General

China’s communication on the corona virus – reality and opportunities

Thursday, February 27th, 2020

More recently, the corona virus has also started to frighten stock markets. The virus has reached more and more countries – and finally Europe more visibly as well, particularly Italy. The outbreak is spreading. One may say unfortunately and unexpected – but for virologists certainly no surprise.

Statistical sources

China remains by far the most negatively affected country with its epicenter in Wuhan (see https://www.ft.com/content/a26fbf7e-48f8-11ea-aeb3-955839e06441, also the following more anonymous source with similar numbers https://www.worldometers.info/coronavirus/#countries). Here I could find for China on February 26 totally 78 073 cases with infection, 30 049 totally recovered people and, unfortunately, 2715 total deaths.

It must be regarded as impossible to judge more precisely the quality and correctness of these statistics. Despite further search, however, I could not find better or more reliable info on the Chinese infection and recovery cases.

The corona virus in Chinese media – a new opportunity for more transparency?

There is a widely spread belief outside China that the numbers for the initial outbreak of the epidemic, the unregistered cases of the disease and the true lethality rate strongly underestimate real developments. This mistrust is certainly caused by inconsistent and limited reporting in the beginning of the crisis – but also by the long-time transparency bottlenecks which I addressed many times in the past.

Having studied more lately quite a number of articles on the corona topic in Chinese media takes me to the conclusion that the virus problem indeed dominates the headlines. However, these reports are mainly presented with encouraging attributes, supported by selected positive comments on all the managed efforts from official and prominent voices from abroad.

Thus, hope dominates, also when it comes to the economy. President Xi Jinping has recently been stating that China can and will meet this year’s social and economic goals. This conclusion underlines what has been written in one of my previous blog that this year’s GDP growth should come in as close as possible to the growth goal of “around 6 %”.

But: The content of “as close as possible to 6 percent” may or will be changed in reality to a somewhat lower “as close as possible”, at the same time using the foreseeable and unforeseeable negative consequences of the corona virus as an excuse.

Right or wrong, China has recently also received some international praise for its fight against the corona virus. In my view, China has now a unique opportunity to improve transparency and international recognition by communicating as openly as possible about the corona virus and the economic/statistical consequences.

Why not commencing now – with the corona virus as the concrete starting point – a new kind of opening-up policy aiming at better transparency after Deng Xiaoping’s important opening-up approach for more cross-border trade in 1978/1979?

At the end of the day, transparency always means a virtue.

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

 

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Turkey’s enormous problems

Monday, August 13th, 2018

From my previous professional life as a bank chief economist I remember very well the Turkish banking crisis of 2000/2001, followed by a major economic downturn (GDP 2001: -5.3%). Prior to the banking crisis, macroeconomic imbalances in mainly the budget and the current account had worsened alarmingly and, thus, strongly contributed to fading international confidence in Turkey’s financial – and also political – system. The lira weakened strongly at the time. Foreign investors sold huge amounts of their Turkish T-bills and even stocks. Logically, the currency reserves shrank dramatically. At the end of the day, the IMF provided Turkey with a 10.5 billion financial rescue package. After this, a serious political crisis followed all the same – before an economic recovery could be noted and the weak banking system was reformed into a more stable shape.

Unfortunately, the acute starting position of the current Turkish crisis does not look very different from the one 17 years ago. Major macroeconomic fiscal and trade imbalances exist also today. The Turkish currency has dropped substantially not only in recent days but also by around 35 percent so far in 2018.

Political conditions, however, look partly different this time – with other kinds of political leadership in both Turkey and the U.S., giving the current economic problems in Turkey even stronger political dimensions than in the beginning of this century. But this does not necessarily mean that the current Turkish crisis “automatically” will end in a more benign way, particularly when considering president Trump’s current resistance to potentially needed major international global financial rescue actions.

Worst case scenario

Still, the worst case scenario is only a scenario. But the current situation is critical and can aggravate further. The worst case scenario could include major bank problems in Turkey with contagion to EU banks that have major loan and securities involvement in the Turkish financial system. Such a development could lead to major GDP losses in mainly Turkey but also to a more limited extent in the EU. Read, by the way, more about this relationship in the research of Hyman Minsky!

All this leads to the conclusion that the coming development in Turkey should be given very strong analytical attention. President Trump’s future ideas and action play certainly an important role in this respect. Sometimes, he changes his mind unexpectedly in another direction. But Turkey itself should also under all circumstances work more ambitiously with its ongoing macroeconomic imbalances, particularly since the country is highly indebted abroad – both what concerns private and public debt.

Experience from other countries with similar challenges shows that nervous or speculating financial markets usually are stronger than the defense lines set up by the pressured country with its currency reserves – unless the acute problems are combatted promptly or surprisingly positive news make the whole picture brighter.

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

 

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Trump and China

Wednesday, November 9th, 2016

The United States is a global power. So is China. Two global powerhouses should get along. Will this be the case with president Trump? This is an important question,

It is a clear matter of fact that the political relations between the U.S. and China were in the worst shape for several decades already before the American presidential election. Thus, it seems to be hard to predict improved political relations between Washington D.C. and Beijing any time soon. The question seems to be rather how much these sensitive political relations can deteriorate further if Trump’s heavy protectionist threats against China come true.

Brexit, the possible or probable death of TTIP, increasing American protectionism against China, a possible future populist president in France, etc ., are challenges that can/will contribute to increasing protectionism in the world. Such a development is never positive and would certainly affect China negatively, particularly since China so far has been the main beneficiary from the past few decades of globalization and trade liberalization.

Conclusion: China has no choice but to conduct a pragmatic political course vis-à-vis the United States.

Hubert Fromlet
Senior Professor of International Economics, Linnaeus University
Editorial board

 

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