populism that has been strengthened by the recent backlash for immigration, Europe’s division will become more intense so a right-winged government will be likely to step into the office, which will presage another Brexit-maze. Asia will also be driven into economic maelstrom, faced with a sharp shrink in tourist numbers and possibilities of global industry quarantines that evince massive trade regulations and the suspension of products. To make things worse, the Olympics, whose initial budgets and costs reached millions of dollars, once canceled, might lead to the erosion of the debt ratio of the government and the impairing of smooth operations. Regarding the US, the longer the epidemic lasts, the lesser confidence citizens will have in the current government, granting the democratic party hopes to win the 2020 election. If the FED fails to provide alternative methods of getting a hold on soaring inflation and yields of US bonds, the monetary systems directly correlated with oil pricing will collapse. Once oil production is reduced, the economy will dwindle largely in the Middle East, altering oil price’s ability to typically avoid risks.
When it comes to China, Hong Kong has utilized the strategy of granting direct funds to families in order to boost economic circulation and activity. Mainland China has also made immediate attempts to lower interests and retain stable economic transfer. China, as one of the biggest markets in the world, equipped with the most comprehensive industrial systems, is not easily replaced. Fortunately, domestic industries hailed as incapable of dominating the markets may find a chance to revolutionize domestic consumption, and occupy positions in future markets. If the US cannot reverse its domestic economic recessions, the deterioration of dollar-oriented monetary systems that have dominated industries for half-a-century will give way to the rise of RMB in the oil pricing systems typically manipulated by US dollars. As the main “warfield” of Coronavirus, China has faced the sacrifice of the Spring Festival, which should have dramatically contributed to annual GDP and the prodigal consumption of supplies.
Honestly speaking, it is the following weeks that might become the watersheds of the upcoming trends of epidemics, in hopes that we can ward off the direct consequences and witness the revival of the global economy. The foundation of a global transportation system , compounded with the distribution of high-density metropolises have provided the breeding bed for the wide-spread transmission of Coronavirus, however, it is also such visible coordinated efforts and human forces gathered that consolidate our hope to overcome the crisis.
This article was written by Hunter Hanting Xu based in Shanghai, China. Contact via email at firstname.lastname@example.org.
Photo Credit: CM Investing Team