Costly Cover-Up

Costly Cover-Up

The Chinese government’s suppression of information about the coronavirus outbreak may have increased the financial and human toll worldwide


Slightly after 2 a.m. February 8, 2020, the morning after the death of Dr. Li Wenliang, the hashtag #wewantfreedomofspeech# appeared on the Chinese social media site Weibo, according to media accounts. The Wuhan ophthalmologist had been among the first to inform other doctors in late December 2019 in an online chat room about the seriousness of the then-mysterious coronavirus outbreak. Two days later, Chinese police detained him and several other doctors, reprimanding them for “disseminating rumors,” NPR reported. While treating patients, Li would later be infected by the virus and succumb to virus-induced pneumonia. By 7 a.m., the morning after his death, the hashtag had more than 2 million views and 5,500 posts, according to The New York Times newspaper. Soon thereafter, Chinese government censors deleted the hashtag and others on related topics, including one calling for the Wuhan government to apologize to Li for attempting to silence him.

“He was an ordinary figure, but a symbol,” Zhang Lifan, an independent historian in Beijing, told The Washington Post newspaper. “If it weren’t for the epidemic and nobody could leave their home, there would likely be demonstrations right now. Officials are absolutely concerned.”

In his death, Li became emblematic of the People’s Republic of China’s (PRC’s) suppression of information about the emerged coronavirus later named COVID-19. The PRC’s muzzling of doctors and other citizens may have contributed to the spread of the virus and escalation of the human and economic costs of the outbreak, experts contend.

Dr. Li Wenliang wears a respirator mask in a Wuhan hospital days before he died on February 7, 2020. REUTERS

“There is no question that the Wuhan government underestimated the disease,” an unnamed senior advisor to China’s central government, told the Financial Times newspaper in mid-February 2020. “The mayor of Wuhan has neither the expertise nor the willingness to follow health experts’ advice. His concern is that an escalation in disease prevention may hurt the local economy and social stability.” He added: “In the current political atmosphere, which values obedience more than competence, local officials have an incentive to avoid taking responsibility.”

Many others also saw Chinese Communist Party (CCP) politics interfering in the implementation of sound health practices during the crisis. “There’s a natural inclination for party officials at all levels to bury negative information and censor dissenting views irrespective of who’s in charge in Beijing,” Jude Blanchette, a China analyst at the Center for Security and International Studies, a Washington-based think-tank, told the Financial Times in February 2020. “But under Xi Jinping, the inclination to suppress has become endemic and, in this case, contributed to a prolonged period of inaction that allowed the virus to spread.”

Wuhan authorities through late January 2020 underreported the number of cases and deaths and repeatedly told the public that human-to-human transmission was improbable, Wuhan doctors revealed to the Financial Times, among others. PRC authorities had been informed weeks earlier that the deadly virus could indeed spread between humans, Wuhan doctors maintained. In an interview with Huxijie, a medical website, Zhao Jianping, a pulmonologist at Tongji Hospital in Wuhan, said he diagnosed patients with suspected coronavirus as early as December 27, 2019.

“We didn’t expect the disease to be so severe,” Zhao said. “But we were sure it could spread from human to human.” Zhao said he immediately reported the situation to the Wuhan Centre for Disease Control and Prevention, the Financial Times reported.

The World Health Organization (WHO) wouldn’t declare the outbreak a public-health emergency of international concern until January 30, 2020, more than a month after Li’s and Zhao’s warnings, likely due in large part to the PRC’s lack of transparency. Such delays, experts said, impeded wider preparation and mobilization of resources to combat the outbreak that started in Wuhan, China, in early December 2019, and would spread to more than 68 countries and territories, afflicting more than 88,365 people by March 1, 2020.

Weeks before WHO’s action, many experts believed the outbreak had already exceeded the threshold of the designation. They also questioned whether the PRC may have not only withheld information from WHO but also influenced WHO’s decision to delay the determination, according to The Daily Mail newspaper. By the time WHO declared the international emergency, the disease had already afflicted more than 9,500 people and killed 213, according to PRC figures, The Wall Street Journal newspaper reported.

A citizen pays tribute to Dr. Li Wenliang at his hospital in central China’s Huebei province on February 7, 2020. AFP/GETTY IMAGES

Yanzhong Huang, senior fellow for global health at the Council on Foreign Relations, told The Daily Telegraph newspaper in mid-January 2020, more than a week before WHO’s designation, that “the criteria for declaring a public health emergency of international concern have been met.” However, “not all WHO decisions are made based on the developments in the biological world,” he said. 

Through mid-April 2020, the Chinese government had failed to identify at least publicly the source of the Wuhan virus and also refused to answer key questions about its first detection and early spread. The CCP’s continued lack of transparency has fueled speculation that the virus escaped from a Chinese biological laboratory in Wuhan, either by accident or because of inadequate safety procedures at the lab. The CCP has repeatedly denied such claims, which are under investigation by U.S. intelligence agencies, according to The Wall Street Journal.

“We know that this virus originated in Wuhan, China. We know that there is the Wuhan Institute of Virology just a handful of miles away from where the wet market was. There’s still lots to learn,” U.S. Secretary of State Mike Pompeo told Fox News on April 15, 2020, referencing a live animal market where some health experts suggest the virus naturally emerged. “We really need the Chinese government to open up.” 

Soaring Costs

Even then, by mid-January 2020, it might have been too late to significantly stop the spread. The coronavirus epidemic was already starting to disrupt China’s manufacturing network and supply chain, sending shock waves through entire industries from airlines and tourism to auto, drug and tech manufacturers worldwide.

International companies, such as Tesla and Apple, had already suspended operations in mainland China by that time, according to Bloomberg News. The impact was also being felt outside of China. South Korea’s Hyundai, for example, halted production of cars due to issues with its supply of parts from China.

By the end of January 2020, analysts were already predicting that the epidemic’s economic toll in the PRC alone could exceed U.S. $60 billion with the PRC’s gross domestic product (GDP) taking the biggest hit. “GDP growth in the first quarter of 2020 could be about 5%, and we cannot rule out the possibility of falling below 5%,” Zhang Min, a Chinese Academy of Social Sciences official, told Caixin, one of the few Chinese media outlets that the government does not tightly control. Other economists feared even slower growth, under 4%, with no immediate rebound in sight. China’s economy grew by 6% in 2019, which was its lowest rate since 1992 when data was first tabulated.

The coronavirus also fueled inflation in China, driving consumer prices in January 2020 up 5.4% to their highest level in more than eight years, The Wall Street Journal newspaper reported in early February 2020. Moreover, the current data may not have captured the true economic effects of the epidemic, Liu Xuezhi, an economist at China’s Bank of Communications, told The Wall Street Journal.

As the detrimental economic repercussions continued to spill over to other countries, analysts adjusted their forecasts upward. By early February 2020, some analysts were predicting a U.S. $300 billion to U.S. $400 billion global impact. Among them, Panos Kouvelis at Washington University’s Olin Business School in St. Louis, Missouri, said the outbreak could disrupt supply chains for 16 months to two years “until you stop seeing these shocks to the global supply chain.”

By mid-February 2020, the China-originated COVID-19 epidemic had killed more than 1,300 people and infected nearly 60,000 people worldwide, although mainly in the PRC, surpassing the severe acute respiratory syndrome (SARS) epidemic in 2002-2003 that killed 774 people and infected more than 8,000 people globally. SARS cost the world economy between U.S. $30 billion and U.S. $50 billion, which was a fraction of the global GDP at the time of about U.S. $35 trillion, The Guardian newspaper reported. The impact of the coronavirus on global supply chains could be multiple times greater than that of SARS, Kouvelis said.

“Even if the virus does not turn into a pandemic, to think it isn’t going to impact what’s going on in the world is irrational,” Scott Minerd, global chief information officer of Guggenheim Investments, wrote in a mid-February 2020 research note, according to U.S. News & World Report magazine. “The impact of all this on corporate profits and free cash flow will be dramatic.”

A woman wearing a mask reacts as workers sanitize a traditional market in Seoul, South Korea, on February 26, 2020. South Korea reported more than 3,700 cases and 21 deaths as of March 1, 2020. REUTERS

Tumbling Stock Markets

Stock markets and commodity prices around the world also started plummeting as the outbreak progressed, largely due to fears about the health crisis. The PRC’s market fell 8% in early February 2020, the first day after the Lunar New Year holiday, the BBC reported. Other markets would soon follow. Asia’s other major markets, including those in Hong Kong, Japan, South Korea and Taiwan, all took hits. European markets declined as well.

Although initially stable, the U.S. stock market would soon face a virus-driven market correction. On February 27, 2020, the Dow Jones Industrial Average set a record for the largest point drop ever in a single day. By the end of February 2020, U.S. stocks saw the greatest decline since the 2008 financial crisis on the order of a correction in the 10% range, and analysts also started extending the duration of their negative forecasts for the PRC from the first quarter to the first two quarters of 2020. “The Chinese economy is flat-lining right now,” Stephen Roach, a senior fellow at Yale University, told CNBC’s Squawk Box in late February 2020. “The impact of unprecedented quarantines and restrictions on travel have brought the Chinese economy right now to a virtual standstill.”

Roach, who lived in China from 2007 until 2012 during his tenure as chairman of Morgan Stanley Asia, said he hoped the Chinese government would continue to work to contain the coronavirus outbreak despite short-term economic effects.

In March 2020, the coronavirus continued to spread worldwide at a horrific rate, however, hitting Italy, Spain and the United States harder than China and infecting 179 countries and territories. The Dow Industrials set more records, heading into bear territory and plunging 10% on March 21, its worst percentage drop in one day since the 1987 crash. Then after bottoming out on March 23 at a level 42% lower than the start of the year, the Dow climbed 21% over a three-day period, the largest three-day percentage gain for the index since 1931, The Wall Street Journal reported.

By the end of March, more than 870,000 people worldwide were infected with coronavirus and more than 43,000 people had died from the disease. The U.S. tallied over 189,000 cases, Italy over 105,000 and Spain over 100,000 cases to China’s over 82,000 cases through March 31, 2020. Deaths in France, Italy, Spain and the U.S. had also exceeded the number of reported deaths in China at that time. Meanwhile, the Dow experienced its worst first-quarter performance ever, losing more than 22% of its value in the first three months of 2020, according to CNBC. The S&P 500 would record its worst first quarter since 1938.

COVID-19 case numbers and deaths continued climbing into April 2020. Volatility in the U.S. and other markets also continued into April, as economies around the world continued to be battered by the pandemic in unforeseen ways. Although investment firm Goldman Sachs predicted in late March that the U.S. economy would experience an unprecedented decline in the second quarter, the firm said the recovery would be the fastest in history, CNBC reported.

Medical workers don protective suits in a preparation room next to isolation wards at Wuhan Red Cross Hospital in Wuhan, China, the epicenter of the emerged coronavirus outbreak, on February 24, 2020. REUTERS

Total Costs Unlimited

The worrisome economic indexes and forecasts underscore the importance of sound public health policy and good governance and show how failures in each can translate not only into financial costs but also human ones.

The PRC could have mitigated these costs by openly and expediently sharing accurate information with its citizens and the world, many experts contend. No one will ever be able to quantify how many lives and how many billions, even trillions, in assets and revenues could have been protected by swift action by the PRC. However, experts agree that serious economic and social consequences will ensue, especially in China. The total costs will depend on the PRC’s ongoing ability to curtail further spread of the virus, how it manages the emerging slowdown and whether it assumes responsibility for its initial missteps, analysts agree.

“A premature relaxation of quarantines and travel restrictions could lead to a relapse that would be far more dangerous than the outbreak at present,” Roach told CNBC in late February 2020. “The Chinese would want to avoid that at all cost. That’s important for the rest of the world where the infection is clearly in the process of spreading right now,” Roach said.

Governments, including the PRC, are rolling out stimulus packages to help offset the economic impact of the outbreak. However, they are unlikely to be enough to remedy the effects of the drastic measures that had to be implemented to stop the epidemic once it was raging. “These measures are basically insensitive to policy action,” he said. “What fiscal and monetary policy can do would be to attempt to stabilize markets — which is certainly important — but most importantly, to underwrite the upside of this subsequent recovery once economies like China and elsewhere go back to work. So, they’re playing for the other side of the virus-related impacts, not the downside.”

No measures can offset the human costs of lives and freedoms. The real tragedy is the PRC had the power to offset the magnitude of such losses but placed the CCP agenda above Chinese citizens’ rights and health, a move that also placed the rest of the world at risk. 

“Many people believe that if the authorities had listened to his [Li’s] warning, the virus would not have spread as it has,” wrote correspondent Keiichi Takamura in mid-February 2020 for NHK World online, a Japanese state-owned international news service.

When Li died, online criticism of the CCP exploded worldwide. The PRC sought to mute such criticism by sending condolences to Li’s family and launching an investigation into Wuhan authorities’ handling of the outbreak. Even if motivated by the engines of the PRC’s propaganda machine, the small steps seem to indicate some movement toward heeding citizens’ concerns, valuing greater transparency and better governance.

Before his death, Li emphasized the importance of getting key information about the outbreak out to the public, rather than his vindication, according to NPR. In an interview with the online magazine Caixin, Li said: “A healthy society should not have only one kind of voice.”