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China Last Week – Xiabing Su Discusses The Coronavirus Outbreak in The US

Hi, I’m Xiabing from Kraneshares. Welcome to China Last Week.

Last week, the U.S. and global market experienced significant declines due to the coronavirus outbreak. The S&P 500 and Dow Jones dropped over 7% twice, triggering a 15-minute halt in trading.

In face of coronavirus, as you have probably noticed, we have activated our business continuity plan at our New York headquarters and everyone has begun to work from home. This situation may now sound familiar, as it unfolded in China a few weeks ago. Globally, confirmed cases of the virus have risen 14 times within the past two weeks and have reached over 50,000 outside China. Meanwhile, within China, 20 provinces have reported no new cases for the past 10 days.

China’s method for successfully containing the spread of the virus can be a useful guideline. We would like to discuss with you how China’s experience both is and isn’t applicable to the U.S..

Quarantine may one of the best ways to stop the spread of the virus. China implemented a national quarantine for two weeks while Wuhan and the surrounding Hubei province are still on lockdown. Although this may be difficult for other countries to replicate in full, cancelling large gatherings is a warranted precaution and New York City has now prohibited gatherings of over 500 people. Institutions such as the Metropolitan Museum of Art and Broadway theaters are temporarily closed. The NBA has also cancelled its season.  

China’s market performance may provide a glimpse of what could happen in the US. In China, the market began to fall in mid-January. Despite a broad rebound, not all sectors were impacted equally. The sectors that were hit hardest include anything related to travel and tourism such as airlines, hotels, and restaurants. White collar work largely continued unabated thanks to remote working platforms facilitated by tech giants such as Alibaba and Tencent.

We believe U.S. will largely follow this pattern. The impact on the travel industry is almost inevitable since President Trump has already declared a travel ban on most European countries for 30 days. Many schools have already begun to hold classes online. Furthermore, large companies such as google, Amazon, and Facebook are recommending that employees work remotely for the near future. As a result, internet companies may see a significant growth in new users as people increasingly find themselves stuck indoors.

We should be prepared that situation may get worse in the short term, but we believe U.S. will, nonetheless, be able to tackle this issue. The US healthcare system is world class, with per capita healthcare expenditure reaching over $11,000 compared to only $400 in China. We believe that the US, like China, will eventually strike the right balance between systemic support for industry and the social distancing necessary to successfully navigate this difficult period.

Thank you for watching China Last Week. Please tune in next week for the latest update on China. I’m Xiabing, we will see you next week.