When an epidemic coincides with the maelstrom of spending that traditionally accompanies the festivities of the Chinese New Year, the economic health of a country also suffers heavy stress. The rhetoric of the Chinese government is marked by promises of economic prosperity for its growing middle class, and it is likely that the threat of fiscal insecurity – which we are seeing during the outbreak of the Wuhan coronavirus – has a broad social and political effect.
GDP growth as a “state religion”
The most significant event of the last four decades in the world has been the transformation of China, which has gone from being an underdeveloped country to one of the great economic powers of the planet. The Government and the Chinese Communist Party (CCP) often use this fact to claim the loyalty and support of their 1.3 billion citizens. China began its economic reforms in 1979, and for decades has experienced impressive growth in its GDP, with frequent double figures. Since Xi Jinping became president of China in 2012, these numbers have ranged from 6 to 8%. It should be noted that the reliability of the data provided by official Chinese sources requires a deeper analysis, given the political influence linked to these figures, which are framed in the narrative of “social stability” so used by Chinese officials in their statements and speeches
The basis of the control exercised by the CCP over the country is a social contract that can be summarized as “prosperity without freedom.” In other words, as long as the 400 million Chinese people who make up the solid middle class grow and enjoy a good standard of living, the party will not be seriously questioned by the innumerable cases of corruption, manipulation of justice and growing media censorship. information.
This explains why GDP growth is considered a national indicator of compliance with said “social contract”, and why any anomaly causes great anxiety in the Government and the party, but also in citizens – who usually react with protests in the network, rarely with demonstrations in the street – and in the richest, who move capitals or even entire businesses and families abroad.
Wuhan coronavirus is a disaster for tourism and the film industry
While markets have been nervous about the news about Wuhan's coronavirus, and many predict consequences for China's global investments and international trade, the economy most directly affected is the domestic one. Some industries already show signs of a strong slowdown.
Although for years it was considered a luxury, national and international tourism has flourished in China since the growing middle class began to see travel as a sign of social success. The time of the Chinese New Year represents a boom in national travel, as tradition requires that all generations of the family meet. For the 2020 celebration, 3 billion shipments were expected, but the Government has restricted transfers, and many frightened citizens have renounced their travel plans.
As Ting Lu, tourism expert at Nomura Asset Management, the first time that the Chinese national tourism sector had problems was after the SARS epidemic of 2002-2003:
“China’s real GDP growth dropped by 2 percentage points from 11.1% in the first quarter of 2003 to 9.1% in the second quarter, before recovering to 10% in the third quarter of that year. Growth was largely dragged by the tertiary sector, especially by two major subcomponents of GDP: (1) transport, storage, and post, and (2) hotel and catering services ”.
The real growth of Chinese GDP fell 2 percentage points, from 11.1% in the first quarter of 2003 to 9.1% in the second quarter, before recovering to 10% in the third quarter of that year. The growth was greatly damaged by the services sector, especially by two important components of GDP: (1) transport, storage and mail and (2) hospitality and catering.
The film industry, which is considered the second most important in the world, has also received a heavy blow due to the moment in which the outbreak occurred. The premieres of the most popular films of the year are always scheduled to coincide with the long holidays of the Chinese New Year – which can last from 10 days to two weeks – when people have time to go to the movies. This year, these important premieres have been postponed indefinitely. In addition to film studios, such as Hengdian studios, considered the largest in the world, more than 70,000 cinemas have been closed to prevent the spread of the virus. This also has political consequences in the Chinese film industry, strictly controlled by the ideology of the party, which imposes quotas for foreign films, which often attract audiences much larger than national films.
The following tweet includes a photo of the official announcement that Hengdian film studios will remain closed due to the alert for Wuhan's coronavirus.
横店 影视城 暂停 剧组 拍摄 与 景区 开放 https://t.co/0ngtn5hHDo pic.twitter.com/wpjbXtm5e9
– 电影 好好 看 (@ MovieDaily2018) January 28, 2020
Hengdian Film and Television City suspend filming and the start of the stage.
It is very likely that the national economy will be affected. It is too early for figures, but it is enough to say that the Chinese New Year is a time of mass shopping, gifts, special offers and trips to restaurants. Although many purchases are made online, deliveries have been suspended or slower due to the risks of coronavirus.
Wuhan is also an important industrial center, as explained by Benny Liu, co-chair of KPMG in China:
“Wuhan serves as a critical industrial, research and education base, and integrated transport hub for the nation. Wuhan’s GDP growth was 7.8 per cent in 2019, 1.7 percentage points higher than the national average, local government data showed ”.
Wuhan is a critical industrial, educational and research base, and an integrated transportation center for the country. Wuhan's GDP grew 7.8% in 2019, 1.7 percentage points higher than the national average, according to local government data.
In fact, Wuhan houses the offices and plants of many of the 500 most important companies.
In this context, the declarations of the central and local governments may not be enough to restore confidence that the Government and the party can fulfill the “social contract”. As Xi Jinping himself said at the XIX PCC Congress in 2017,
“What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.”
What we now face is the contradiction between an unbalanced and inappropriate development and the ever-increasing need of people for a better life.