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The SARS epidemic caused nearly 800 deaths, and hit China's economy alone by an estimated $25 billion -- before the country's closer involvement in world markets. (Photo by Yuki Kohara)
The Big Story

Coronavirus: Economic contagion is already rippling through Asia

Authorities scramble to limit fallout of the virus, now spread across 15 countries

WILLIAM YANG, Contributing writer, MARWAAN MACAN-MARKAR, AKANE OKUTSU and CLIFF VENZON, Nikkei staff writers | China

BANGKOK/MANILA/TAIPEI/TOKYO -- It was late December when Dorothy, a Wuhan resident, first began hearing stories about a mysterious surge in pneumonia cases in the city, an 11-million-strong metropolis in eastern China. Rumors spread quickly on social media, but the local government assured residents that the disease was "containable and curable," so she didn't worry unduly.

"I did go buy some masks and surgical spirit, but I wasn't immediately putting them on everywhere I go," she told the Nikkei Asian Review.

Three weeks later, the Chinese government announced that it had confirmed that the virus -- by then identified as a coronavirus, similar in origin to severe acute respiratory syndrome, which killed hundreds of people in 2002 and 2003 -- could be spread from one human to another. Within another week, the entire city of Wuhan was on near-total lockdown. Travel across the whole of China had been severely restricted, with tens of millions of people essentially confined to their home cities. At least 106 people have died from the illness.

"I'm very angry, because I didn't realize the virus was so contagious," Dorothy said. "I visited museums and theaters in Wuhan on Jan. 17 and 18. If I had known how serious the outbreak was, I would have never left my house at all."

In Wuhan, people rushed to buy medical supplies and stock up on food, leading to shortages of masks and medicines.

"This is the first time in my life that I've seen so much fear filling up Wuhan," said lifelong resident Robin Chen. Even though the Lunar New Year holiday is a time when Chinese people typically visit relatives, Chen's immediate family had decided to stay indoors.

"We believe there are still a lot of people who have contracted the virus in Wuhan, so we think it's more dangerous to leave the house," he said.

The 2002-2003 SARS epidemic spread to 17 countries and territories, and killed nearly 800 people. In China alone, the economic impact was estimated at $25 billion. Since then, the avenues for contagion have increased dramatically.

In 2003, China had yet to establish itself as a driver of Asian economic growth and integration. SARS came before the Belt and Road Initiative, before Beijing's massive diplomatic and economic push into Southeast Asia, before Chinese companies and tourists had gone en masse into the region.

"Now, it's a dominant economic powerhouse for the world economy," says Rajiv Biswas, Asia-Pacific chief economist at IHS Markit. "If we take tourism alone, international tourism outflows from China back in 2003 were 20 million per year. The latest numbers for 2018 show that it had risen to about 150 million. ... The transmission effects in terms of the economy will be substantial, and probably considerably more than we saw in 2003."

With cases now confirmed in 14 other countries, governments and companies have to strike an incredibly delicate balance between the need to contain the outbreak, and the need to limit their economic damage. For most of the region, the first vector of contagion is tourism.

Medical staff transfer a suspected case of coronavirus at Hong Kong's Queen Elizabeth Hospital on Jan. 22.   © Reuters

Travel advisory

On the night of Jan. 4, Phakaphong Tavipatana, the governor of the popular Thai resort island of Phuket, was in his official vehicle, dropping in on the various New Year reception parties that he had been invited to. Around 11:30 that evening, he received word of the coronavirus outbreak in China, which had just begun to make the news in Thailand, a source with knowledge of the situation told Nikkei.

A flight from Wuhan, the epicenter of the virus, was due to touch down at 1 a.m. the following morning. Phakaphong's first call was to the provincial health authorities, who set up thermal scanners to monitor the arriving passengers.

"Officers are collecting information, such as where the tourists are staying and how they will leave the country. The information is being collected to prevent Wuhan flu from spreading," Phakaphong told a news conference on Jan. 26.

According to Thai public health authorities, nine flights from Wuhan landed in Thailand daily before the city went into lockdown. They include three to Suvarnabhumi Airport, the country's main airport southeast of Bangkok, two to Don Mueang, the old airport north of Bangkok that is a hub for budget carriers, two to Phuket, and one each to Chiang Mai and Krabi.

Thailand receives the highest number of direct flights from Wuhan in Asia, and presented the first international confirmed case of coronavirus. (Photo by Akira Kodaka)

Before the lockdowns in China, Suvarnabhumi Airport was the most popular arrival airport in Asia for tourists from Wuhan. Don Mueang was fourth. According to Thai authorities, 11,558 tourists from Wuhan flew into Suvarnabhumi Airport from the beginning of January till Chinese officials stopped flights out of Wuhan on Jan. 23. Close to 9,000 had arrived in Don Mueang over the same period.

On Jan. 13, Thailand became the first country outside of China to confirm a case of the coronavirus -- a 61-year-old Chinese tourist. Since then, 13 more cases have been confirmed in Thailand.

Tourism accounts for nearly 22% of Thailand's gross domestic product, and supports 6 million jobs, according to the World Travel and Tourism Council. Chinese tourist arrivals have grown from just over 3 million in 2012 to 11 million in 2019, and now make up a quarter of the industry's revenues. Jason Lim, owner of the Old Capital Bike Inn in Bangkok, said that the industry may have to prepare for lower sales numbers, and not just from China. "We need to prepare for a likely sharp drop in Chinese tourists and how other guests may feel in the presence of Chinese tourists at hotels," he said.

That would exacerbate an existing slowdown in arrivals, Lim added, as the strength of the Thai baht has led to some Chinese travelers now choosing lower-cost alternatives, such as Vietnam and Cambodia. As of Jan. 28, Vietnam currently has two confirmed cases of the coronavirus; Cambodia has one.

The impacts on tourism of epidemics can be deep, and last a long time. As a result of the SARS epidemic, tourism to Singapore dropped 70%, leading to $1.2 billion in lost revenues, according to the WTTC. It took 17 months for the industry to recover to pre-crisis levels. Hong Kong lost $1 billion in tourism spending, and took 14 months to recover.

The first signs of the virus' impact are already showing. At the beginning of 2020, Manila-based Pan Pacific Airlines doubled the frequency of its charter flights from Wuhan to Kalibo, a gateway to the popular Boracay Island resort, to three times a week. Under current President Rodrigo Duterte, who is close to Beijing, the Philippines has experienced a surge in investment and tourist arrivals from China. The airline's president Arturo Alejandrino hoped to tap into the new demand.

Three weeks after it launched, the route was shut down as Chinese authorities put Wuhan under quarantine. The airline, which only has five planes, estimates that it will now forgo revenues of 6 million pesos ($118,000) per week. Reconfiguring the routes and redeploying the Airbus A320 assigned to the journey could take six months, Alejandrino told Nikkei.

Still, Alejandrino said he felt "relieved" that the Chinese government had initiated the lockdown. "If we did it unilaterally, we will be held responsible to the agents, passengers and the Chinese government," he said. "Revenue is revenue. But protection is also protection. We are in the Philippines, and we don't want this virus to hit the Philippines."

A quarantine officer operates a thermal scanner at the international arrivals terminal of Kuala Lumpur International Airport, Malaysia.   © Reuters

The Philippines is yet to confirm a case of the coronavirus, but the country's business community is on high alert -- particularly the online gambling sector, which employs tens of thousands of Chinese citizens. Philippine Amusement and Gaming Corp. Chairwoman Andrea Domingo told Nikkei that online casino companies have been ordered to screen employees for the coronavirus. Brick-and-mortar casinos, which are popular with Chinese gamblers, were also told to hand out masks to any visitor who asks for them, she said.

In Japan, the tourism industry's reaction was initially muted, with several tour operators telling Nikkei before the weekend beginning Jan. 25 that they had yet to experience any real concerns. But after the Chinese government banned outbound tour groups the following Monday, many began to feel an impact. A spokesperson for major chain Prince Hotels, which operates 43 hotels across the country, told Nikkei that cancellations by Chinese tourists began ahead of the Lunar New Year weekend, and increased after the ban. At the Yokohama port near Tokyo, the scheduled Feb. 1 arrival of a cruise ship carrying 1,880 people from Shanghai was canceled.

Japan's tourist industry increasingly relies on Chinese visitors. In 2002, just over 450,000 Chinese tourists visited Japan. By 2019, that number had soared to 7.4 million, according to the Japan National Tourism Organization.

Arrivals from China make up around 30% of all visitors to the country, and have helped to buoy up a flagging retail sector. Duty-free sales account for about 5% of total sales for major Japanese department stores, latest monthly figures show. When SARS hit in 2003, those sales fell nearly 3% year on year, according to the industry association.

"The economy is suffering from a consumption tax hike, so the virus outbreak has come at a bad time for Japan. It was counting on the Lunar New Year inbound tourists, and the Olympics in half a year's time," said Toshihiro Nagahama, executive chief economist at the Tokyo-based Dai-ichi Life Research Institute, in a report earlier in the week. The Japanese government increased its sales tax from 8% to 10% in October 2019.

The Summer Olympics is due to begin in Tokyo in July. The set piece event was supposed to help Japan reach a target of 40 million tourist arrivals in 2020, and to deliver a shot in the arm to an economy that has struggled for growth.

"If this virus is still a major health concern by then, it could have major impact," IHS Markit's Biswas said. "I think that is now a major policy concern for Japan."

Weak links

Whether the economic impact of the coronavirus is as significant -- or worse -- than the SARS outbreak two decades ago depends on whether China and its neighbors have learned the lessons of 2003.

The Chinese government was widely criticized for its handling of the SARS epidemic, and in particular for delaying warning other countries about the virus' spread.

Both China and the international community have evolved since then, according to the World Health Organization's regional director for the Western Pacific region, Takeshi Kasai. After 2003, China established new research centers for infectious diseases and more comprehensive reporting networks. Once the coronavirus had been identified, Chinese scientists quickly shared its gene sequence with other countries to help them to diagnose suspected cases.

"The past 20 years, member states' capacity has really improved, as we can see with what China is doing," Kasai said.

Asian countries' reactions have been mixed. Some have acted quickly and decisively, others have been more reactive. Some seem to be struggling.

When it emerged that the first person in Hong Kong confirmed to have the coronavirus had four relatives who had flown to the Philippines, Manila's bureaus of immigration and quarantine immediately mobilized agents to track them down. "We were in touch with them in less than a day," Dana Sandoval, spokesperson at the immigration bureau, told Nikkei.

The government has stepped up screening at the airport and created an interagency "task force" on the virus. "We are taking this issue very seriously," Health Undersecretary Eric Domingo told Nikkei.

Japan's health ministry said it began inspecting passengers arriving from Wuhan, using thermometers and a health questionnaire, before flights out of the city were canceled. On Jan. 27, the government decided to give the disease "designated infectious disease" status, which will enable the authorities to hospitalize a person suspected of having the disease without first seeking their consent, and to fine visitors if they lie on health questionnaires. The status, which SARS was given in 2003, will take effect on Feb. 7, after the end of the Lunar New Year holiday.

Thailand's initial reaction has been inconsistent. On Jan. 24, passengers on Japanese carrier All Nippon Airways, who flew from Tokyo's Haneda Airport and arrived at Suvarnabhumi Airport just before dawn, told Nikkei that they found little evidence of any thermal testing equipment, nor visible signage directing passengers to check with health authorities if they have signs of fever. Passengers arriving from Singapore with Thai Airways International later in the day confirmed as much, saying they had not noticed any health teams on hand to screen passengers.

Anutin Charnvirakul, Thailand's public health minister, did little to calm fears that the government has the situation at the airports in hand. On Jan. 25, in response to local critics saying that the country has not been sufficiently vigilant, he posted on his personal Facebook account: "Flights from Wuhan were already canceled. Why the f--- should airport install temperature scanner at arrival gate from Wuhan. Think before complaining. The situation is under control."

In a calmer public statement the following day, he struck a more reassuring note, telling reporters: "We can control the situation and are confident in our ability to handle the crisis."

A patchy response around the region could be dangerous. Coordination between governments, businesses and citizens is vital for the overall response to be successful.

"In infectious diseases, the weakest link in the chain becomes the strength of the [whole] capacity to respond," Kasai said.

Often, the weakest link is individuals. The experience of previous outbreaks is that people will travel regardless, and that authorities are often on the back foot, reacting "pragmatically" to the situation in front of them, said Simon Reid, associate professor of global disease control at the University of Queensland, Australia. There is also, he added, the issue that idealized response mechanisms assume that people behave rationally and responsibly, and they do not.

"We're humans," Reid said. "You cannot control human movement."

"We're humans. You cannot control human movement"

Simon Reid, associate professor of global disease control at the University of Queensland

Nowhere is that clearer than in Wuhan. Nikkei spoke to Wuhan residents and visitors stuck within the quarantine zone, some of whom were determined to travel regardless of the ban. Others fled the city after it became clear that the virus could spread between individuals. One, a trainee doctor, left on a train to her home province of Fujian before the quarantine was imposed on Jan. 23.

"I knew something about the virus, and always wore a protective mask before leaving Wuhan," she said. "But because I suspect I might still be infected, I've quarantined myself at home. I haven't gone out for a week." She reports her temperature daily to a community officer in Fujian.

Most Wuhan citizens underestimated the virus threat, and stayed in the city working right up until the holiday, she explained. Then, "without understanding the risk of contagion and danger of pneumonia, some people chose to go home."

Additional reporting by Nikki Sun, Nikkei staff writer in Hong Kong.

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