The outbreak of severe acute respiratory syndrome (SARS) has hit Beijing hard and swept across China. The epidemic will have a tremendous impact on China's political and economic situation. Various indications have now emerged as to what kind of impact the outbreak will have on the power structure, but they are not adequate to draw conclusions.
The only sure thing is that the outbreak will deal a fatal blow to the economy. In China, where politics and the economy are closely intertwined, stupendous economic losses might trigger political upheaval.
Although the outside world could only make tentative evaluations on the economic losses that SARS will inflict on China, the figure is already staggering. The April 24 issue of the Far Eastern Economic Review presented a study of government documents and reports issued by eight financial institutions, including Merrill Lynch, Goldman Sachs and Morgan Stanley. The study arrived at an estimated loss of US$22 billion.
This is merely the direct losses resulting from preliminary estimates. With SARS continuing to spread from Beijing and Guangzhou to all over China, the figure will definitely keep going up.
For example, China's manager of the sporting-goods manufacturer Adidas said if the Beijing authorities fail to contain the SARS outbreak by mid-May, Adidas will have to consider transferring some orders to other countries such as Vietnam and Indonesia. Several manufacturers of ready-made clothes also have similar contingency plans.
On the surface, the SARS impact on China's economy is manifest in the shrinking tourism sector, plummeting stock prices and decreasing orders from foreign companies. But the real threat does not lie here. For example, China's tourism industry does not account for a big chunk in the overall economy, and it will not have a great impact on the gross national product even if travel agencies have to close. The real crisis lies in two aspects.
First, a decline in the economic growth rate. Citigroup recently revised its forecast of China's economic growth this year, down from 7.6 percent to 6.5 percent. This is not far off from the World Bank forecast. In any case, a decline in the economic growth rate is unavoidable.
For years China has relied on high economic growth to maintain social and economic stability. Without it, unemployment and the financial black hole cannot be effectively contained. The SARS epidemic will eventually pass the peak, but the social crisis, induced by the slowing economic development, will soon surface and brew a second storm. The exhausted Chinese authorities might find it impossible to salvage the situation.
Second, a decline in foreign investment. China's steady growth in the past decade reflects its increasing dependence on foreign investment. As domestic demand is seriously insufficient, China will not have the oil it needs to start the economic engine once foreign investment slumps.
The SARS storm will expose the contradiction between China's autocratic structure and the market-dominated free economy. Foreign companies' faith in Beijing will be affected. To what extent this will affect investor confidence will be of crucial importance.
Even if the SARS outbreak can be kept under control, it may not be entirely contained in the short term. China will still be viewed with fear, which will deal a fatal blow at its efforts to attract foreign investment.
As China's economy has been growing for 20 years, more and more economists start to worry that it is going downhill.
Wang Dan was a student leader during the 1989 Tiananmen Square demonstrations in Beijing.
Translated by Jackie Lin
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
I have heard people equate the government’s stance on resisting forced unification with China or the conditional reinstatement of the military court system with the rise of the Nazis before World War II. The comparison is absurd. There is no meaningful parallel between the government and Nazi Germany, nor does such a mindset exist within the general public in Taiwan. It is important to remember that the German public bore some responsibility for the horrors of the Holocaust. Post-World War II Germany’s transitional justice efforts were rooted in a national reckoning and introspection. Many Jews were sent to concentration camps not
RSS