The Novel Coronavirus Outbreak

January 28, 2020

China on the Edge



The explosive outbreak of a novel coronavirus (now known as 2019-nCoV) in China’s Hubei province is advancing at a breakneck pace. The case count stands, as of early Tuesday, January 28, at 4,474, with 107 fatalities. Cases have spread across China and to more than a dozen other countries.



The Wuhan-centered outbreak, which first began in December 2019, is expected to continue to spread widely within China, with additional cases exported to other countries. In the coming days, the outbreak will soon exceed the 8,000 cases of SARS that occurred during the 2003 outbreak in southern China.



The Chinese government has imposed a quarantine on Wuhan and 15 other cities in Hubei province, affecting an estimated 57 million people. This is a staggering scale of ambition—an unprecedented use of quarantines as an emergency public health measure. This sudden decision, borne of fear, and indeed even desperation, is a historic gamble by China’s anxious leadership that quarantines can contain the outbreak from spreading to other parts of China and the world. Other controls that fall short of a full quarantine have been imposed in Beijing, Shanghai, and other major hubs.



It is altogether unclear if the Chinese government’s profound reliance on mass quarantines will actually slow the progression of the disease. Expert observers are increasingly of the opinion that the Chinese, after a sluggish response in the first several weeks of the outbreak—a strategic stumble—are now doing too much, too late. Some believe they may fail to contain the disease.



The effectiveness of mass quarantines is questionable, as they may accelerate transmission by concentrating populations. Quarantines can also foster opposition to government officials, as citizens struggle to access food and other basic social services. Citizens and the virus itself are notorious for eluding or otherwise defying controls. An estimated 5 million of Wuhan’s 11 million residents vacated the city late last week, before full controls came into force. The epidemic will only be arrested when 60 percent of those infected are isolated and treated, yet quarantines do not necessarily help reach that target.



This is an anxious, fraught, and potentially humiliating moment for a Chinese government that in its new superpower status faces a public health crisis beyond its capacities. It has assumed an enormous burden to ensure access to food and quality health care for 57 million confined citizens amid disrupted transport and supply chains and a health system that is overwhelmed and suffering from acute shortages of health personnel and basic medical commodities, including protective masks. Citizens are flocking to hospitals. The weak primary health care system, especially in rural areas in China, is utterly unequipped to handle this outbreak. Inexorably, political disaffection will spike, amplified through social media, which the government has attempted to control but realistically cannot.



Popular skepticism of the government’s intentions, truthfulness, and competencies were already quite high and in full view before the onset of the coronavirus outbreak. Public trust and confidence suffered in 2019 in the face of the government’s ham-handed management of the African Swine Flu outbreak, which badly damaged China’s pork industry and hurt the average Chinese citizen’s pocketbook.



- J. Stephen Morrison



Q1: Are we facing a dangerous global pandemic?



A1: Whether the coronavirus becomes a truly global pandemic of grave concern will depend on several key biological factors that will determine how far and how fast the disease spreads, and how dangerous it becomes. It is early days in the outbreak and much of the basic science surrounding this novel coronavirus remains a mystery. Much of what we think we know today may be replaced by what we think we know tomorrow. Humility is the order of the day.



One stark complication is that the Chinese government, determined to defend its perceived sovereign interests and not suggest to the outside world that it is failing, has yet to welcome external scientists into China to cooperate side-by-side in reaching answers to the most pressing, outstanding scientific questions, enumerated below. While the Chinese government has been transparent in sharing case numbers, sequencing data, and diagnostic data, its sharing of broader scientific data has been limited. The World Health Organization (WHO) has not yet succeeded in brokering an agreement on access with the Chinese government. Frustration is running high within the U.S. government and elsewhere. Arguably, the Chinese government is not likely to capitulate until circumstances have become far more painful.



The lack of scientific data makes it difficult to know just how severe or dangerous the coronavirus truly is. Much more work is needed to understand how many people have been exposed, how many remain asymptomatic or only suffer mild illness, and how many develop extreme illness or die. This type of uncertainty is common at the chaotic onset of outbreaks. Only when data has improved will we begin to understand more precisely just how deadly the virus is—the case fatality rate—and how much extreme illness the virus causes.



A global pandemic would occur if there are explosive, uncontrolled outbreaks—as seen in Hubei—that arise in other parts of China and which in turn ignite similar outbreaks outside of China. Globally, there have been only a few scattered, individual cases of onward, secondary transmission, nothing that up to now seriously threatens a knock-on runaway outbreak. The risk remains very low to the United States, to other advanced economies, and to other states such as Thailand that have relatively strong capacities for managing unforeseen infectious disease outbreaks.



If, however, the outbreaks in China widen into major urban centers such as Beijing and Shanghai, and if export occurs to countries in Africa and elsewhere where there are limited health security capacities, grave secondary outbreaks could emerge outside of China, giving rise to the onset of a global pandemic. We are not facing that scenario today, but it is not inconceivable.



- J. Stephen Morrison



Q2: What do we know, and what do we not know, about 2019-nCoV?



A2: Scientists continue to puzzle fiercely over how fast the virus may spread. There are more questions than answers at this moment in time. In Hubei province, the number of individuals infected by each person who is infectious (also known as the viral reproductive rate, or R-zero) is currently understood to be between 2.0 and 3.0. That is a serious, aggressive rate of transmission. Some scientists in China have estimated the reproductive rate to be as high as 5.5. If that proves to be accurate, it would in part explain the surprisingly swift growth of cases in Hubei and beyond and suggest that China is in for a very rough ride.



The scientific community has yet to reach a consensus on whether individuals who have been infected by the virus but are not yet symptomatic can indeed be contagious. Minister Ma Xiaowei, China’s health commissioner, publicly asserted on Sunday, January 26, that this type of transmission is occurring in China. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), subsequently complained that China has not shared the data upon which this claim is based and has not yet invited U.S. scientists to visit China for consultations. This is a pivotal consideration: if asymptomatic individuals can infect others, that will significantly accelerate the spread of infection and make it much harder to detect the spread of the disease throughout at-risk populations.



It is also unknown whether there are coronavirus “super-spreaders”—individuals who infect disproportionately large numbers of other individuals. As was seen during the 2003 SARS epidemic and the 2015 MERS epidemic, super-spreaders can spur explosive outbreaks in other countries. So far, there are no documented cases of super-spreaders. If this phenomenon arises, it will change the equation.



We know that the virus can be transmitted by respiratory droplets exchanged through coughing and sneezing. In recent days, discussion has extended to whether the virus can be aerosolized—or transmitted through particles that remain suspended in an air mist—even after the infected individual has departed. The latter phenomenon has not yet been seen or confirmed. If there is in fact aerosolized transmission, that could also accelerate spread.



More scientific evidence is needed on each of these issues—reproductive rate, asymptomatic spread, super-spreaders, and transmissibility—to stop the spread of the disease in China and beyond. Despite these gaps in our understanding, several efforts are underway by NIAID, Johnson & Johnson, and the Coalition for Epidemic Preparedness Innovations (CEPI) to produce a 2019-nCoV vaccine.



- J. Stephen Morrison



Q3: Is the Chinese political system capable of containing the virus?



A3: Early evidence suggests that officials in Wuhan and at the provincial level reacted sluggishly to the outbreak of the coronavirus, with Beijing likewise virtually silent until brief remarks by Xi Jinping on January 20 during an inspection trip in Yunnan directing officials to “prioritize the safety and health of the people.” This provided a signal to sub-national governments that Xi was now closely monitoring the issue. Despite this, Beijing’s response remained muted.



Indeed, as late as January 19, public health officials at the National Health Commission were calling the virus “preventable and controllable (可防可控),” a position that was looking increasingly out-of-touch with the reality on the ground. The front page of the People’s Daily, the Chinese Communist Party’s (CCP) paramount mouthpiece, was silent on the virus until January 25, when it ran an article lauding residents of Wuhan for “remaining at their posts.” As Beijing continued to ignore the fast-moving crisis in speeches and in the media, criticisms emerged that it was either ignorant of the full extent of the problem or was deliberately attempting to cover up the scope of the problem.



By this past weekend, such a posture was untenable, and by Saturday, the entire media and political system kicked into high gear after a convening of the seven-member Politburo Standing Committee, which is chaired by Xi and which sits at the apex of the CCP. During the meeting, Xi proclaimed that, “Faced with the serious situation of the rapid spread of [the coronavirus virus], it is necessary to strengthen the centralized and unified leadership of the CCP Central Committee” and “unswervingly implement all decisions and arrangements” that Beijing commands. Xi also announced the creation of a new policy-coordinating “leading small group” headed by Li Keqiang, the CCP’s number two leader and premier of the State Council. Over the past few days, China’s Ministry of Finance and the National Health Commission have begun announcing tens of billions of renminbi (RMB) to support local control and prevention efforts.



While Li is an extremely able manager and bureaucrat, he has long been sidelined by Xi and has come to be seen as relatively weak and feckless, leading to speculation that Xi has made Li a possible scapegoat if the virus is not soon contained. This is in keeping with other problematic policy areas, including U.S.-China relations, where Xi has opted to remain somewhat aloof, preferring to place deputies on the front line. If a crisis is averted, Xi can claim ultimate responsibility, but if problems arise, he can point the finger at lower-level officials.



Beijing’s handling of the coronavirus highlights many of the unique, and problematic, features of the CPP-dominated political system. Now that Xi has made the issue a central priority, the CCP’s organizational might will kick into gear, ensuring that vast resources (e.g., media, financial, material) are thrust at the problem.



Resource mobilization is a key strength of command-and-control systems like China’s, as evidenced by reports that Wuhan plans to build two medical facilities in less than one week, each capable of admitting more than a thousand coronavirus patients. Yet in this environment, where the CCP must be seen to be completely in control and the situation as continually improving, the space for divergent or independent opinions will remain highly constrained. Rather than focusing on the already significant challenge of containing a public health emergency, party-state officials are burdened with the extra load of considering the potential political costs of their actions.



Finally, there is also the problem of a bureaucracy that feels disempowered to act until it receives the green light from Xi Jinping, a direct result of his extraordinary campaign to consolidate power and decisionmaking. Indeed, as the mayor of Wuhan recently stated in a rare rebuke to Beijing, “As a local government official, after I get [sensitive information about the spread of the virus] I still have to wait for authorization before I can release it. . . . This is one thing people didn’t understand at the time.” Now facing a dynamic and volatile crisis, it is unclear if China’s bureaucratic system has the requisite flexibility to manage the situation.



- Jude Blanchette



Q4: What effect is the virus and the policy response likely to have on China’s economy?



A4: Much depends on whether the virus is contained or if it turns into a full-blown pandemic, but at a minimum, there will be a substantial hit to China’s 2020 growth prospects.



According to Reuters, the 2002-2003 SARS epidemic shaved off a little more than one percent of China’s gross domestic product. Fewer people have contracted or died from 2019-nCoV thus far, and Hubei province accounts for only three percent of China’s total economy. But we should expect the cost to outstrip SARS and have implications beyond the direct effect on Hubei.



The government’s response is meant to stop a pandemic, but its drastic measures—quarantining 57 million people in Hubei, limiting travel and gatherings in many other cities, and delaying the resumption of schools for at least two weeks—translates into less economic activity. China’s economy is over 7 times larger in nominal terms and 3.7 times larger in real terms than it was in 2003. If half a month of economic activity drops by two-thirds, that would mean a 2.7 percent reduction in total GDP (or $380 billion of $14.1 trillion). This would mean a drop from 6.0 percent annual growth, the recent estimate made by the IMF, to something closer to 5.8 percent.



At the micro level, Chinese and multinational companies are taking stock of the situation. The outbreak and response will, at a minimum, effect treatment of firms’ employees, manufacturing and production, support from suppliers, and delivery plans for customers. Slower activity up and down the supply chain will have financial repercussions, putting stress on banks’ balance sheets and securities markets.



Given the likely negative effect on the economy, there will be substantial pressure on the Chinese government to adopt a variety of stimulus measures. We should look for looser monetary policy, a lowering of banks’ reserve requirements, tax cuts, subsidies (perhaps re-raising them for vehicles), and expanded government procurement. If the slowdown is severe, we may even see a weakening of the Renminbi, which currently is at 6.94 to the U.S. dollar, to support exports. So, the most likely scenario is a substantially slower than expected first half of 2020 followed by a juiced-up economy in the second half of the year.



- Scott Kennedy



Q5: What are the global economic effects of the outbreak?



A5: Attention has focused primarily on impacts of the crisis on China’s economic outlook, but as the virus has spread, analysts are starting to assess the direct and indirect impacts of the outbreak on the global economy. As of January 28, the Centers for Disease Control and Prevention (CDC) lists 15 economies, along with China, Hong Kong, and Macau, with confirmed cases; together, they account for $50 trillion—or nearly 60 percent of global economic activity.



With China placing formal travel restrictions on tens of millions of people, and millions more around the world evaluating the potential exposure to the virus, economic impacts from the outbreak will extend beyond China’s borders.



Travel and tourism-related sectors are the most immediately vulnerable; data from the China Outbound Tourism Research Institute show Thailand, Japan, South Korea, Vietnam, and Singapore receive the greatest number of Chinese visitors (excluding mainland visitors to Hong Kong and Macau). For the Lunar New Year holiday alone, Thailand’s Tourism Council estimates revenues will be at least $1.6 billion lower than usual—2.5 percent of Thailand’s total tourism receipts for 2019.



The Eurasia Group estimates that a shock similar in magnitude to the 2003 SARS outbreak would lower global growth by 0.25-0.35 percentage points this year; and research conducted in the wake of the 2003 SARS outbreak found that the overall economic costs of an outbreak will be impacted by its persistence, with a more enduring shock weighing on investment and confidence.



The outbreak comes as China registered its lowest rate of growth since 1990; a further shock will weigh on the global outlook given the importance of China to global growth. In addition, the attention demanded by the outbreak means other issues—e.g., fulfilling purchase requirements under the U.S.-China Economic and Trade (“Phase One”) Agreement—will take a backseat until the health crisis is under control. The increased uncertainty is playing out in financial markets, with all major U.S. stock indices losing ground on Monday. Markets can reverse as the outlook improves, but we do not yet appear to be at an inflection point.



- Stephanie Segal



Q6: How to manage the geopolitics of this burgeoning crisis?



A6: Seventeen years after the SARS outbreak, China has not transcended the cycle of crisis and complacency that bedevils the field of health security.



As the coronavirus outbreak initially ignited, local and provincial parochial interests caused critical early delays in the response, while the national government was slow to intervene. Preparedness for outbreaks at the local, provincial, and national levels was woefully inadequate. Live animal markets, the source of SARS in 2002, remained open throughout China and are believed to be the source of the 2019-nCoV outbreak (they have since been closed in Wuhan and restricted throughout China). China’s acute sovereign sensitivities, likely aggravated by the strategic collision between China and the United States, have impeded transparency and scientific collaboration on the critical scientific questions. The WHO has thus far been ineffectual in holding the Chinese to account.



China is a stark and bewildering story of a superpower put at risk by its failings to cope with a public health crisis, owing to its endemic weaknesses and miscalculations. Geopolitically, the worsening crisis is by definition far more challenging than what was faced during the 2014-2015 Ebola outbreak in West Africa and the more recent outbreak in the Democratic Republic of the Congo. This crisis runs headlong into considerations of superpower rivalry and pride. China, the United States, other major powers and neighboring states, as well as the WHO, are all under intensifying pressure to transcend the political barriers to cooperation and focus upon the urgent scientific and public health requirements. Whether and how that will happen remains very unclear.



How is the United States going to deal with this? High-level action has thus far been an ad hoc, pickup game. The United States and other countries have understandably given greatest emphasis to screening people traveling from China (now in 20 U.S. airports) and other emergency measures, such as the removal of diplomats and their families from Wuhan.



Amid the impeachment trial, President Trump, who initially suggested the outbreak was not too serious a matter, has more recently signaled that he recognizes its gravity. The United States is hampered by uncertainty surrounding White House leadership on global health security issues. In 2018, then National Security Advisor John Bolton dismantled the National Security Council’s (NSC) global health security and biodefense directorate for global health and biodefense, folding its staff into the directorate for weapons of mass destruction and biodefense. In the coming days, President Trump will continue to hear loud calls to restore this directorate and designate a high-level official to coordinate the U.S. response both domestically and internationally.



- J. Stephen Morrison



J. Stephen Morrison is senior vice president and director of the Global Health Policy Center at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jude Blanchette holds the Freeman Chair in China Studies at CSIS. Scott Kennedy is a senior adviser and Trustee Chair in Chinese Business and Economics at CSIS. Stephanie Segal is a senior fellow of the Simon Chair in Political Economy at CSIS.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2020 by the Center for Strategic and International Studies. All rights reserved.

