The coronavirus is going global, and it could bring the world economy to a standstill.
China Business Survey Shows Growth Plummet.
This means that China’s GDP in the first quarter of this year may even grow zero. Of course, this was a prediction made at the time when the epidemic had not spread globally, so it was quite conservative. At this stage, after the global spread of the epidemic, the impact of the epidemic on the Chinese economy and even the world has far exceeded people’s previous expectations. For example, CICC’s latest target for China’s GDP growth rate has been significantly reduced.
CICC reduced its GDP growth forecast for 2020 to 2.6% from the previous 6.1%. What concept is this? In 2019, China’s GDP is close to 100 trillion yuan, according to the 6% growth forecast given by major institutions around the world before the outbreak. Then in 2020 China’s GDP will develop according to the original track, and it should increase by about 6 trillion yuan. Now CICC has lowered its growth target from 6.1% to 2.6%. This means that CICC believes that the damage caused by the epidemic to the Chinese economy will reach about 3.5 trillion yuan. Here is a brief introduction to CICC. Compared with other foreign institutions, China may deliberately look down on China, but CICC’s predictions will not show such intentional decline. The largest shareholder of China International Capital Corporation Limited is Huijin, also known as the national team. Generally speaking, CICC is also regarded as the main investment bank representative of the national team overseas.
Therefore, it is impossible for China International Capital Corporation to deliberately look down on China, as some overseas investment banks do. China International Capital Corporation has lowered its target of China’s GDP growth rate to 2.6%, which only shows that China’s GDP growth rate in 2020 is indeed quite likely to be within this range. At present, many people can control the epidemic situation in China and can quickly recover the economy. This is too optimistic. For now, the epidemic has affected not only the Chinese economy but also the global economy. And because the European and American countries adopted the wrong “negative epidemic prevention” strategy in the early stage and mistakenly treated the new coronavirus as the flu, this has caused the European and American countries to be in a state of complete out of control. Even if the European and American countries have been forced by reality and started to learn from China to strictly control the anti-epidemic model, it is too late.
This makes the impact of the current epidemic on the global economy far more than people had expected. The irony is that when the European and American countries first adopted passive epidemic prevention, it was precisely to reduce the impact on the economy. The result is that they adopted the wrong strategy of passive epidemic prevention, so that the coronavirus could not be contained promptly, which in turn caused a more devastating impact on the economy.
Will there be a new trade war between China and the United States?
Many people believe that the current European and American countries have begun to enter a strict control mode, such as blockade city, restricted travel, curfews, etc., which has caused many manufacturing industries in Europe and the United States to fall into a lockout state. So, as a world factory and manufacturing country, can China seize the opportunity to seize the market? This is unlikely.
Because the current global economy is integrated, even China, which has the most complete industrial chain in the world, cannot arrange all the industrial chains and manufacturing links in the world. This is unrealistic. And it is not allowed by other countries. In other countries’ minds., if China does this, they will not feel that China is timely assistance, but will only think that China is “looting on fire.” Other countries will think that China will seize its domestic market while its manufacturing industry is shut down.
I’m not saying that their cognition is correct, but if they look at this behavior from their perspective, then they are likely to adopt this cognition. This means that only one result will result. That is the result of the world entering a real trade war. Just like the Great Depression of 1929.
In the early days of the Great Depression in 1929, the United States also launched a trade war against the world, which is very similar to this time. And after the Great Depression broke out in 1929, the global trade war became more intense. At that time, the tariffs imposed by various countries even reached 35%. No country will sit idly by and see the mass failure of its own manufacturing industry, let alone other countries use any reason to seize its own inherent market share. If the factories in some countries are temporarily closed due to the outbreak of the epidemic, and other countries use a large number of cheap alternative products to seize the market at this time, it will inevitably lead to various countries having to start increasing tariffs in order to protect the local manufacturing industry.
By that time, the global trade, which had been paralyzed by the epidemic, would worsen the situation.
Therefore, many Chinese netizens have called on China to take advantage of the epidemic, and China has initially controlled the epidemic. It has called on China to seize the European and American markets while the manufacturing of other countries is shut down. This is actually an extremely short-sighted behavior. This kind of behavior may reap short-term temporary benefits, but it is likely to ruin the long-term interests in the future and intensify the contradictions among countries with complex current situations. It is an act that China cannot do at present.
Coronavirus leads to global overcapacity and sharp decline in oil production
One of the most basic economic perceptions and that is that everything that is finally produced in manufacturing is meant to be sold to the consumer. How large the market for consumer demand directly determines how large the manufacturing market can ultimately be supported.
But now the problem is that the global consumer market has seen a sharp contraction as a result of the novel coronavirus epidemic. Because many countries around the world have now started to impose restricted travel, billions of people around the world are being banned from living in their homes.
In this case, shrinking consumption is inevitable. We can actually see the problem in the current sharp decline in oil demand.
One of Russia’s latest demand estimates is that global oil demand is currently down by about 15 to 20 million barrels per day.
What is this concept?
Global oil demand in 2019 is 100 million barrels per day. This means that global oil demand has plummeted by 20% because of the outbreak. And that actually means that the global consumer market will see a demand decline of at least 20% as a result of this epidemic. Once the consumer market shrinks, it will inevitably lead to the problem of “overcapacity” in the entire global industry chain. China already has a serious overcapacity problem. So at this stage, it is no longer a question of China considering taking advantage of the opportunity to replace capacity in other countries, but rather a question of how to solve its own overcapacity.
On this issue, you can now look for a company that does export in China and see if you can receive a foreign order. Of course, just don’t look for companies that do medical exports, this is the time when they’ll be eating the most. However, apart from these areas of medical supplies and daily necessities, exports in other areas should be almost paralyzed at this stage. The overcapacity of these unexportable, highly backlogged goods, and even the huge industry chain behind them is a problem.
It’s all a super problem. This is not just a problem for China. In fact, it is also a mega-dilemma for the countries of the world at this stage. This dilemma could lead to a final outcome with far greater impact than the “financial crisis” that ravaged global financial markets half a month ago. In fact, why was there a 30 percent general plunge in all assets in global financial markets half a month ago?
It was actually just an early response to a world economic crisis that could hit in a few months. Here we need to be clear about the difference between the concepts of “financial crisis” and “economic crisis”. Financial crises exist only in the financial sector, and they do not necessarily spread to the real sector.
The U.S. stock market crash of 1987, for example, was actually the most prosperous period for the U.S. economy, and the U.S. real economy at the time was completely unaffected by that stock market crash. However, there is a risk that the financial crisis will spread to the physical sphere and eventually lead to an “economic crisis”. The most typical is the Great Depression of 1929 in the United States. At the time, the trigger for the Great Depression in the United States was the Great Stock Market Crash. This is the most typical example of a “financial crisis” that eventually evolved into a “world economic crisis”.
The world economic crisis, which is affecting the entire world economy, is all-encompassing.
Will there be a global economic crisis this year?
I clearly predicted that a world economic crisis might strike this year. The reason is simple: there is already a serious global overcapacity problem, with consumer markets beginning to see a ceiling, followed by weak growth, and a serious bubble in financial markets. And as you have found out, this coronavirus epidemic happens to strike a fatal blow at exactly three issues. So as I said before, this coronavirus epidemic is not the root cause of the world economic crisis, but only the trigger. The current world economy itself has many problems, and even without the coronavirus epidemic, the world economic crisis will erupt on its own within 1-2 years at most. Only the coronavirus epidemic is like a sharp knife, stabbing relentlessly into these three deadliest spots in the world economy.
First, we can see that half a month ago, global financial markets plunged more than 30% in a collective crash.
Secondly, the coronavirus epidemic has led to a sharp contraction in the global consumer market, further exacerbating the global overcapacity problem.
And all these problems are bound to lead to a world economic crisis this year. So now more and more Big Brother-level figures, instead of an ostrich that the world economy is still healthy as before, have begun to acknowledge that a world recession is inevitable.
The recession of the world economy, superimposed on the long-term quantitative easing bubble in Europe and the United States and other countries, is equivalent to the world economic crisis, only these big players are still keeping the last decent, did not say this subtext.
But we as ordinary people, should have a sober understanding of this current economic situation. As I have been telling you, we must remain sane and sober enough when we face this world economic crisis, which has been relatively rare throughout human history and takes 45 years to occur. Not blindly optimistic, but not blindly pessimistic either. Only then will we be able to turn the economic crisis into an opportunity. In the current economic situation, it is important to “cash is king” and not to invest blindly. Only by waiting patiently for the onset of the world economic crisis and waiting for a major plunge in global assets, including the stock market, can we begin to enter the market and pick up all kinds of cheap assets at cabbage prices. Only those who are able to uphold this philosophy will be able to be among the first to experience rapid wealth growth after the world economic crisis and when the economy enters a recovery cycle.
This is akin to Buffett’s plunge into the US stock market with huge amounts of cash during the 2008 subprime mortgage crisis. Of course, we ordinary people are not as rich as Warren Buffett, so if we want to take a bottom, we need to be more patient. The fact that the boat is small and well-tuned is our biggest advantage, so we don’t need to rush it.
As I’ve told you before, there are two points in time this year to focus on, one is this June and one is this December. Until then, patience is advised for good. A lot of people say, in case this summer, or the end of the year, this historical bottom doesn’t happen, it would be a blow to the face. It needs to be stated here that all of my predictions are based on my personal thinking, research, and represent only my personal opinion. I’m not a prophet and I’m not coming back from a future crossing, so it’s impossible for me to guarantee to everyone that all my points are right.
So you are going to say that there will not be a so-called historical bottom this year, and I can’t tell you that there will definitely be one. However, judging from the current situation of the epidemic spreading around the world and its impact on the global economy, I think the probability is still relatively high.
First, according to WTTC (World Travel and Tourism Council) projections, the coronavirus epidemic could result in 75 million tourism workers worldwide losing their jobs and global tourism GDP losses of up to $2.1 trillion by 2020.
When I made my predictions with you earlier, the loss in the tourism market was about half of the total economic loss.
If the tourism market alone loses up to $2.1 trillion in 2020, this means that the global economy could lose more than $4 trillion in total to the coronavirus epidemic in 2020.
This one we can actually predict a little bit.
First, Goldman Sachs previously predicted that global GDP will shrink by 1% this year.
And the U.S. could see a 24% drop in GDP in the second quarter.
What is this concept?
The total annual GDP of the United States in 2019 is $21 trillion.The average single quarter is $5.25 trillion, and a 24% drop is $1.26 trillion. If the US GDP growth target of 2% this year was originally estimated, then the actual loss of the US due to this epidemic is estimated to reach $1.365 trillion. That’s a single quarterly impact, and if the epidemic isn’t contained in the third or even fourth quarter, the impact will be even greater. China Financial Corporation’s GDP forecast for China shows that China’s economic losses this year due to the coronavirus epidemic are about 3.5 trillion yuan, converted into USD 500 billion. That’s almost $1.8 trillion in damage from the coronavirus epidemic in China and the United States alone.
We can actually estimate from this a quantity of global economic loss.
Total global GDP in 2019 is $86.6 trillion, with the US $21 trillion and China $14 trillion Together, the United States and China account for 40 percent of the global economy. Based on this estimate, if the United States and China lose $1.8 trillion due to the coronavirus epidemic, the global economy will lose roughly $4.5 trillion due to the coronavirus epidemic. This is basically in line with the WTTC’s budget above for global tourism to lose $2.1 trillion this year, accounting for almost half of global losses. So, personally, I think the global economy is probably going to lose over $4 trillion this year because of the epidemic. Of course, this is only my estimate, and it needs to be based on the premise that the outbreak will be contained by June at the latest. If this outbreak goes beyond June and is not contained on a global scale, the impact on the global economy will be even greater. So the global economic loss is over $4 trillion, which I think is still a conservative estimate.
At that point, however, in order to keep their economies from collapsing, I am afraid that countries will have to risk the spread of the epidemic by returning to work and eventually being forced to “mass immunize” themselves. To put it bluntly, if the epidemic isn’t over by June. The countries affected by the epidemic have to make a difficult choice. The mortality rate for returning to work with the new coronavirus is only 2% to 10%, and there is a more than 90% chance that young people will heal themselves. And anyone who doesn’t return to work risks starving to death. It’s a very real question of choice. Now we can only hope that Europe and the United States and other countries around the world will wake up and stop engaging in “negative epidemic prevention”. But the good thing is that the rest of the world is now aware of the seriousness of the situation and is beginning to go all out to prevent and control it.
In this case, the coming month is key to whether the epidemic can be contained.
And whether the epidemic can be contained or not, one can no longer expect the summer virus to disappear as naturally as the flu. This is because there is currently a viral outbreak spreading in the southern hemisphere, including South Africa, Australia, and tropical countries like Malaysia. This means that the high temperatures do not stop the spread of the coronavirus virus. This is an influenza-grade contagion with a death rate between SARS and influenza, a death rate that is not too high and not too low. If the death rate of coronavirus is as high as that of SARS, it is likely that it will not spread as quickly because everyone will be the first to notice it, and it will be difficult to spread the virus when patients become acute. And if the coronavirus has a lower death rate, like the flu, then it is not a threat to humans and can really be treated like the flu. But the lethality rate of the new coronavirus in question, it seems, is precisely regulated in a range that is no longer just right. In the absence of a medical resource squeeze, the death rate of 2% is 20 times higher than that of influenza and 1/5 of SARS. And in the event of a medical resource crunch, such as in Italy, where the current dynamic mortality rate for coronavirus has reached 10 percent.
From this we can see how cunning the coronavirus virus is, at first through the low lethality rate, many countries paralyzed, even like the European and American countries generally treat it as an influenza virus. As a result, in the event of a massive outbreak of proliferation, the greatest danger is the sharp increase in mortality in the event of a crowding out of medical resources. This is coupled with the fact that the new coronavirus has a number of extremely tricky characteristics, such as a large number of asymptomatic patients and the infectious nature of asymptomatic patients. This is arguably the most insidious virus with the highest actual risk factor ever faced in human history. Although there is a history of the 1918 pandemic influenza, the Black Death, a more serious infectious disease that often causes the death of tens of millions of people. But given the medical conditions of that era, it’s actually estimated that if the coronavirus had been put in that era, the death rate would have been more than 10 percent, and tens of millions of people would have died. Even with all the health care available today, there is a mortality rate of 2 percent, which increases rapidly to more than 10 percent once health resources are crowded out.
The dangers of the coronavirus are actually quite obvious. That’s why I’ve been urging people not to underestimate the coronavirus as early as January 20, when I first analyzed it. It really is an extremely cunning enemy. Anyone who takes it lightly is going to pay a huge price. Now Europe and America, among others, are being liquidated for despising it in the first place. We should be reminded that we cannot be paralyzed at the last minute. While keeping its own economy running smoothly, it is important to maintain strict control and prevention.