Heiwai Tang

China’s return to work is good news for the economy – but it also risks unleashing a second wave of Covid-19 infections

Both the government and businesses are eager to restart and revive the economy. But as millions pile back into factories, cafeterias and dormitories, the risk is that a new wave of Covid-19 could pose even bigger risks to the system

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A man returns to his duties at a reopened workshop, part of the Harbin Electric Machinery Company in China’s Heilongjiang province, on February 25. Photo: Xinhua

Heiwai Tang

Published: 9:00am, 3 Mar 2020Updated: 9:27am, 3 Mar 2020

China Inc. is gradually returning to business. After more than a month of extensive city lockdowns and travel restrictions in response to the Covid-19 outbreak, Chinese workers and small business owners cannot wait any longer to make some money in the Lunar New Year, while factory owners can finally tell their foreign clients that it is back to business as usual.

Beijing is equally impatient. President Xi Jinping told local government officials that people need to get back to work. Local governments provided free transport to ferry workers from their hometowns, while large companies such as Foxconn have offered thousands of yuan in bonuses to lure workers back to the factory.

For multinational firms like Foxconn, the priorities are obvious – the largest business risk is losing their million-dollar contracts to competitors. Beijing’s objective is even clearer – after years of slowdown amid the trade war and other tensions with the United States, the Chinese economy is vulnerable to shock and must be shored up.

These decisions may be rational. However, the aggregate systematic risks of a second wave of the coronavirus could be tremendous for both China and the world. To the Chinese government, perhaps the risk of an economic downturn is bigger.

People like to draw lessons from the severe acute respiratory syndrome outbreak in 2003 to shed light on the current outbreak, but such an exercise is not very useful. When Sars hit China 17 years ago, its economy was on an upwards swing after its accession to the World Trade Organisation in 2001. Its economy was much simpler and had weaker ties with other economies.

This time is different. The Chinese economy is much bigger, but slowing. Moreover, China’s engagement in complex global supply chains is much stronger than 17 years ago.