"Spring Festival Risks Spreading Epidemic Far and Wide"
It was exactly one year ago that I wrote my first article about the coronavirus, under that headline. We had been hearing, here in Hong Kong, since very late in 2019 about a mystery lung illness doing the rounds in central China that bore certain similarities with SARS. It was hitting just before the Spring Festival, a.k.a. Chinese New Year.
Now in 2021, we again await Lunar New Year (also celebrated in Vietnam and Korea), and parts of Beijing are locked down once again. There are 1.6 million residents of the Daxing suburb and the area around Beijing Daxing International Airport who are unable to leave the city. Another 22 million people in Hebei Province surrounding Beijing are also locked down. In a northeastern province on the Russian border, Heilongjiang, 16 officials have been reprimanded for dereliction of duty in preventing recent clusters of Covid cases there.
Have we moved on in a year? We certainly have. I thought I'd look at what's happened since I first broached the virus as a matter of concern to international investors on January 21, 2020, with Lunar New Year due to take place on January 25. This year, the lunar event falls later, on February 12.
At first, we weren't too sure what to make of this new disease. The Hong Kong media at the end of 2019 started covering fears about this "mystery pneumonia," relying on hearsay and social media posts. But word on the ground in mainland China was sketchy, where the official media were keeping quiet. A week or two after the calendar turned, it became clear the disease would spread, and we started getting first-hand coverage out of Wuhan.
By the time of my first story, the disease had killed four people in Guangdong Province, just across the border from Hong Kong, with another 14 cases of the disease. In and around Wuhan, 270 people had fallen sick, with another seven cases in Beijing and Shanghai combined.
The World Health Organization was due to meet later that week to assess whether the outbreak constitutes a "public health emergency of international concern." I made that call for them. The answer is "Yes."
Actually, they decided "No, not yet." Their initial assessment was that the disease was a problem for China but not a global issue. I was disappointed, and have remained disappointed. WHO chief Tedros Adhanom Ghebreyesus soon heaped praise on Chinese President Xi Jinping.
"I was very encouraged and impressed by the president's detailed knowledge of the outbreak and his personal involvement in the outbreak. This was for me a very rare leadership," Tedros said on January 29.
The WHO director-general described "very candid discussions" in Beijing and praised Xi for his commitment to transparency. China had agreed to let in a WHO team of experts, he said.
A year later, the WHO virus experts are still in quarantine trying to start their research in China. We have learnt that China covered up initial details of the disease, silenced "troublemakers" trying to warn other Chinese people about it, and denied it spread person-to-person when there was every indication it did. China is now mounting a furious campaign to muddy the waters about where the virus originated.
China also allowed free travel over Lunar New Year 2020, although it belatedly locked down Wuhan two days before the holiday after many of its 9.8 million residents left. The central government started to restrict movement China-wide for the return from the Spring Festival holiday, a time when 400 million people are normally on the move inside China. About 7 million Chinese citizens typically travel overseas.
I'm also disappointed that, to this day, Taiwan is still excluded from the WHO. This is a decision made purely on political grounds. The WHO signed a secret Memorandum of Understanding in 2005 never to recognize Taiwan to the U.N. body, in return for support (and money) from Beijing. Taiwan, to this day, has had 868 cases of Covid-19 from its population of 23.6 million. And 7 deaths. Couldn't we learn from that?
By the time of my second story, the first case of what we were calling WARS (for Wuhan Acute Respiratory Syndrome) had arrived in the United States. A patient had traveled to Wuhan and then returned to Washington State, wasn't sick when he flew but reported to authorities when he fell ill back home.
I got a lot wrong in my early estimates about the extent of the damage from Covid-19. And I got some things right. I warned that it didn't make sense Chinese shares rallied just before the Lunar New Year break. "Breezy bullishness looks like a bad idea at this point," I quoted from a Nomura research note.
Initially I ran numbers purely on how the Chinese economy would be affected. That was short-sighted. I also based casualty and death projections on the experience of SARS, which was relatively quickly contained. A worst-case scenario from Northeastern University and Imperial College London projected almost 10,000 infections, total.
But I did note the problem of the long incubation period of up to 14 days, meaning it "may therefore pose a greater hazard in terms of its scope. At least patients with SARS, which killed 813 people globally, got obviously and seriously sick within five days."
As I cast around, the first industries I predicted would run into trouble were carmakers, since Wuhan is the center of that industry in China, as well as Macau casinos, travel stocks like airlines, and luxury-goods retailers with heavy reliance on Chinese customers. Correct. But I didn't go far enough.
By the end of January 2020, I was running some numbers, and it was clear WARS was much worse than SARS. For the United States, a 15 million infection count that matches flu season but at the WARS death rate would mean 330,000 fatalities, I worked out. I fell short. We're at 400,000 deaths, and counting. China's population is four times bigger than the United States, I noted - that projection ran way long. China officially has had 88,557 infections, and 4,635 fatalities.
Only in late February did global markets catch on, falling first in Japan and South Korea, where the virus took hold. With components swiftly unavailable for a growing number of industries, "the reality of worldwide manufacturing pain is sinking in."
But by that stage, I noted, investors had more than a month to prepare for the selloff. "I've been surprised it has taken this long for investors outside greater China to respond," I pointed out. "Just as they should take reasonable precautions over their own health, investors should start assessing public companies for their exposure to the supply-chain effects of Covid-19."
I was wrong about any sense of a rebound. Markets bounced back surprisingly swiftly after their March descent and lows. Even with all the expert heads trying to make sense of where we were heading, market timing remained and remains a mystery.
China's economy is back on track, too, poised for a 9.0% rebound in 2021. The 2.1% growth in GDP in 2020 was better than any other major economy in the world.
I'm seeing today that Hong Kong's unemployment hit a 16-year high in December, at 6.6%, worse than economists expected. That's the highest since 2004, in the wake of SARS. Another 3.4% of citizens are under-employed. We have not recovered. The government's plan to rectify this is to make the city so unlivable, so dictatorial, that everyone here who has any sense will leave. No jobless rate if there's no one around...
Another anniversary will tick around for me in mid-February. It's been 20 years as of Feb. 16 that I arrived in Hong Kong, at first to work at CNN. Eventually I met my future wife, and settled here. But we are now discouraged enough by the direction of the city that we, for the sake of our school-age children, are considering a move.
Jumping ship would be appropriate. This year has been the Year of the Rat, according to the Chinese zodiac. It's been a plague year. It will be remembered for a long time to come.
Next year? It's the Year of the Ox, a metal ox. Will our health be as strong as an ox? Will there be a bull run for stocks? We better hope so... and not just a load of bull....
