Positive externalities of an epidemic: The case of the coronavirus (COVID‐19) in China

1. INTRODUCTION

The outbreak of deadly coronavirus disease 2019 (COVID‐19) which started in late December 2019 in Wuhan, Hubei, China has raised major concerns among academics, researchers, and policymakers on its likely potential effects on the health of the Chinese economy and the world at large. Touted as the second‐largest economy in the world with a nominal gross domestic product (GDP) and GDP growth rate of US$13.9 trillion and 6.1%, respectively, as at 2019 (Figure 1) ¹ and projected to take over the number one spot as the largest economy, it is clear that “when China sneezes, the rest of the world catches cold.”

Figure 1.

Growth rates of the top 10 global economies. Colors represent different years ¹

Undisputedly, the COVID‐19 has immensely dented global economies as shown by indicators from the various market and reports from factories in China and other parts of the world. For instance, the world's largest producer of car parts, Robert Bosch GmbH is reported to have shut down two factories which employed a little over 800 people in Wuhan. ² Honda Motors Co, Ltd, and Nissan Motor Co, Ltd, have also shut down their factory in Wuhan. There has been a fall in global stock prices (Figure 2) ³ as well as oil price all due to quarantines, cancelation of flights by many airlines, factories shut down, and so forth. This has reduced demand for oil drastically given that China is the second largest consumer of oil. ⁴ Given the unfortunate spread of COVID‐19 across the borders of China into other countries, the negative effects have multiplied.

Figure 2.

Impact of coronavirus on the stock markets since its inception. Colors yellow, blue‐black, green, and red represent performance of Dow Jones, Nikkei, FTSE, and Shanghai Stock Index, respectively, from January to March 2020. ³

However, amidst these woes, China's quest to contain the spread of the disease and ultimately find its cure has resulted in some positive spillovers worth discussing. Section 2 will highlight some positive lights of the COVID‐19.

2. OPPORTUNITIES TO TRY OUT NEWER TECHNOLOGIES AND DEVELOP MANUAL DISTRIBUTION

Compared to the same period as last year, the lockdown is estimated to have reduced transportation by 50%. ⁵ With mobility greatly affected due to the lockdown, people, therefore, got confined to their rooms making access to basic goods and services a bit difficult. Online services became the alternative for many dwellers, particularly in Wuhan. This alternative also came with some hurdles, as goods ordered took longer than expected to arrive. Moreover, newer policies barred door‐to‐door delivery services in some communities. Thus, individuals had to pick their ordered items at the community entrance further increasing their chances of contracting the virus. This could be described as inefficiency in the delivery market. Autonomous vehicles (AVs) or self‐driving cars provided by companies such as JD and Meitan came in to solve this market failure as it also helps to reduce the spread of the virus. Ordered goods were now loaded unto AVs at specified stations and then delivered to their destination within the communities. ⁶ JD's AVs which operated in Wuhan, for instance, delivered 24 smaller packages of orders per trip at a travel speed of 15 km/h.

The identification of symptoms, finding newer treatments, and tracking the spread of the disease became a herculean task for authorities. For instance, some health professionals although in protective gear who came into contact with patients ended up contracting the disease. Artificial intelligence powering futuristic technologies came in to resolve these issues. Interactions made via robots made treatment of sick patients easier, reduced disease transmission, and saved health workers time on simple tasks. Robots were now being used in communicating with isolated patients, disinfecting rooms, taking vital statistics, and delivering medications. In addition, meal delivery robots provided by Keenon Robotics reached people in hospitals and quarantine zones in more than 40 cities. ⁷ People who might be sick or not wearing masks, walking in open spaces were detected and alerted via powerful surveillance technologies, such as facial recognition enabled cameras and drones. Although potentially unreliable, infrared thermometers or thermometer guns increasingly become common in China, where people's temperatures were regularly checked by health workers. ⁸

Schools and universities in China, for the time being, remain closed indefinitely to minimize the spread of the virus. To reduce the impact of the postponements, online classrooms that enable teachers and professors to conduct online courses from homes such as DingTalk and Tencent Education were launched. Furthermore, online educational platforms such as Liulishuo, Onion Academy, and Zuoyebang currently offer free online classes to students nationwide.

3. REDUCING INFORMATION ASYMMETRY

During pandemics, patients belonging to low income and vulnerable groups are mostly at a disadvantage in their quest to seek preventive health services due to the limited information at their disposal. The spread of the COVID‐19 witnessed health service providers cashing in on the sale of fake cures (vitamin C boosters), face masks, disinfectant wipes, and newly published books on online platforms. ⁹ This also led to price gouging, referring to the practice where prices of goods are hiked up to unreasonably high levels due to the increase in demand. For instance, a 50‐piece surgical mask sold on Amazon at £10 early January 2020 shot up to £170 a few weeks later as the virus spread heightened (ibid). The World Health Organization (WHO) expressing concerns about some of this misleading information especially on Amazon helped rectify this anomaly. A million products with the claim of protecting patients against the coronavirus or even curing it have now been banned on Amazon. Furthermore, tens of thousands of overpriced health products from unscrupulous sellers have also been removed from the platform.

Aside from WHO and the various departments of health raising awareness via traditional media, many companies are offering new tools to share reliable information and counteract myths especially in this age where fake news, rumors, and misinformation travel faster than pathogens. For example, a map layer has been created on top of Baidu's Map App that indicates real‐time locations of confirmed and suspected cases of the virus. ¹⁰ A platform created by Qihoo 360 now provides information about the health status of travelers boarding trains or planes. New entries on the relevant symptoms, medical treatments, and preventive measures are currently updated on Medipedia, a health care encyclopedia, and are edited and reviewed by renowned medical experts. JiaoZhen a myth‐busting platform is also in place to aid users to discern fact from myth. ¹¹

4. DECLINE IN POLLUTION

The lockdown coupled with the extension of the Chinese New Year prolonged production slowed business activities and restricted transportation. This move is argued to be a contributing factor to China's economic slowdown as the affected provinces serves as major manufacturing hubs for the country. ¹² However, current satellite images show a dramatic decline in pollution levels over China as indicated by (Figure 3). ¹³ Maps from NASA indicate of falling levels in nitrogen dioxide (NO₂) compared to the first 2 months of 2019. ¹³ Although a similar trend was observed during the 2008 economic recession this current rate is estimated to have happened at a very faster rate and have lasted long. Longer exposures to elevated concentrations of NO₂ is argued to potentially increase susceptibility to respiratory infections. ¹⁴ The chances of individuals contracting the respiratory infection are limited in this instance especially when such symptoms are exhibited when one contracts the virus.

Figure 3.

Nitrogen levels before and during the pandemic in China. The colors represent the various mean tropospheric NO₂ densities between periods ¹³

5. SUBSIDIES/TRANSFER PAYMENTS/EXEMPTIONS

The applied strategies so as to contain and control the spread of the virus during the Lunar New Year holidays brought some losses to businesses. The central government via the provincial governments in their quest to revive businesses have responded by promising tax breaks, exemptions, and subsidies to affected firms. These measures have been rolled out in a number of regions and cities that have been hardly hit by the disease. Notable among these provinces include the capital Beijing, Shanghai, Hubei, Guangdong, Suzhou, Shandong, Qingdao, Chongqing, Hunan, Sichuan, Liaoning, and Fujian. ¹⁵ It is worthy to note that these policies are mostly applicable to micro‐, small‐, and medium‐sized enterprises as well as foreign businesses registered in line with the standard for classification of Small and Micro Enterprises (SMEs).

According to the China Briefing News portal, these measures comprise of preferential policies aimed at reviving and sustaining the business operations of SMEs, including reliefs on taxation, finance, social security, subsidies, and rent reduction. Notable measures which cut across this policy include: reducing rents for SMEs, waiving of administrative fees (special equipment fee, sewage treatment fee, and road occupation fee) for SMEs; subsidizing research and development cost for SMEs of up to RMB 200 000 (US$ 28 700) as well increasing financial support for SMEs. Refunding unemployment insurance premiums, offering social insurance subsidies for SMEs, subsidies for employee training, the purchase of teleworking service products, and the extension period for the payment of social insurance premiums to the end of March. Others include the lowering of lending rates, whiles local banks are being encouraged to adjust loan repayment, extend maturity periods, or renew the loan without repayment for firms in heavily hit zones. In the case of exemptions, SMEs seriously affected by the epidemic and lease state‐owned assets are exempted from paying the first month's rent, and either halving or paying zero rents in the next 2 months. In all of these measures, it is instructive to note that some are specific to some regions as they are time‐bound and thus required to be adhered to to smoothen the production and operations of the affected SMEs and other businesses (ibid).

In the area of e‐commerce, Alibaba‐backed internet bank MyBank claimed that interest on loans would be slashed for 1.5 million shops and 300 000 pharmaceutical shops in Hubei. Meituan Dianping, an online food delivery and ticketing services platform has also exempted all take‐out businesses in Wuhan for a month's commission. Huazhu Group, one of China's largest hotel operators, is also purported to have halved all franchise fees for its subsidiary hotels nationwide for 2 months starting February, whereas areas in Hubei would be waived for the entire period. ¹⁶

Of course, the COVID‐19 has stamped its foot on China's economy and the world's at large. It is also expected to last far longer and spread to other parts of the world. The steps and strategies undertaken in China in curbing this situation form a blueprint for other affected areas to emulate. Some of the methods and ways of handling diseases or outbreaks as the global crisis plays out may very well become standard operating procedures in the decade that awaits.

CONFLICT OF INTERESTS

The authors declare that there are no conflict of interests.

Okyere MA, Forson R, Essel‐Gaisey F. Positive externalities of an epidemic: The case of the coronavirus (COVID‐19) in China. J Med Virol. 2020;92:1376–1379. 10.1002/jmv.25830