The virus has peaked and dropped in China, the front line has shifted, the world is sick and no one knows quite how to deal with it. The latest numbers we are seeing suggests a lower death rate among infected individuals than was previously calculated, but it is still a straw-grasping exercise.
Much of the rest of the world is addressing the financial problems caused by the virus by throwing vast amounts of stimulus funds at their economies. China has been notable for not doing that, with the reason being that it’s already facing a huge debt overhang and it doesn’t really have available to it the kind of stimulus measures it used during the great financial crisis.
The Chinese government is now getting desperate to get the economy moving again, but given the hierarchical nature of this system and the positioning of responsibility in a setup bereft of diversity, it is very difficult to make that happen. The past week has seen a slew of numbers depicting just how deep an impact the virus has made on China’s economic activity since it hit, and prospects for a solid V-shaped recovery are undercut by the double-whammy of the fall in exports that is going to result from the impact elsewhere. Larger companies, both SOEs and private, are going to be okay because they can get money from the state banks to tide them over. The key is going to the small businesses and the unemployment rate. It is hard to be optimistic about prospects for either.
The pandemic is a classic and highly informative event in terms of how the Western and Chinese systems deal with such a situation. Diversity versus discipline – which provides the best response to such an unexpected body blow? We will find out in the months ahead with consequences that will reverberate for decades to come.
Meanwhile, the current tit-for-tats on journalists between the United States and China are arguably as significant or more so than the virus situation. The scenarios for China’s relationship with the rest of the world are getting starker. Yet another weighty issue to ponder in the midst of spring sunshine this weekend.