News that 40,000 plus persons have been officially diagnosed as having the newest strain of coronavirus in China have further widened fissures in both the Chinese economy and the government authoritarian model of dealing with the economy. All of this, sadly, represents good news for the US economy and western economies in general at the direct expense of China.
The Chinese GDP, based upon a multiprovince cessation in passenger and goods traffic, will certainly experience a marked slowdown in the first quarter of 2020. This will continue to place pressure upon the Chinese government to comply with western directives to reform and open up the domestic economy. Housebound citizens don’t do much to support domestic spending within China and exports will be curbed for an interval; the combination is a powerful motivator to, if not befriend the west, to at least discontinue efforts to antagonize the United States and its allies via economic horseplay.
The Chinese government handling of the 2019-nCoV outbreak leaves much to be desired. Quarantine of an entire city is an extremely heavy hand and would not be necessary were it not for the fact that China still has an antiquated patchwork of medical care systems. A reliance upon “Chinese medicine”, which involves stretching, “cupping”, fake tonics, placebo pills or bootleg medicines is no substitute for modern anti-virals and electrolytes when dealing with infectious outbreaks. Chinese hospitals are treatment centers of last resort for the citizenry and are also known for dispensing fake medications or diluted medicines; anyone sick and with money in China leaves China for treatment. Arresting and silencing those within China who sought to bring the severity of the spread of 2019-nCov does immeasurable reputational harm to a government already known for their heavy handed treatment of dissent. There is also growing talk about how wealthy Chinese were able to avoid the quarantine; anecdotes are numerous that the decision to quarantine a major population center was timed after most of the wealthy left. For a supposedly classless society, this bodes ill.
As a result of the outbreak, and attendant issues with the supply chain in China, efforts by the west to further reduce, or completely remove, Chinese businesses as a source of products, will continue unabated. This spells bad news for the Chinese economy in the mid-term. A continued secular trend away from China, of course, conversely represents business wins for economies that will supplant Chinese output.