The war being fought by Chinese authorities right now is of deep concern to the wider world and particularly Thailand. China is caught between the demands of its highly leveraged economy and a virus outbreak that is infecting and killing more people every day. In spite of this, however, most respected financial institutions and market analysts are not predicting a dramatic or devastating effect on the world economy due to the crisis.

The death of Dr Li Wenliang, a 34-year-old Chinese ophthalmologist who was persecuted by Chinese authorities in Wuhan in early January for identifying clusters of the virus before it spread, on Thursday, underlines the danger of an authoritarian approach to dealing with san outbreak like this. It comes as stocks, despite a sell-off on Monday, were up on Wall Street on Friday and the SET stable even as the virus outbreak has nearly closed down the Chinese economy. Thailand’s Deputy Prime Minister, Somkid Jatusripitak, on Friday alerted the public to the fact that the country was now facing another economic storm but promised that it would come through it intact.

Thailand’s Deputy Prime Minister Somkid Jatusripitak urged the Thai public not to panic but did warn that the country is facing a stiff test and economic storm as the fallout from the coronavirus outbreak comes to bear. He said on Friday that many parts of the Thai economy were now shut down because of the virus. On Thursday evening, there was anger and anguish in China when 34-year old doctor Dr Li Wenliang who first warned of the outbreak in Wuhan and who was wrongly silenced by authorities with charges of spreading rumour and false information, died. The Chinese economic and manufacturing sector is still shut down as the country’s Communist Party is now fighting a ‘war’ to urgently halt the outbreak.

Thailand’s Deputy Prime Minister Somkid Jatusripitak has urged the Thai public not to panic as he revealed that the country is facing a major economic challenge linked with coronavirus outbreak which is emerging as a severe risk factor not only to Thailand’s already battered economy but the whole world’s. 

On Friday, the Deputy PM admitted to an audience at the Post Today Economic Forum in Bangkok organised by the Bangkok Post that many parts of Thailand’s economy were in shutdown mode because of the virus nightmare in China.

Urged Thai people not to panic

The Deputy Prime Minister asked the Thai people not to panic. He pointed out that Thailand was still not in a recession and promised that the country would come through this latest economic storm.

Mr Somkid said the series of crises since March 2019 highlighted the need for Thailand to rebalance, modernise and upgrade its economy. 

Already economists have predicted a loss of ฿120 bullion to ฿200 billion depending on when China reopens for business but what is now emerging is the threat of financial tightening in the markets as the Chinese leadership is no longer just focused on economic growth figures but the reality of a race to preserve the social order in the country which has been tested in recent weeks.

Today’s latest figures from authorities in China state that there are over 31,100 people infected with 636 people who have already died including Dr Li from Wuhan whose names were only included on the infection figures compiled by authorities on January 30th last.

He was the second doctor to die following the death of 62-year-old Dr Liang Wudong two weeks ago.

Lancet study questions China’s official figures

The problem is these figures are now being questioned by medical experts around the world who are doing their homework.

Last week, a study for Lancet, the reputable medical journal, conducted by the University of Hong Kong, the former British colony’s oldest third-level institution, determined that the spread rate of the disease was 2.68 and that the number of infections was doubling every 6.4 days.

This was based on a range of data sources including travel and movement patterns of the population.

Fears that other large Chinese cities are infected

The study team at the university concluded that at least 76,000 people are currently infected in Wuhan from the outbreak.

The reports also project that the Chinese cities of Chongqing, Changsha and Nanchang are highly infected.

4 Thai evacuees from Wuhan subjected to further tests although all were reported in good health

Some observers are pointing to the incidence of coronavirus infection in evacuees from the city who have been found to have had the virus.

3 out of 206 Japanese evacuees tested positive for the virus but 2 had no symptoms and 12 people were hospitalised with issues.

In Thailand, test results are awaited on four 4 patents who were isolated from the 138 evacuated from Wuhan this week but reports suggest that their health is relatively good.

Study and US expert warn of a pandemic

The study by the Hong Kong university warns that there is still the risk that ‘independent self-sustaining outbreaks in major cities globally could become inevitable.’

In the United States, Anthony Fauci heads up the National Institute of Allergy and Infectious Disease. He warns that the current virus which has been named only as 2019-nCoV variant could well become a pandemic. ‘It’s very, very transmissible, and it almost certainly is going to be a pandemic,’ he said this week.

World Health Organisation emphasises science not fear in the battle to defeat the virus

Of course, the definitive source of information on the virus and its status should be the World Health Organisation in Geneva.

However, the judgement of Director-General of that organisation, Tedros Adhanom Ghebreyesus, has been questioned over his earlier assessment of the outbreak as a ‘moderate’ one.

The Director-General has since warned about a heavy-handed response to the outbreak in China from other countries and has railed against fake news.

In announcing a global health emergency last week, the WHO boss warned that what was needed to beat this outbreak was science and not fear.

WHO warns not only about fake news by an abundance of information as well as fake news

Since then, various senior officials of the World Health Organisation have complained not only of fake news and scaremongering but also a ‘massive infodemic’ on the crisis. 

These sentiments have been echoed by Thailand’s Prime Minister Prayut Cha ocha who warned this week that fake news was a bigger threat than the virus while senior Public Health Ministry officials have suggested that media commentary on the outbreak makes health workers on the front line nervous and uncomfortable.

London based expert warns that it could birth of new killer flu if not contained and eradicated

The Head of the London School of Hygiene and Tropical Medicine has warned that it is possible that the outbreak could emerge from China and spread around the world to become a prevalent infection such as flu.

The difference is that the confirmed death rate from this infection so far is 2.3% which is 20 times the mortality rate from the common flu worldwide. 

His outlook is akin to that of the World Health Organization itself which in explaining the reason for declaring an emergency last week, suggested that it did so out of concern for countries in Asia and Africa where health services may not be able to cope with a crisis like this.

Young Chinese doctor silenced by police 

The death of the young doctor, Dr Li Wenliang, a father of one, and whose wife is expecting a second child in Wuhan on Thursday evening has become a focal point for anger among Chinese citizens at the Communist Party for ist mishandling of the outbreak.

The doctor was warned and officially reprimanded by the Public Security Bureau in Wuhan at the end of December and early January when he began to warn that clusters of infections were developing which looked very like the SARS epidemic.

Contracted the virus from treating an elderly woman 

The doctor contracted the virus himself from an elderly woman whom he was treating for glaucoma and was hospitalised in mid-January with the disease.

He then began to speak out again. Dr Li was later interviewed by the New York Times: ‘If the officials had disclosed information about the epidemic earlier, I think it would have been a lot better. There should be more openness and transparency,’ he declared

Anger in China towards authorities

The anger and outpouring of invective on Thursday caused the Communist Party authorities to change the story and announcements were made that the valiant young doctor was still fighting for his life while on Friday, the communist People’s Daily newspaper admitted that Dr Li had passed away after all.

To many Chinese people, he is quite rightly a hero, one persecuted for doing his job and speaking the truth.

Doctor vindicated by the Chinese Supreme People’s Court

Dr Li’s role has now been accepted by Chinese authorities at the highest level. The Supreme People’s Court reprimanded local police authorities this week for silencing a man doing his job.

If he was listened to, it could have well have helped foil the outbreak.

Free speech groups warn that information crackdown by Chinese authorities has only bred distrust

The doctor’s death has drawn reprimands from human rights groups in Asia targeted at crackdowns on fake news not only in China but in Asian countries, including Thailand, concerning the outbreak.

On Thursday, Sophie Richardson of Human Rights Watch in China describes the handling of the outbreak in China by Chinese authorities as one which conversely had made people distrustful of authorities and consequently less secure about what they are being told.

‘I have real concerns about people who are supposedly ‘spreading rumours’ being harassed by authorities, they have been treated as anarchists,’ Ms Richardosn said. 

China’s efforts to control the story ‘severely stunted its initial response’ says free speech group

These comments were echoed by Matthew Bugher of the Asian director of Article 19 a British organisation that promotes free expression.

‘China’s early efforts to control the narrative around the outbreak severely stunted its initial response to the spread of the coronavirus. It’s extremely worrying that governments in Southeast Asia appear to be following China’s example,’ he said on Thursday.

Truth and transparency is the answer

Mr Bugher warned that government efforts to control all information is counterproductive. ‘Truth and transparency are the best tonic for misinformation. Asian governments would be wise to prioritise their own public awareness efforts over an attempt to police public discourse on the crisis.’

China still censoring online content and mobilising its surveillance systems for war against the virus

There is now evidence that Chinese authorities are moving to censor and control online content as well as using their extraordinary database-driven surveillance and intelligence powers to track sufferers from the virus.

The Chinese Communist Party and state is making no secret that the country is now fully mobilised in a ‘war’ against the coronavirus outbreak.

Reports online from some Chinese doctors about conditions in Chinese medical facilities

This should give readers in Thailand and around the world ample notice that at least some of the reports from doctors online regarding the horrendous conditions in Chinese hospitals at the centre of the outbreaks and the extraordinary, apocalyptic situation that has developed in Wuhan and other large cities, are real.

First question is can it be contained within China

The question is how long will it take Chinese authorities to control the outbreak and will it develop outside of China.

The University of Southampton said last week that Hong Kong and Bangkok would be two of the cities most at risk but so far Thailand seems to be doing well.

80% of the Chinese economy is now shut down 

The next issue is the economy. Leading economists and observers now estimate that 80% of Chinese industry and manufacturing is shut down. This is the manufacturing hub of the world and we are already witnessing a steep drop in the price of oil by up to 20%. This has not happened since the Lehman crisis in 2008.

‘It’s now clear that coronavirus is a serious event risk to the entire world and that financial conditions are tightening very quickly,’ said Edward Harrison this week from Credit Writedowns, a respected newsletter on finance and economics.

Corporate debt is the weak point on world markets

Many economists are pointing to corporate debt or junk bonds which have lower credit ratings as the most at risk on the market.

30% of corporate bonds currently have a debt to earnings ratio higher than 6. This is higher than the level just before the 2008 financial crisis and Lehman collapse. In addition to this, the amount of corporate debt that has a rating of BBB or lower has risen by 500% since 2008.

The only difference between 2008 and now is that all central banks around the world have already dropped interest rates to near-zero or even lower with many economies such as Europe engaged in ongoing quantitative easing measures.

China – what will happen in the next few weeks?

The key to this financial threat is how fast can China restart its industrial base without running the risk of letting the virus get out of control. Already factories like Foxconn, which makes Apple products, and most of the automobile plants are shut.

Beyond next week, questions will begin to be asked of China. It already announced a liquidity injection into its financial markets last week and the markets have been buoyed by talk of cures for the virus and confident predictions that the infection rate is slowing down. But is it? The Hong Kong University study suggests otherwise.

At the very least, China may want to engage in quantitative easing measures of its own and consequent devaluation of the Yuan. Answers must be found in the coming weeks to get the world’s second-largest economy back on the rails.

Institutions and market analysts are still relatively sanguine about the economic impacts

Some experts are predicting that this is an ominous and serious situation. The market consensus appears otherwise for now.

On Friday, the Dow Jones was up 89 points and the SET in Bangkok was holding its own, down very marginally. Most of the world’s leading financial institutions and analysts appear, however, to be remarkably sanguine about the impact of this emergency shut down in China

Many are predicting its impact based on the SARS virus of 2002 and scaling it to reflect the growth of the Chinese economy since then with was then only the 6th largest economy in the world.

However, this is a very different virus and already that has become more serious than SARS.

Last week most experts said Chinese firms and factories would open in February 2nd – they didn’t

One financial body says that on this basis the impact on the world economy could be a reduction of 1.8% to 6% of growth. That is according to the Centre for Economics and Business Research (CERB) in the United Kingdom.

That prediction was last week when most experts predicted confidently that Chinese business would be up and running by February 2nd. It is still in lockdown.

Get ready for the bad news in spite of the experts, this may be the calm before the storm begins

Most experts agree that economies in Southeast Asia such as Thailand will be hardest hit from the outbreak. There is also an acceptance that the impacts of this will be greater than SARs. But none has yet to forensically question the Chinese government.

However, stock markets have begun to recover this week with some expert predictions suggesting that the impact in the long run for the year will be only in the order of a 0.3% reduction in growth once the Chinese economy gets up and running again.

However, a sign of things to come may be a prediction by Diana Choyleva of Enodo Economics on CNBC this week who predicted that China will conceivably fall into a technical recession this year.

The respected Bulgarian forecaster said: ‘Not only has growth slowed down significantly in the second half of last year, but this year was going to be the crunch time for trying to sort out China’s very large bad debt problem,’ she pointed out. ‘So when we then estimate what the impact’s going to be like, even on the assumption that it will be a repeat of SARS, I think it will be worse, we could easily get into a technical recession in China in the first half of this year.’

Further reading:

Bank of Thailand says it has more scope as the economy is left reeling from biting coronavirus setback

Bank interest rate cut anticipated as a devastated tourism industry battles with the Chinese coronavirus threat

Prime Minister and Budget director issue strong warning about the legally stalled 2020 budget

Thailand economic prospects are dimming fast even as global agencies talk about its strength

Central bank boss plans to loosen capital controls and decide on broader lending curbs by year’s end

Thai economy remains sound says Fitch the ratings agency as the baht’s surge may be over for now

Thailand’s new move to boost the birth rate and fight the negative impact of an ageing population

World Bank fears political problems in Thailand as it still eyes 3.5% growth for 2019 in latest bulletin