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  • In 2018, Microsoft co-founder Bill Gates gave an ominous warning

  • that, “The world needs to prepare for pandemics in the same serious

  • way it prepares for war.”

  • Two years later, an outbreak of a coronavirus in Wuhan, China,

  • gripped the world as the death toll and infection count grew by the day.

  • The first string of infections was reported to the World Health Organization’s

  • China office on the last day of 2019.

  • "Declaring a public health emergency of international concern."

  • The international agency then declared a global emergency a month later.

  • The rare designation allows it to mobilize financial and political support to contain

  • the virusspread. Less than two months after it was first reported,

  • the virus had infected more than 75,000 people worldwide

  • and killed more than 2,000.

  • So, what happens when a completely unforeseen event

  • shocks the world’s second largest economy?

  • The disease, which is now officially called COVID-19, appears to have originated from

  • a seafood market in Wuhan, China, where wild animals were illegally traded.

  • To date, at least 25 countries have reported cases of COVID-19, including the U.S., U.K.,

  • India, Japan and Singapore.

  • However, despite its spread, the WHO still considers the new coronavirus an epidemic

  • and not a pandemic, which is defined as an ongoing epidemic on two or more continents.

  • The timing of the outbreak was a double whammy for China’s economy.

  • The country was in the midst of an ongoing trade war with the United States

  • that was already slowing down growth.

  • It also took hold before the busy Lunar New Year travel season,

  • when hundreds of millions of people normally travel home to celebrate

  • with their families.

  • At least 10 Chinese cities were locked down in late January as authorities

  • attempted to contain the new virus, leading to the cancellation of flights,

  • events and the closure of venues.

  • So, how exactly has business been impacted in China?

  • Businesses across the nation were already winding down operations

  • in the lead up to the Lunar New Year holiday, which lasts for a week.

  • But that closure was extended in the wake of the outbreak.

  • This affected restaurants and stores, too as the government discouraged mass gatherings.

  • Businesses and factories in at least 24 provinces, municipalities

  • and other regions were told not to resume work until February 10 at the earliest.

  • Together, these hubs account for more than 80% of China’s GDP and 90% of its exports.

  • At the same time, thousands of flights from more than 50 airlines including Delta

  • and British Airways were cancelled, as governments imposed travel restrictions to and from China.

  • Domestic rail trips plummeted more than 75%, while its tourism industry is in a tailspin

  • as the Chinese stay home and foreigners avoid the country.

  • Even in Disneyland, the nightmare is creeping in as its theme parks in Shanghai

  • and Hong Kong were closed.

  • Disney warned it's expecting to take a $175 million hit if the parks stay closed for two months.

  • China’s box office, meanwhile, which is highly lucrative for Hollywood,

  • took an estimated $210 million beating on what was expected

  • to be a gangbuster weekend.

  • All seven films scheduled for release over the Lunar New Year holiday announced they

  • were pulling screenings.

  • In fact, China’s box office revenues plunged to less than $4 million this

  • year from $1.5 billion last year over the same 20-day period,

  • commencing on the eve of the Lunar New Year.

  • And it’s not just the consumer landscape that has been severely disrupted.

  • The fallout from the virus has essentially isolated the world’s largest population

  • from the rest of the world, disrupting worldwide trade and supply chains in the process.

  • In the weeks following January 20th, ship activity at China’s major ports fell 20%.

  • Even oil prices have fallen as demand weakens in China,

  • the world’s largest importer of oil.

  • Automakers from Nissan to Honda and American giants Apple and Nike all have

  • massive operations in China that have been impacted as well.

  • To understand the magnitude of COVID-19, it might be useful to look back at the SARS outbreak

  • 17 years ago, which infected more than 8,000 people worldwide and caused

  • nearly 800 deaths.

  • COVID-19 and SARS come from the same family of coronavirus.

  • But the number of COVID-19 cases has quickly outpaced SARS.

  • This graph, which shows the 30 days following the

  • WHO’s first reports on the outbreaks, shows the dramatic difference.

  • However, despite already clocking more deaths than SARS,

  • initial figures from the government suggest that of the total confirmed cases

  • in China, between 2-3% have died. The WHO placed China’s case fatality ratio for SARS at 7%.

  • From the first to second quarter in 2003, China’s real GDP growth

  • plunged by 2 percentage points as a result of SARS.

  • And growth in China slowed from 8% year-on-year to 5% during the outbreak.

  • But one major thing is different now.

  • China’s economy in 2003 during the SARS outbreak was much smaller than what it is today.

  • Just look at how China’s economy has grown.

  • It made up about four percent of global GDP in 2003.

  • That’s grown to more than 15 percent in these 17 years.

  • China’s annual economic output has surged from $1.7 trillion to nearly $14 trillion,

  • while its economic output per person has gone

  • from nearly $1,300 in 2003, to more than $9,000 in 2018.

  • China has also been the world’s largest exporter for more than a decade, with many

  • countries such as Japan and Vietnam very reliant on the Chinese supply chain.

  • China is much more intertwined to the world economy than ever before.

  • Because of this, the global economynot just Chinawill feel the impact of the virus.

  • While it’s too early to know exactly how dramatically China’s economy will be impacted,

  • economists and companies alike have sounded multiple warning bells.

  • One IHS Markit report summed it up well, saying:

  • In 2019, China’s economy grew just 6.1 percent thanks in part to the trade war.

  • It was the country’s weakest growth in nearly 30 years.

  • Still, as a result of the virus, numerous banks and research

  • houses have downgraded China’s GDP growth forecast for 2020. Some have even warned

  • that China’s economy could enter a technical recessionthat’s defined as two back-to-back

  • quarters of negative growth. And some even worry it could spread globally.

  • China’s government has poured billions of dollars into the financial system as it

  • attempts to restore investor confidence and minimize the economic fallout, among a slew

  • of emergency measures.To minimize job losses, the government is

  • expected to approve tax relief and subsidies for sectors that have been impacted by the

  • virus. And China’s central bank announced measures aimed at lowering borrowing costs

  • and easing financial strains on affected industries. However, some analysts remain unconvinced

  • that Beijing’s monetary and fiscal policy measures will work in the near-term.

  • As the outbreak unexpectedly upended normal business operations across China,

  • its overall impact on the economy is likely to be analyzed for decades to come.

In 2018, Microsoft co-founder Bill Gates gave an ominous warning

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