When China sneezes, the world catches a cold. This old adage for the role the country plays in global economic growth is getting a new interpretation as the coronavirus outbreak which started in Wuhan threatens to spread to a stock market near you.
The mainland's mysterious outbreak, which has now killed 17, stopped a miniboom in its tracks. This week began with optimism about the "phase one" trade war truce between Beijing and Washington and about scattered hints Chinese growth might be stabilizing.
That had investors upping bets in Shanghai, propelling the composite index to a nearly 8% gain from its November doldrums.
By Tuesday, bad news had caught up with the bulls. The steady increase in pneumonia patients and news of confirmed cases in Japan, South Korea, Taiwan, Thailand and now the U.S. began echoing the reach of the 2003 SARS crisis. The Shanghai Composite started falling and by Wednesday lunchtime was down 2.6%.
China's financial sneeze reached U.S. Treasury securities, which are seeing a burst of safe-haven buying. European shares, meantime, are seeing red: airline groups Air France-KLM, IAG and Lufthansa and China-reliant luxury brands Burberry, Hermes and LVMH are already feeling under the weather. Asia's export-addicted economies will be next.
How bad could things get should the coronavirus get out of hand? Very, if the fallout from 2003 is any guide.
First, the good news: China, it seems, has learned from its numerous missteps 17 years ago when SARS killed nearly 800 people and caused at least $40 billion of losses around the globe.
China was roundly criticized for covering up the crisis and misleading the World Health Organization. Not this time, argues state mouthpiece Global Times, which wrote recently: "In the early moments of SARS, there was concealment in China. This must not be repeated."
There is also optimism: while the virus can be spread from human to human, WHO officials suggest what is being called "2019-nCoV" might not be transmitted as easily as SARS. With any luck, this latest scare will prove no more damaging to world gross domestic product than intermittent avian flu scares since then.
Now the bad news: pneumonias have a knack for mutating and changing course as pandemics gain strength. This was what gripped the global economy in 2003.
Really, if Hollywood producers tried to devise a disaster film scenario, their wildest imaginations might not outdo today's reality: a trade-war battered global economy facing a possible pandemic just as a few hundred million people at its epicenter prepare to fan out in all directions for the January 25 Lunar New Year holiday.
U.S. President Donald Trump's trade war just resulted in the slowest Chinese growth in 30 years, and number-crunchers in Beijing are worried in case consumer demand catches its own cold.
Chinese New Year is a holiday that inspires humankind's largest annual migration. Hundreds of millions of travelers jammed into very proximity -- planes, trains, automobiles, ships -- provide an ideal breeding ground for hostile pathogens.
The weeklong holiday is a pivotal period for traveling, shopping and banquet-style feasts that generate growth around the nation. If tens of millions of mainlanders stayed home over the next 10 days, first-quarter GDP might suffer markedly.
China-dependant economies could suffer terribly too. The trade war has pushed countries from South Korea to Singapore to the edge of recession and is contributing to a powerful downturn in Hong Kong. SARS cratered economies in Hong Kong, Singapore and Taiwan, and China's economy is an exponentially more important driver of world growth today than it was in 2003.
In Tokyo, Prime Minister Shinzo Abe charged Cabinet ministers with increasing Japan's defenses -- enhanced monitoring, quarantine procedures and data collection. For Abe, a sudden surge in cases could quickly imperil the Tokyo Olympics set to begin in August. It casts a pall more generally over tourism flows, an important driver of Japanese growth.
Governments should hope for the best, but prepare for the worst; Japan's crisis measures are worthy of replication elsewhere. The suspicion and nationalism which follows past outbreaks -- be it SARS or Ebola -- are not an option in 2020. Public officials must share intelligence with peers in neighboring countries early and often; stockpile supplies and medication; and assemble skilled emergency response teams. It is better to overreact than be caught napping.
Policymakers, meantime, should be drawing up their own blueprints in case disease imperils economic impetus. This is no time to assume conventional economic tools are any match for a virus beyond out control.
Investors may already be pivoting to take-no-chances-mode, making for chaotic conditions in markets in fragile health.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."