Chusu He would like to thank Professor Alistair Milne
of Loughborough University and the freelance journalist Elena Berton,
both of whom provided input for the article.
The Conversation is funded by the National Research Foundation,
eight universities, including the Cape Peninsula University of
Technology, Rhodes University, Stellenbosch University and the
Universities of Cape Town, Johannesburg, Kwa-Zulu Natal, Pretoria, and
South Africa. It is hosted by the Universities of the Witwatersrand and
Western Cape, the African Population and Health Research Centre and the
Nigerian Academy of Science. The Bill & Melinda Gates Foundation is a
Strategic Partner. more
Many Chinese factories remain restricted or closed.
EPA
Investors are still being fairly complacent about the novel
coronavirus. After the number of new daily cases suddenly shot up to
more than 15,000 on February 12 following more than a week of decline,
there were some jitters in the markets. With Chinese authorities saying the increase was due to a decision to broaden the definition for diagnosing people, there were falls in the region of 1% in European markets, and smaller retrenchments in Asia and North America.
It is a fairly minor shift in sentiment after a few days in which investor concerns had been
steadily receding. There appears to be a real danger of underestimating
the likely economic impact of this crisis. China’s manufacturing sector
in particular faces an unprecedented challenge because supply chains
have been so seriously disrupted. Coronavirus daily new cases
WorldometersWell over
80 cities have gone into lockdown, including the entire areas of five
Chinese provinces – Hubei, Liaoning, Jiangxi, An’hui and Inner Mongolia –
and four main cities in Zhejiang province, affecting well over 275
million people. Since February 10, Beijing and Shanghai have further
restricted the movement of people, having already extended the Chinese
New Year break.
My parents live in Jiangxi province and are among millions
semi-quarantined at home. The local government allows one person from
each household to go out every two day to buy necessities. Even in
cities not under compulsory lockdown, there are rarely people on the
streets. The tweet below shows the Nanjing Road in Shanghai, the busiest
shopping precinct in the country. It was taken on January 26 but the
situation is not much better now.
This is taking a serious toll on the Chinese economy. No statistics
on the actual losses are available yet, but for example, the number of
intercity passengers on public transport during the new year break was only 60% of 2019 levels.
Xibei, a famous dining brand with 350 restaurants and RMB5.7 billion (£628 million) annual revenues, said takings
during the holiday period were down 87% year on year. The contrast with
last year, when Chinese tourism, retail and catering revenues all rose by around 8% during the new year period, is likely to be huge.
The problems in the Chinese services sector are primarily a demand
shock. This will probably rebound once the epidemic is contained, just like during the Sars outbreak of 2003. The Chinese inflation rate based on the consumer price index (CPI) turned down during peak crisis between February and June 2003, then quickly shifted to positive.
Makers not marching
This time around in manufacturing, which comprises
nearly a third of the Chinese economy, there is a much bigger shock to
the supply side than in 2003. Factory lines have ground to a halt
because of the lockdown. You can see the gap between the demand and
supply of Chinese goods by comparing the inflation rate with the level
of optimism among the country’s manufacturers, as measured by the
purchasing managers’ index (PMI).
The Chinese CPI in January rose 5.4%, the highest monthly rate since October 2011, while the manufacturing PMI hit a three-month low
of 50%. The fact that inflation is actually rising this time when it
fell in 2003 is because this time, both supply and demand are falling
but supply is falling faster.
To keep the economy afloat, the government has rolled out
a series of financial measures, including lower borrowing rates, loan
extensions, tax reductions and waivers, and an injection of RMB200
billion (£22 billion) in market liquidity. This will ease financial
strains, but not address the underlying problems in manufacturing supply
chains.
Many manufacturers cannot resume
work because they can’t get supplies of raw materials and their
workforce is quarantined. They are having problems with orders, wage
payments, cash flow, order deliveries, debt repayments, and logistics
and transport. Many are also facing penalties for breaching contracts.
Many companies are also having to suspend operations by order of the
local government. For example, out of 29,814 firms that have applied to
resume operations in Hangzhou, the capital city of Zhejiang province,
just 162 had been given authorisation by February 10.
Many smaller companies can’t get authorisation because they are less
capable of sourcing face masks than bigger companies. They are also more
wary of letting out-of-town workers return because they usually have
less dormitory space so can’t give them a room to themselves – another
key precaution against the spread of infection. A poll
of 1,295 firms by the Chinese Academy of Social Science (CASS)
published on February 1 found that 43.9% expected their business will
post a loss in the coming year. It won’t take long before liquidity
problems morph into solvency problems, especially for smaller companies.
Only 9% of respondents to the CASS survey
thought they would survive a month of suspended operations, while
two-thirds said that a two-week shutdown was all they could take.
Global supply chains
This is already disrupting the world supply chain for manufacturing, hitting everyone from big South Korean car manufacturers like Hyundai and Kia to small tech companies in the US like Agilian Technology.
Hyundai factory in Ulsan, South Korea, closed due to supply problems.EPA
Some Chinese manufacturers, such as number-one Apple supplier Foxconn, are resuming work
in phases, but they still need more time to reach full capacity because
only local employees can return immediately. Workers travelling from
elsewhere have to isolate themselves at home for seven to 14 days before
returning. The next Apple smartphone, due in March, could be delayed.
The new coronavirus is a major shock to all market participants in
China. Even if the outbreak is contained over the next few weeks, it
will still have a long-term impact. The demand and supply shocks could
combine to drive China into stagflation,
where there is inflation and weak economic growth at the same time, and
for which there are no effective monetary or fiscal policies.
The uncertainty created by the outbreak, compounded by China’s trade
war with the US, is going to force companies to re-examine their
exposure to Chinese manufacturing and the whole idea of a global supply
chain. It wouldn’t be surprising to see rival countries developing
supply hubs of closely linked manufacturers of the kind that China has
created very successfully. This, too, looks like bad news for China. The
novel coronavirus is prompting a new period of global instability whose
ramifications could be felt for many years to come.
Thank you so much for your innovative green buildings - which could tap into a potentially lucrative market across Africa.
Ghana's
trade with China last year, for example, came to a total of
U.S.$7.25 billion - making our country the seventh-largest trading
partner of China in Africa.
As an aspirational people, we are keen to improve and modernise our country's infrastructure.
New
infrastructure for the country's educational sector's institutions,
readily come to mind in that regard - as an example of a potential area
you could make a win-win contribution in.
There is a great need
for new classroom blocks, dining facilities with modern kitchens,
dormitories etc., etc., right across the country. Ditto clinics and
hospitals in the health sector, amongst other sectors of our national
economy.
The question is: If you were supported by the
Australian government's foreign ministry, through the provision of
market intelligence and in-country reports of the state of the nation,
would you be willing to explore the Ghanaian market - by having
conversations with the Australian High Commission in Accra, Ghana's
capital city?
They could put you in touch with some of the most reputable real estate developers in Ghana.
The
beauty of having an innovative green building company, such as Mirreco,
in Ghana, is that it will enable our country to develop an integrated
industrial hemp agribusiness sector, which could provide your business
with raw materials and other inputs, thereby creating jobs galore for
young people farming in new industrial hemp plantations, in areas of
rural Ghana currently being poisoned and ruined by illegal gold mining,
illegal logging and illegal sandwinning. Ditto create a new cohort of
young green entrepreneurs - generating wealth that remains locally.
Has the time come to dismantle the
entitlement-superstructure empowering our vampire-élites to ruthlessly
exploit Mother Ghana? Perhaps.
In the year 2000,
the Ghana Education Trust Fund (GETFund), was set up as a public trust
by an Act of Parliament. It was an innovative common-good policy
designed to help improve our educational institutions, nationwide, by
resourcing them well.
The recent revelations (about how
during the Mahama-era, privileged people, including sitting MPs, who
weren't poor people, were given GETFund scholarships to study overseas,
in some of the world's most prestigious universities, just to enable
them spruce-up and burnish their CVs), show clearly that the GETFund
ought to focus solely on empowering educational institutions across
Ghana, by providing them with infrastructure and logistics, and leave
the granting of scholarships to the Scholarship Secretariat. Simple.
It
appears that under the 4th Republic, we have ended up creating a
well-funded cradle-to-grave welfare state, for our greedy and
self-seeking vampire-élites. That entitlement-superstructure means that
when they are taken ill, for example, taxpayers pay for them to be flown
abroad, to be treated in some of the world's best healthcare
facilities. Outrageous.
The irony in all this, is that the
selfless and principled President Nkrumah - whom the political forebears
of our current leaders, sought to physically eliminate many times over
because they felt that somehow he did not deserve to lead Ghana - worked
hard to prevent that odious form of state-capture from occurring
throughout his years in power. That is why he focused on creating
conditions to encourage social mobility in Ghanaian society.
His
1963 speech, at the formal opening of the Tema Oil Refinery (TOR), is
insightful, in that regard. President Nkrumah told the world that day,
that he sought partnerships with investors so that our share of the
profits from such joint-ventures could pay for social programmes, to
empower the poor to bootstrap their way out of poverty. Free education
in the north comes readily to mind.
A pioneer female Ghanaian
industrialist, Mrs. Esther Ocloo, once recounted to me, how the Trade
Fair Site came into being. A group of industrialists led by her
apparently went to see President Nkrumah appeal to him for a permanent
place to hold exhibitions for the products of Ghanaian manufacturing
businesses. The proactive and visionary Nkrumah readily obliged.
Today,
politically well-connected private entrepreneurs, hold sway over the
Trade Fair Site, and their public private partnership (PPP) plan to
partner foreign investors, to redevelop it, has resulted in the
destruction of Ghanaian-owned manufacturing companies, providing jobs
for young Ghanaians. How ironic.
Thus, in short, we have arrived
at a juncture in our nation's history, when although this is a
democracy, society's hardpressed-poor are rather subsidising a
well-funded high-level public-sector entitlement culture - in stark
contrast to the situation pertaining in Sweden, where their system is so
structured that those at the top of society, such as MPs, serve the
Swedish people diligently, abiding by strict rules and ethical
requirements about their conduct - ensuring that they do a very, very
good job and act in selfless fashion doing so: at very little cost to
taxpayers there.
The time has now come to dismantle the
entitlement-superstructure empowering our vampire-élites to ruthlessly
exploit Mother Ghana. Haaba. Hmmmm, Oman Ghana, eyeasem ooooo - asem
kesie ebeba debi ankasa. Yooooo...
Dear Daryl, With the greatest respect, the
various colonialists who came to the shores of our Motherland -
culminating in the British who were the last to occupy our country -
were never our masters. Neither were we their slaves. We need to stop
using that demeaning and derogatory phrase, 'colonial masters'. The
fact of the matter is that the colonialists were the sly-occupiers of
the landmass, which became known as the Gold Coast colony - which they
succeeded in colonising because we had an effete and corrupt ruling
élite. Full stop.
Our pre-colonial traditional ruling élites were
opportunistic, unprincipled and worshipped wealth to the exclusion of
everything else. That was our undoing as a people - and our ending up as
a colonised people: before the astute and racially-aware Nkrumah
arrived on the scene, to lead our liberation from colonisation.
Please
note that India had Maharaja's, who, in pre-colonial India, were more
powerful, vastly more influential and wealthier, than all our
traditional pre-colonial ruling élites, bar none. Some were truly
magnificent rulers by any standard.
Yet, India's nationalist
leaders understood clearly that inherited privilege is the greatest
enemy of meritocracy. Since they intended to create a modern
nation-state in the newly-independent India, they resolved to strip the
Maharajah's of all their privileges and vestigial powers, as soon as
practicable and prudent. Prime Minister Mrs. Indira Ghandi, stripped
away the last vestigial powers of the Maharajahs in 1971.
Please
note that today, India is infinitely more prosperous, and has ended up
becoming a global power to be reckoned with - while corruption is slowly
destroying Ghanaian society, setting back the clock-of-progress and
impeding our forward march, as a people. Pity.
The question we
must ponder over is: What do we expect when potential scientists,
lawyers, engineers, medical doctors are enslaved by a traditional
system, which is today's bastion of tribal-supremacy across Ghana, and
serve out their lives carrying their fellow humans beings in palanquins,
on their heads, in the name of preserving our 'rich cultural heritage'?
Is that monstrosity and human-rights-abomination not symbolic of all
that is wrong with our country? Haaba.
