On Monday, two months after the Chinese government started to relax the blanket shutdowns that it had ordered to combat the spread of the coronavirus, the theme park at Shanghai Disneyland reopened, with social-distancing rules in effect, and Mickey, Minnie, and the rest of the crew on hand to greet the first customers. “It has been an emotional morning,” Joe Schott, the resort’s general manager, told the Times, “There is light at the end of the tunnel.”
That is what everyone around the world is hoping for, of course, and China’s experience does provide some hopeful signs for Western countries—the United States included—which are now embarking on the route that China started down in March. The Chinese government has been able to reopen almost all of its offices, factories, schools, and stores. Most internal transport links are operating, and official statistics indicate that the over-all economic output has started to expand again, after contracting at a record rate in February.
But as Disneyland’s reopening made news, it also illustrated the limited nature of China’s economic rebound, and the challenges that the U.S. will face in the coming months. With the Chinese government having ordered the park to operate at thirty per cent of its capacity, the crowds were much smaller than usual. Visitors were forced to wear masks, submit to temperature tests, and show a green QR code on their cell phones, indicating that they were authorized to move around.
Other Chinese businesses, particularly in manufacturing, don’t face these issues with customer safety, but many of them are still struggling to operate in the coronavirus economy. On Monday, the National Bureau of Statistics reported that producer prices fell sharply in April, indicating that the vast Chinese manufacturing sector is facing a lack of demand. “The post lockdown recovery in China . . . has turned out to be slower than most people expected,” Qu Hongbin, the chief China economist at H.S.B.C., told Bloomberg television.
Part of China’s economic problem is an external one. As other countries have introduced lockdowns, the demand for Chinese exports has fallen sharply. But that isn’t the only issue. Qu pointed out that domestic spending, particularly retail sales, is still running well below pre-crisis levels. He attributed this lag to the “emotional headwinds”—fear and nervousness—that the virus has created, and which have yet to dissipate. Other sectors are facing similar challenges. A new report from McKinsey, the international consulting group, says that internal travel over the recent May Day holiday weekend was roughly half of last year’s level. “Travelers are still cautious,” the report said. “They prefer to stay close to home—choosing, for example, to drive or take trains to regional destinations.”
Even some of the strong spots in the economy appear to reflect precautionary behavior. Last week, Volkswagen said that its sales of passenger cars in China, where it has extensive operations, were running at higher levels than last year; one of its executives attributed this to a general fear of crowds. “People want to avoid public transport these days,” the executive told Reuters.
These attitudes may change, but it will take time. According to a McKinsey survey, a majority of Chinese people aren’t planning to travel again until September or October—six months after the lockdowns were lifted. If a similar timetable were to play out here, the dates for a resumption in travel wouldn’t be until November or December. Some American travel companies have already gotten the message that many of their customers aren’t returning anytime soon. United Airlines said last week that, starting in October, it plans to cut thirty per cent of its white-collar payroll.
It is also important to remember that China has done a much better job of containing the virus than the United States. On Sunday, China’s national-health commission confirmed seventeen new cases of COVID-19, the highest number for some time, and classified the eastern city of Shulan as a high-risk area. The United States is still reporting about twenty thousand new cases a day. Even allowing for some skepticism about the official Chinese statistics, the contrast is glaring.
If the economic rebound in China has been limited and fitful in a relatively favorable public-health environment, how will the American economy fare in a situation where the Trump Administration can’t keep the virus out of the White House, and the infection rate is still going up in a number of states? Ending the shutdowns and getting more people back to work will give an instant boost to employment and output: that’s simply a matter of arithmetic. But the longer-term picture remains highly uncertain, and, as Anthony Fauci indicated during his testimony to Congress on Tuesday, the threat of a resurgence of infections hangs over everything. Even if we get lucky and avoid such a tragic outcome, the lesson from China is that the economic effects of the virus are going to be serious and long-lasting.
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