China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Sweden’s fight against the corona virus – a model for emerging countries?

May 13, 2020

International analysts look currently very carefully at the Swedish way of combatting the global corona virus. Criticism from abroad is mostly very loud whereas the majority of the Swedish people strongly agrees with the official soft fight against covid-19. Johan Giesecke, former Swedish chief state epidemiologist and currently very active promotor of the soft Swedish way to combat covid-19, feels convinced that the lax Swedish model will turn out be superior to the more restrictive approaches in the rest of the world. Being harsh now only delays future infection problems, even in so far successful New Zealand, according to professor Giesecke.

But also the official Sweden obviously shares – more or less – Giesecke’s view. It seems, however, be forgotten or neglected that the corona virus is a new phenomenon also for experienced virologists. There is still no certainty about anything – and particularly not about the optimal strategy for fighting the new global virus.

Emerging countries are affected by covid-19 as well – but the Swedish way of combatting the virus is no option

Even in Sweden we have no idea about the real volume of infected people. Certain experts believe that about 500 000-600 000 people already have been infected by the virus alone in Greater Stockholm which could be a multiplier of around 50 compared to the official number. This little calculation of mine clarifies two points. First, one may feel even more convinced that applicable official knowledge about corona by definition remains extremely low. Second, more should be done about Swedish corona statistics. The number of tested persons was – and still is – simply too small. Some change may now be going on.

This little example from Sweden underlines well the hard work that is necessary to organize and analyze the fight against covid-19. When regarding this fact, it is certainly most natural that these difficulties are much more challenging in poor and emerging countries, even in the more advanced ones. For this reason, the Swedish way of combining limited restrictions with quite liberal mobility applications certainly should be ruled out by emerging markets and particularly by less advanced developing countries.

This is my own conclusion despite the fact that I am not a virologist. But I have experience from analyzing the efficiency of institutions outside the advanced OECD area. Institutional shortcomings are common in poor and less developed countries and should be reduced as soon and as much as possible to make the fight against cobid-19 work better. Read more about this in the next chapter. By the way, also advanced countries failed initially quite a lot in their battle against the corona virus.

Urgent priorities: health care, organization, communication and instructions – areas where developed countries could help

Many emerging and developing countries have already now substantial problems with the corona virus. Some simple statistical results and calculations below mean at least some confirmation of that conclusion.

It has already been mentioned above how difficult it is to guesstimate the multiplier of anonymously infected people for the case of Stockholm. Considering this fact, it is indeed understandable that less developed countries will have even more complications to come to a roughly applicable statistical guesstimate. However, some lessons can be taken from the initial mistakes in China and most OECD countries.

Numbers for registered infection cases in the 10 most affected countries                     (per 1 million people, average)

EU countries                         3300

South America                        700

Asia (Iran excl)                        115

Africa (South of the Sahara)      85

Källa: Worldometers, own calculations

The numbers above should not be used as accurate measurements. They just reflect two issues: the current proportions of registered infections between the EU and three continents and – derived from these continental numbers – future risks of explosive developments. Challenges seem to be particularly large in Africa, parts of Asia but also in some Latin American countries like Brazil and Mexico. For India, Indonesia and Bangladesh, the officially noted average infection number per 1million is only 50 as regards the first two mentioned countries and 95 for Bangladesh – three countries that cover at the same time almost one fifth of global population.

To be re-considered in times of corona: The composition of foreign aid

Altogether, there is no doubt that emerging and lagging developing countries do need all thinkable support from the developed world – now! Sure, politicians see the corona pandemic mostly in national terms. This approach is natural and also understandable. However, advanced countries should not forget that corona is an extreme global issue. They therefore should give countries with weak health systems and other insufficiently working institutions all possible financial resources and educational help to meet future corona challenges.

Maybe, some part of the existing and hopefully extended foreign aid from Western governments or the EU could be directed to more direct flows of financial and human resources to help affected poor and less effective countries in their fight against the corona virus.

Again: There are no borders for the corona virus. This challenge is totally global. Widely spread support from all over the world to lagging countries should be regarded as a commitment! Also for Sweden – but certainly not by exporting its model for fighting the virus.

Conclusion: Sweden could be a driver for corona-adapted foreign (financial) aid to less favored countries – not to forget corona education and institutionally improved health care. However, flock infection – not even the light Swedish version – should not be regarded as an option for less advanced countries in their fight against covid-19. This would mean too many corona victims already in the first phase of accelerating infections.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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The corona conundrum in China

March 17, 2020

Frågor om Kinas corona-återhämtning

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Sammanfattning på svenska / summary in Swedish 

Kommunikation från det officiella Kina har tveklöst präglats av påtagliga brister vid en historisk tillbakablick. Själv har jag uppmärksammat detta problem framför allt vid BNP-analyser. Min slutsats var vid upprepade tillfällen att denna historiska malus kan hänga kvar under ansenlig tid även när kommunikation och statistisk kvalitet verkligen förbättrats. Därför verkar det svårt att aktuellt kunna bedöma lätt optimistiska kinesiska ställningstaganden kring coronaviruset. Jag har en del historiskt betingade tvivel. Förhoppningsvis har jag fel, för Kinas och hela världens skull.

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English version

“It’s only make believe” was one the nicest songs in the 1960s, performed by the British popstar Billy Fury. This song came into my mind this morning when I started my readings and reflections on the Chinese economy. Is it really only make believe when it comes to Chinese reports on the corona virus and the described strong return to work and production?

Of course, I wished it were so – for the sake of China itself and the rest of the world. However, I still have – right or wrong – a serious trust problem when looking at current statistics and comments from China. This is a trust problem mainly based on historical experience. At different occasions, I have been pointing in the past at the risk that, for example, China’s obvious long-lasting shortcomings in GDP-statistics will make it difficult to recognize or appreciate really achieved progress in communication and statistical reporting.

The return to work and production

Chinese media report these days more and more about a sizeable and strong supply chain recovery. This is an area all neutral external and/or foreign observers cannot have a distinct opinion on. Hopefully, this is the case. However, such a phenomenon still would not say anything about future production plans. Demand itself from many countries still may be alive right now but may be shrinking onward because of more dampened or reduced growth in many countries.

The enormous and sudden drop of new corona cases

Currently, China has around 81 000 reported corona-infected people. Almost 69 000 are statistically totally recovered https://www.worldometers.info/coronavirus/. This is the highest share among the most strongly affected countries as far as I can note – but I cannot have a strong opinion on this issue since China was the first affected country. What surprises me more are the extremely low numbers of new corana cases in China. I really do not know what conclusion on this number may be appropriate.

Avoidance of a recession – still a realistic scenario?

Hope of a visible recovery later this year is still alive in China – not only in official statements. But I really wonder what official GDP statistics will show for the first and second quarter. Indicators for the first quarter are indeed worrying. In February, the PMI has dropped dramatically. So did, for example, retail sales (minus 20.5 % yoy in Jan-Feb), fixed investments (minus 24.5 % yoy in Jan-Feb), and industrial production (minus13.5 % yoy Jan-Feb) – a crash also when considering the special circumstances.

My impression is that China’s GDP development in the first quarter 2020 in both real terms and in reality was in negative territory (somewhere between a slight or a more recognizable minus). I emphasize the chosen word of “impression” because it is really impossible to be more precise right now.

For the first time since quite some time it has become hard to make a forecast on Chinese quarterly GDP growth. Do Chinese decision-makers prefer an understandable major drop in order to praise a possible sizeable recovery later on – or do they prefer a more even growth development downward as they did in the past? Or a position somewhere in between – which actually is my view?

Summary: Altogther, there is no doubt that the official China will do everything to show that the economy is on the right track again when the 100th anniversary of the foundation of the Communist Party will be celebrated in 2021. However: to make this really credible, recognizable progress should be visible also at the end of this celebrated century, i.e. by the end of this year!

Back to Billy Fury: It is not only make believe anymore…

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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The Swedish analysis of the corona virus and the need of understanding globalization

March 10, 2020

The corona virus is a top topic also in Sweden. This should not be a surprise since Sweden currently is ranked as number 13 among the countries with most corona infections (as of March 9) https://www.worldometers.info/coronavirus/#countries. This is a relatively high position.

Official communication about the corona virus is mainly handled by the Public Health Agency of Sweden (PHAS, Folkhälsomyndigheten) https://www.folkhalsomyndigheten.se/the-public-health-agency-of-sweden/about-us/our-mission/. One important task of PHAS is “to provide expert support to investigations of suspected or confirmed outbreaks of communicable diseases and to maintain laboratory preparedness needed for effective communicable disease control in the country”.

There is no doubt that an infection by the corona virus must be regarded as a “communicable disease”.

The lagging understanding of globalization

In my view, the PHAS has shown serious shortcomings in understanding globalization and its consequences. Sure, the PHAS admitted that developments and trends in China were underestimated https://omni.se/tegnell-medger-miss-i-virus-bedomning-trodde-att-kina-skulle-fa-stopp-pa-det/a/pLkM9E. However, if PHAS had looked for more information of global forces in general, global productions chains and China’s close integration in the world economy, the underestimation of China’s corona conditions could at least showed up milder.

And now adding that corona infections in China are slowing down is also a quite risky official statement by PHAS. Theoretically, it may be the case but there is no applicable evidence. From the economic area we know that official Chinese statistics often are not credible enough, particularly when it comes to the calculation of GDP. How much correctness is in the statistics of March 9 that China on that day had less new cases than Sweden, i.e. only 44 versus 57? Obviously, the PHAS could have been (more) in touch with regular users of Chinese statistics and the experience of these analyzing people.

Another example of insufficient consideration of global impact on the spread of the corona virus can be picked from the too narrow view on the imported corona virus by Swedish skiers in South Tyrol. PHAS believed that the end of the Swedish winter holidays for school kids a week ago would mean a peak for new corona cases – but at the time forgetting that Italians and people with recent trips to Italy nowadays get around in the whole world https://www.dn.se/nyheter/sverige/antalet-coronafall-i-sverige-kan-ha-natt-toppen-kommer-snart-att-klinga-av/. This is globalization in real life and on the corporate level.

A very strong bilateral view on global virus risks has become outdated!

Conclusion:

The Swedish example shows the cooperation between government organizations certainly should include different areas like the environment, institutions and psychology – but also more frequently the characteristics of modern globalization as shown above.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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