Before there was the coronavirus, there was SARS.
Shorthand for Severe Acute Respiratory Syndrome, the lethal, pneumonia-like virus emerged in late 2002 in China. It ultimately spread over several months to 37 countries, infecting more than 8,000 people, killing about 750, and briefly causing global panic.
Today, the coronavirus is spreading faster than SARS. As of February 6, the global death toll from the outbreak that began in December had already risen to more than 560, according to Reuters: all but two were in mainland China, with more than 28,000 confirmed infections there.
The current virus may end up not only being more lethal to humans but also more damaging to the world economy as well.
The coronavirus is expected to trim economic growth in China this year to 5.6 percent, down from 6.1 percent in 2019, according to a forecast by Oxford Economics cited by The New York Times.
What makes that more worrying is the role China plays in the world economy today.
Back in 2002, China accounted for 4.3 percent of the world economy. It was largely churning out low-cost goods like T-shirts and sneakers to be bought elsewhere, mainly in the West.
Today, China’s share of the global economy is 16.9 percent. Some of that in the high-tech industry, including smart phones. It’s the second-largest economy in the world, after the United States, which is the largest consumer market in the world and the number one export market for Chinese goods.
That means more Chinese have more disposable income to spend. They are no longer just makers, but buyers.
Apple, Starbucks, and IKEA have temporarily closed stores in China. Shopping malls are deserted. That means Chinese consumers aren’t spending disposable income. And all those shuttered shops have global businesses worried, not least in the United States.
Goldman Sachs expects Chinese tourism to the United States and exports of American goods to China will take a hit because of the coronavirus. The U.S.-based investment bank predicts the virus will trim 0.4 percentage points from annualized growth in the United States over the first quarter of 2020. The bank foresees a slight rebound in the second quarter, but the risks are “skewed towards a larger hit,” according to a report cited by the Guardian.
Coronavirus Costs Russia
For Russia, the costs of the coronavirus could be even higher.
Russia has fostered closer ties with China since relations with the West went south after Moscow seized Ukraine’s Crimean Peninsula in March 2014 and began backing separatists in eastern Ukraine in a conflict that has killed more than 13,000. China is now Russia’s top trade partner. Turnover between the two amounted to $100 billion in 2018, according to figures cited by China’s official Xinhua news agency.
But on January 31, Russia closed its more-than-4,000-kilometer-long border with China, shutting 16 border crossings. According to the Financial Times, the move risks “damaging a relationship that has bloomed over the past six years.”
Not just goods but people are also being affected by the measures.
In late January, Russia announced it was suspending a visa-free travel program for Chinese tourists, the biggest driver of growth for Russia’s tourist industry since 2015.
The Association of Tour Operators of Russia, a tourism lobbying group, said Russia could lose $100 million from the restrictions, and an extra $10 million from Russian tourists cancelling or postponing trips to China.
Russia’s Foreign Ministry also announced that it had stopped issuing electronic visas to Chinese nationals, suspending a special permit that gives tourists short-term access to St Petersburg, the Baltic Sea exclave of Kaliningrad and parts of the country’s Far East.
Globally, tourism is expected to be hard hit as people face travel restrictions to China.
“Tourism is vulnerable to the effects of public health emergencies and is already being affected by this outbreak. However, it is too early to fully estimate the impacts this outbreak will have,” the United Nations World Tourism Organization said in a January 31 statement.
Governments are shutting the borders to non-citizens who have recently traveled to China. The United States is temporarily barring foreign nationals who have visited China unless they are immediate relatives of American citizens or permanent residents.
Less travel means fewer flights, and global airlines are already feeling the pain of coronavirus-linked travel restrictions.
Dozens of airlines around the globe from Air France to Air Astana to Delta Airlines have suspended or restricted commercial flights in and out of China. Beijing and Shanghai are among the most affected cities, and some airlines have cut service to Hong Kong, a semiautonomous region of the country. Only seven U.S. airports were accepting flights from China as of February 3, 2020.
As flight cancellations piled up, so too have losses for the global airline industry.
During the SARS crisis back in 2002-2003, Asia Pacific carriers lost $6 billion in revenue, according to the International Air Transport Authority. North American airlines lost $1 billion and European carriers came out largely unscathed, analysts said.
The coronavirus will “definitely” trump that $7 billion figure associated with SARS, said Ivan Su, an analyst with the financial services firm Morningstar.
Part of that has to do with the number of Chinese travelers now compared to 2003. Around 660 million Chinese passengers traveled by air in 2019 — more than seven times as many as in 2003, according to state news agency Xinhua. The boom in China far outpaced the global increase in passenger numbers, which grew from 1.7 billion in 2003 to 4.2 billion in 2018, according to the World Bank.
"Airlines are more impacted today because China is the world's economic engine," Shukor Yusof, head of aviation consulting firm Endau Analytics in Malaysia, told CNN Business.
Yusof said that the sweeping flight cancellations made by American Airlines, Air Canada, British Airways, and others are "unprecedented."
The London-based Center for Economics and Business Research warned that unless a cure was found quickly, the coronavirus risked pushing a “fragile world economic recovery into reverse.”