Medical workers spray antiseptic outside of the main gate of Shanghai Stock Exchange Building on Feb. 3, 2020.
Yifan Ding/Getty Images
The Chinese government has held up Canada as a bulwark of calm next to the more dramatic U.S. reaction to the spreading Wuhan virus, drawing Ottawa into the middle of a new spat between the worlds two largest economic powers even as plunging stock markets reflected widespread panic among people across China.
Shares traded in Shanghai and Shenzhen fell more than 8 per cent Monday, a roughly US$400-billion contraction in stock value that saw more than 3,200 stocks drop the maximum of 10 per cent as investor fears overrode a concerted effort by Chinese government-affiliated institutions to prop up shares. It may take hundreds of billions of dollars in government financial support to bring stability, one scholar warned, as the developing health crisis which has now killed 361 in China takes on sharper economic and political dimensions. A further 17,320 cases have been confirmed, and 21,558 suspected.
And while Beijing struggles to ease fears at home it is also now more directly battling those outside its borders it accuses of exploiting the situation, in particular the U.S.
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Washington has told its citizens do not travel to China, and banned entry by foreign citizens who have travelled to China in the last 14 days. New Zealand, Australia and eight other countries have imposed similar restrictions, which have angered Beijing. Hong Kong on Monday said it will close all but three entry points from mainland China, including a land crossing and its airport.
On Monday, however, the countrys foreign ministry lashed out at the U.S. for spreading fear, setting a bad example and, spokesperson Hua Chunying said, turning from overconfidence to fear and overreaction.
But she specifically praised Canada, whose relations with China have been fraught following the arrest of Huawei executive Meng Wanzhou, for its refusal to follow the U.S. approach. Canadian Health Minister Patty Hajdu has said the risks to Canada are low, and Ottawa sees no need to keep away travellers who have been to China. Canada believes the entry ban has no basis, which is a sharp contrast to the U.S. behaviours, Ms. Hua said, in a digital press conference held on the WeChat app.
The comments underscored how, with the Wuhan virus, Canada once again finds itself wedged between China and the U.S. in the midst of a much greater economic and political tussle between those two countries.
However, Ms. Hua made no promises about when Beijing might give permission for a plane chartered by the Canadian government to fly from Hanoi to Wuhan to evacuate Canadians trapped in a sprawling lockdown zone around the epicentre of the virus. That plane is standing by, and will fly to Wuhan once the Government of China has given authorization to land, Global Affairs Canada said in a news release Sunday.
Ms. Hua gave no answer as to when that authorization might be provided, or why it has been slow in coming. I understand China and Canada are in communication on this, she said. Some 325 Canadians have requested evacuation from Wuhan.
But for Chinas leadership, concerns about stranded foreigners have commanded less urgency than the scale of the national crisis it is confronting among its own people.
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The plunge in stock markets defied heavy spending by state-controlled investors in a centrally-directed effort to help combat negative feelings and anxiety, said Zhao Xijun, deputy director of the School of Finance at Renmin University. There is good reason, he said, to rein in the confused emotions of retail investors who have plunged from heaven to hell, with a festive Lunar New Year season swiftly blackened by virus fears.
But the force of market pessimism overwhelmed even the powerful tools wielded by Beijing. To arrest falling markets may take as much as five times the four trillion yuan $750-billion in todays dollars used by Beijing to shield its economy from the convulsions of the 2008 financial crisis, said Wang Fuzhong, a scholar at the Central University of Finance and Economics.
The virus has seriously damaged China’s production, consumption, exports, imports and investment. Its like a lethal strike against our country, said Prof. Wang.
The most terrible fact is that many small businesses will die, he said. Whats happening is not just a short-term phenomenon. Its a long-term downturn. The effects of this epidemic are very profound and wont easily be fixed.
Many reached for comparisons to the SARS epidemic, which in 2003 caused financial losses equivalent to 1.05 per cent of Chinas economy. Scholars have estimated the global loss from SARS at US$40-billion.
But China has grown into a far larger economy in the intervening years and much more tightly interwoven with the rest of the world, factors that considerably raise the stakes for the Wuhan virus.
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The interruption of supply chains could have a snowball effect if stocks of essential electronic components from China are depleted, ING economists Timme Spakman and Rico Luman wrote Monday.
And this isnt necessarily a temporary slowdown. The coronavirus could potentially impact the annual level of world trade in 2020, as its not certain that factories and logistics will be able to catch up and fully compensate for earlier delays, given the limited capacity.
At the heart of the anxiety lies a great uncertainty. It took more than half a year for SARS fears to recede. The response to the Wuhan virus has been far more swift than SARS but so, too, has its spread.
The epidemic is in its developing stage, said Li Huiyong, chief macro analyst at Shenwan Hongyuan Securities.
Nobody can judge how severe the negative impact will be, because we dont know how long the battle against this epidemic will last and, most importantly, how long it will take to rebuild everything and restore production after the battle is over.
-with reporting by Alexandra Li
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