Decoding Coronomics

Corona is a Chinese Virus but don’t blame the Chinese for it…

Ever since the Corona outbreak has happened, various social media and other networking platforms are flooded with an outcry against China. Strident demand for boycotting Chinese goods has been gathering pace.

This post is to bust some myths and get closer to reality. Corona is as much a natural calamity, as it’s an economic calamity caused by poor handling of economic problems.

On the onset, linking economic problems with Corona may sound ludicrous, but in truth, economic reasons are equally valid.

First and foremost, more than China needs the world, the world needs China—like it or not.

Did you know?

  • China has a 16% share in global GDP Vs 2% 30 years ago
  • Australia exports 16% of its output to China against 4% about 15 years ago
  • China consumes 15% of South Africa’s produce
  • 14% of revenues earned by US IT companies forming a part of (MSCI Index) are from China
  • Number of Chinese students going abroad for studies increased 16 times over the last two decades
  • 44% of world’s production of computers and electronics happens in China
  • China consumes 21% of global mining exports, chemicals and paper products have a share of 12% each

(Source Mckinsey 2019)

Bottom line

You simply can’t substitute China in the global trade for at least the next 25 years.

The world has created dependencies. In search of higher profits, corporations across the world moved their manufacturing bases to countries offering cheap labour without compromising on the quality. Until, they could bully manufacturing destinations, they did and they will, even in future. But the trouble starts when manufacturing destinations have impregnable military capabilities. With this as a backdrop, we should see trade wars, now and even in future.

Now about the Chinese Virus…

Sources of SARS and Corona have been traced back to live wild-life markets in China. And, this has given rise to a general notion that, majority of Chinese eat exotic foods and their eating habits have cost the world pretty pennies.

Well, many of you may not know, a peacock costs 800 Yuan—and it’s not cheap. In a city like Shanghai one can have at least 10-15 average meals for that price. A baby badger costs no less than 1,300 Yuan.

Experts say, in contrast to the popularly held notion, majority of Chinese don’t eat exotic meat and buy from these live markets. In fact, treating your guests with exotic meat is often considered a status symbol and a means of showing gratitude in the Chinese upper economic class.

In the wake of the spread of Corona, China has now banned these live markets permanently. Post the SARS outbreak, the Chinese have taken action against these markets temporarily but the trade not only resumed but proliferated soon after.  Will it be different this time? Going by the historical evidence, the permanent ban also doesn’t mean much. Illegal trades in animals (who are treated as resources in China) might proliferate under the cover of corrupt systems.

According to a government sponsored report released by Chinese Academy of Engineering, the size of the wild life market in China was around USD 74 billion in 2017. And that’s under threat now. According to National Geographic, the Chinese government allows breeding of 54 species on farms. It provides employment to over 1 million people—this could be a high-stake game for the Chinese government.

But banning wildlife permanently is easier said than done in China. Wild Life has cultural value attached to it.

Did you know, wildlife animals are widely used in Traditional Chinese Medicines (TCM)? In fact, TCM is a USD 130 billion industry in China and growing rapidly. In the aftermath of the global financial crisis (of 2008), China decided to shift focus from exports to consumption. And, in this set up, TCM related health tourism is expected to grow by leaps and bounds in future, especially now that WHO recognises TCM as Traditional Medicine (TM).

China is a home to 1.4 billion people and providing adequate employment opportunities to such a huge population isn’t an easy task for any administration, especially when the global economy is facing recessionary pressure. Over the last 2 decades, the officially declared unemployment rate in China has been in the range of 3%-4.5% largely. Higher unemployment may create pressure on the government, like it does in any part of the world.

Wildlife domestication has been the government agenda in China towards poverty alleviation and rural development. Ecotourism, medical tourism linked to wild life domestication is no different then.

China’s TCM thrust is in line with WHO’s objective of offering universal health coverage by 2030. Nonetheless, WHO clarified that its recognition to TCM is NOT an endorsement of the scientific validity of any TM practice or the efficacy of any TM intervention but it’s just a way which provides the means for doing research and evaluation to establish efficacy and safety of TM.

From that perspective, China is under pressure to keep the show running but now has tremendous onus of improving its interactions with wild life substantially, given that the whole world is watching it.

You see, creating blue-collar jobs is crucial to run an economy seamlessly. All political regimes seem to have given rise to cronies and genuine distribution of wealth appears a pipedream. The complications increase when universal health goes for a toss due to domestic economic policies of a nation.

The Zoonotic nature of the Corona Virus pandemic is likely to create a big hurdle for TCM tourism in China, post the Corona episode.

Lesson for India?

For attracting any foreign investment, ESG (Environment, Sustainability and Governance) compliance is likely to assume enormous important, like never before.

In the aftermath of the Chinese Virus, global businesses are now planning to rationalise their supply-chains. And, India can be a major beneficiary of that. As reported by Economic Times, at least 200 US companies are likely to shift their base from China to India.

More bright spots for India?

On the lines of TCM, India also has a long history of Ayurvedic Medicines which are used as traditional medicines. Given the tremendous scope for Ayurvedic tourism in India, it is imperative for India to standardise Ayurvedic medicines and practices and prove their efficacy and safety to the rest of the world.

Banning and boycotting foreign goods is a colonial idea; it doesn’t work in the modern world. Today, sensing opportunity, building capabilities and executing plans in an impeccable manner is the success mantra.

Is India ready to make it happen in India?

You May Also Like to Read: In Conversation with Ritesh Jain

 

Disclaimer:

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

 

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