Meeting

Examining the Coronavirus Outbreak: China, Markets, and Global Health Governance

Wednesday, February 12, 2020
Kim Kyung Hoon/Reuters
Speakers
Thomas R. Frieden

President and Chief Executive Officer, Resolve to Save Lives, an initiative of Vital Strategies; Former Director, Centers for Disease Control and Prevention

Senior Fellow for Global Health, Council on Foreign Relations; @YanzhongHuang

Jennifer Nuzzo

Senior Scholar, Center for Health Security, and Associate Professor, Department of Environmental Health and Engineering, and Department of Epidemiology, Johns Hopkins Bloomberg School of Public Health

Steven A. Tananbaum Senior Fellow for International Economics, Council on Foreign Relations; @Brad_Setser

Presider
Robyn Meredith

Client Strategist, BNY Mellon Wealth Management

Speakers discuss how the coronavirus outbreak is testing global health governance, its broader economic consequences, and its implications for the Chinese political system.

MEREDITH: Good evening. Good evening and welcome, everyone, to today’s Council on Foreign Relations meeting, Examining the Coronavirus Outbreak: China, Markets, and Global health governance. I’m Robyn Meredith, client strategist at BNY Mellon. I’ll be presiding over today’s discussion.

We have a fantastic panel today, as I’m sure you’ve seen from reading people’s full bios. But let me introduce them briefly. Tom Frieden is president and CEO of Office—of Resolve to Save Lives, an initiative of Vital Strategies. He’s a former director of the Centers for Disease Control and Prevention. Yanzhong Huang is senior fellow for global health at the Council on Foreign Relations. Jennifer Nuzzo is senior scholar at the Center for Health Security and associate professor in the Department of Environmental Health and Engineering and the Department of Epidemiology at Johns Hopkins Bloomberg School of Public Health. And Brad Setser is the Steven Tananbaum senior fellow for international economics at the Council on Foreign Relations.

As you know, the novel coronavirus is thought to have originated at a market in Wuhan, China. The latest figures show the virus name—which now has a name, by the way, which is COVID-19—has killed more than 1,100 people and sickened nearly forty-five thousand. So it’s far surpassed the SARS impact so far. In recent days, it seems to have reported—at least, the reported cases seem to have settled down into the range of about two thousand new cases a day and about, give or take, one hundred deaths. But I emphasize reported cases, because we really—there’s so much that we don’t know about what’s happening with the numbers.

So I want to start by talking about the health response and the issues that this new virus raises. And then we’ll move onto what China’s response tells us about China. And finally, we’ll talk about the economic impact, and potential economic impact, of the virus. Sadly, I have a little personal experience with this sort of thing. I’m a veteran of the SARS virus. I lived in Hong Kong for many years, and I was there during SARS. And I remember how very, very scary it was to be in a place where for months and months schools were closed in a city as large as New York, and even busier. You would see no people on the streets. It was just really, really strange.

I moved to Hong Kong in the spring of 2002 and later that year that’s when SARS hit. And it really virtually shut down Hong Kong until it ended in June 2003. And life kind of began returning to normal that summer. I mention it because COVID-19 has some similarities to the SARS virus. That’s why people keep comparing it to it. It started at a market in mainland China where wild animals are sold. It’s a coronavirus. It’s new, which means that none of the world’s population has had exposure to it, which is why we’re all more susceptible to getting it. Fortunately, if we can generalize from the data we have so far, COVID-19 appears to spread much more easily than SARS but be less deadly. So we’re—even though it’s easier to catch, it so far at least seems to be killing fewer people.

Let me turn to the panel. Tom, you led CDC. Just give us your thoughts on how health officials around the world ought to be responding at this stage, given what we know.

FRIEDEN: We’ve seen additional cases in twenty-four countries around the world. And we haven’t seen cases in some countries that have the same or larger number of travelers from China.

MEREDITH: Like Indonesia.

FRIEDEN: As one, yes. So the first thing countries need to do is be ready to find infections when they occur, and then to respond appropriately by isolating patients, protecting health care workers, doing effective laboratory tests, doing control measures such as contact tracing. This is core public health action, and it’s done well in many countries. And in other countries, there are both very stretched systems—because microbes don’t read the media. We continue to have Ebola, and measles, and Lassa fever, and yellow fever, lots of problems in Africa and elsewhere. And because those systems are very underdeveloped. We already knew before Ebola, before SARS, before coronavirus that there were a huge number of gaps in preparedness. Countries, particularly in parts of Africa and Asia, lack the basics. It’s like having a building with no fire alarm, and no smoke alarm, and no sprinkler system in certain rooms of that building. The whole building is at greater risk.

MEREDITH: Right. It seems like there’s kind of a dichotomy now, and I’m wondering if there should be, between trying to contain the virus, as we’re seeing in China and in countries that are targeting people who travel to China, and the response of trying to treat sick people. What are your thoughts on that?

FRIEDEN: The major question right now is: Is this going to be controllable, like SARS, which as far as we know is gone—has not infected anyone in the last fourteen years—or is it going to be like flu or the common cold, that circulates regionally, or in countries, for months, or years, or indefinitely? And we really don’t know that. What we’ve got to do is continue to assume it can be stopped and do everything possible to stop it, while we also have to plan for what we could do to better manage or, as we say, mitigate the impact if it’s not able to be completely stopped.

MEREDITH: So act like optimists and pessimists at the same time? Something like that. And an advanced team just this week landed in China from the WHO, the World Health Organization. What are you hoping to see as a result of that?

FRIEDEN: More than a month after the response we still don’t have very basic information. This may get a little bit technical public health, but we expect to see cases by time of onset. That’s a standard curve. That’s the first thing you do. We’ve yet to see that. We expect to see how many people got tested, by what age group, over what week, in what place, and what the positivity rates are. Haven’t seen it. I don’t think it’s primarily or even exclusively any form of hiding information. I think the system in China is heavily stretched by what is an unprecedented event, and although China dramatically improved and increased its investment in public health after SARS, it still is a relatively weak part of China’s system—much weaker, for example, than their extraordinary capacities of social mobilization and community mobilization.

MEREDITH: Jennifer, I just want to turn to you for a second. Other nations have kind of responded to the coronavirus as if the virus need a visa to get into their countries, like they can stop it at national borders. Is that the right response?

NUZZO: Yeah, so I’ve been concerned about that approach. I mean, I think Tom’s right, there is an open question about whether it’s possible to contain this virus. I tend to fall on the slightly more pessimistic side, because I believe that this virus is very much unlike SARS, in the sense that it’s spreading much more quickly, we’re seeing much more mild cases. When you have mild cases out there, it’s very hard to know where they are. And I know that many countries, the ones that are actually looking for cases, are only looking for cases with some connection to China. And now that we’re seeing local transmission in other places, that means if infections are occurring elsewhere we are likely to miss cases that resulted from those infections.

So I believe that if our strategy to contain the virus relies on stopping it at borders, that’s only as good as our knowledge of where in the world the virus is. So I don’t believe that that’s the best approach. Now, some people will say, well, let’s try it anyway. What harm can it do? And that’s also where I have concerns, because, you know, in countries it’s the same people who are doing this work—the people who are responding to planes, and taking people off planes, and trying to find a place to put them to quarantine them, trying to find hotels in undisclosed locations, escort them with security because their safety is at risk—those are the same people who also need to do the really hard work of making sure the laboratories are ready to process more specimens when the laboratories come online, making sure the hospitals have what they need in order to respond to a surge of patients.

And what we have been seeing, at least particularly in the U.S. context, is that work has been slowed by the focus on trying to stop it at borders. And so while I don’t think it’s necessarily a bad idea to have some hope for containment, if we do so at the exclusion of the important work for mitigation, reducing the impacts of the virus, that’s what I have deep concerns. We also need to consider what the impact of these measures are in terms of economies and also our ability to respond further. So if we stop flights, either because of policy or because nobody’s taking these flights anymore due to restrictions, that has consequences for the movement of goods, particularly essential goods, when many companies rely on commercial flights. So we need to—

MEREDITH: You’re worried about, like, medical supplies, like surgical masks and things like that, that are made in China. Is that what you’re talking about?

NUZZO: Right. I mean, there was just a story today about parcels not shipping because the fights have been reduced. So I think that we need to look at these measures thoughtfully and consider, of course, the potential public health impacts. I think they’re a bit more theoretical than we are willing to admit. But then also consider the kind of broader social and economic impact of these measures.

MEREDITH: OK. Well, let’s talk about—there are also sort of two distinct responses we can have—quarantine and isolation. So quarantine meaning restricting people who aren’t yet ill, or we don’t know that they’re ill, but they might become sick. Isolation is you are sick and we’re containing you in a safe place, so you don’t infect other people.

Tom, you want to talk about that, and also the incidence of—maybe this always happens in coronaviruses—but in this one we’ve seen medical workers infected at quite a high rate in Wuhan.

FRIEDEN: Right. So first off, whether we’re trying to stop it completely or manage it, many of the things we do are the same. And one of them that’s essential is to quickly isolate the sick. And that could be at home, for someone with mild illness, and the caregivers need to be cared for and ideally use some form of mask, or in a health care facility if they’re ill or if there is capacity. For many infections, we see lots of spread in health care facilities. And last Friday JAMA published a striking article from one hospital in Wuhan where of the first patients between January 1 and January 28 were identified, 41 percent were health care workers. That was fifty-seven health care workers were infected. Forty health care—sorry—health care infections. Forty health care workers and seventeen patients.

And in SARS and MERS, we saw what are caused super-spreader events, where you have someone, or some procedure, or some environment and it can result in dozens of infections. And there was at least one of those in that hospital. But that only a small proportion of the infections. And that was what was so scary. The infections occurred all over the hospital, from one patient to another in multi-bedded rooms, many different types of health care workers. And that’s a strong hint that this is virus that appears to be more infectious than SARS. It certainly infected more people in a month than SARS did in its entire eight- to nine-month epidemic. So we’re seeing health care facilities become both risks to health care workers and amplification points for the infection. And we see this with other infectious diseases—measles, tuberculosis, C. diff, a variety of other diseases, in addition, of course, to MERS and SARS.

So this is a major risk. Isolation is important. Quarantine or cordon is unusual. And the effort in Wuhan is, as far as any of us know in public health, unprecedented, to try to cordon off a city of this size. I don’t think there are many governments in the world that could have tried it. I don’t think there’s any doubt that it slowed the spread of the coronavirus. At the same time, if the pattern that we’re seeing is going to be like the pattern with flu, measures like that may slow the trajectory, but may not change, if you will, the area under the curve, the total number of people who become infected. But only time will tell how this virus behaves, because we are seeing—in one hour you can read two recent articles, one of them is encouraging one of them is discouraging, in terms of the possibility of control. And that’s why we say we need to go all-out, because if it’s possible that we can make it go away completely, of course, we want that. If it’s not possible, we need to plan for that.

MEREDITH: Yanzhong, I think that Tom raised an interesting point about the unprecedented lockdown of the Wuhan area. And actually, if you count all of the places that are—that are under travel restraints, it’s, like, one hundred million people. This is an extraordinary response. And it is making some people in China on social media question whether the numbers reported, which are vast already, are in fact accurate, or might be underreported. What are people—what are you hearing Chinese people say about their trust in the numbers that they’re seeing?

HUANG: Well, the—thank you. The numbers today certainly are better than the numbers before January 20 in terms of the accuracy, the data. And I think here we might also need to differentiate two types of data here—the data that is provided by Wuhan and Hubei province, and the data provided by other provinces. I think for other provinces, the data are probably more accurate, you know, than was provided in Hubei and Wuhan. In Hubei and in Wuhan, I’m not accusing them of being intentionally covering up the disease situation. Maybe they’re just so overwhelmed, you know, by the cases.

But that, indeed, raises red flag in terms of the accuracy of the data because, you know, someone actually did some simple math, like, you know, by dividing the number of cases—the fatalities by the number of cases, and they found, like, every day it’s like the same number of case fatality—you know, 2.1 percent, 2.1 percent, like, for almost, like, ten days. You know, that—you know, we joked, if this is submitted to academic publication, you know, nobody’s going to accept that. It’s, like, doctored data, you know? So I think there is indeed a need to improve the quality of the data for Hubei province.

MEREDITH: What does it say about people’s trust in the information they’re getting from their government about this health issue? Not just in China, because, by the way, the Japanese people have criticized the Japanese government for not quickly sharing information. CDC just announced that some test kits have malfunctioned in the United States. Hong Kong people are quite worried that they may not be getting a straight story, and some are wishing that the border with China be closed more than it already is. What does this virus tell us sort of country by country about how people feel about their governments?

HUANG: Well, I think—well, public health is based on trust. And Tom knows better than I on this, that I think that this social capital, trust in the government is critical, you know, for effective public health interventions. You know, what we see in Hong Kong is maybe because of the lack of trust in the local government there. When I say local government, the Hong Kong government. You know, you’re seeing actually the health care workers actually strike because they feel like the government there failed to take effective measures against the coronavirus. You know, I think that is unfortunate because you would expect the health care workers to be right there, right, to contain, you know, the spread of the virus. And so the accuracy of the data, and how you communicate the risk to the public, that’s actually a major challenge, you know, for the government.

FRIEDEN: This really goes beyond public health. In public health we have principles of risk communication: Be first, be right, be credible. And CDC went out today with information that there appears to have been a problem with some test kits. There weren’t false positives, there weren’t false negatives, but they said that openly and said what they were doing to address it. That builds trust. And in the surveys that we did when I was at CDC, CDC came in just after the U.S. Mint in most trusted institution in the U.S. (Laughter.) That’s not necessarily the case elsewhere. And it goes beyond public health. There is a gut reaction of many leaders to hold information until you’re sure, or to be worried that it’s going to cause panic. Panic is actually quite rare. Less rare is suspicion that people are not telling you things.

MEREDITH: That’s interesting.

Yanzhong, what do you think about the way China has responded this time? To me, it seems quite different. I mean, during SARS, China considered SARS a state secret and doctors weren’t allowed to talk about it, the press was certainly not allowed to talk about it within China, and censorship about it was rampant. Now people in China have information about the disease at all. So quibbling about the numbers aside, they at least know there is a disease there. What do you think about the changing—the comparison of China’s response?

HUANG: OK, well, I think we have both similarities and differences. But if you compare, right, the government response for the first stage of the coronavirus outbreak, I think the pattern is fundamentally the same in terms of coverup, in terms of inaction, right, especially from the local government. I wrote a piece in the New York Times basically pointing out that on January 23. But then you look at the government response, once they started to take decisive action, those actions also the pattern similar to what happened during the SARS outbreak, right? Basically they mobilized entire state, like, to tackle this evil virus, you know, like do whatever it takes.

But this time, as Tom correctly pointed out, this is unprecedented in terms of—I mean, think about quarantining an entire city, right? And the province, one hundred million people, right? I think only a state like China, you know, could achieve that. You know, and certainly that is aided by the fact of this rapid centralization of political power under President Xi. So everybody has to jump into the bandwagon of this campaign against the coronavirus. You know, so any food tracking, you know, mobility that is obvious. Food tracking, it’s impossible.

You know, I think that it also has its side effects. You know, A, it sort of limited the capacity of the local officials to take initiatives. That actually caused that problem, inaction in the very beginning. And, B, it also has the side effects in that they only focus on the issue of the coronavirus control, and so you see actually in Wuhan and actually surrounding cities, maybe other parts of China, those people who have, like, noncommunal diseases, like cancer, you know, people, HIV patients, they have difficulty having access to medicines because of the lockdown measures.

And third there’s the impact on the economy. You know, maybe Brad can elaborate on that. You know, I think this is also different from SARS, because if you look at SARS, the impact is mainly on the consumer side, you know, not on the supply side. But now these quarantine measures, these draconian measures area already affecting the supply side because of the difficulty for the workers to receive work now.

MEREDITH: Yeah, I think it’s interesting. Your colleague, Liz Economy, wrote a really interesting piece saying that this is a stress test for Xi Jinping. And I commend that piece to those of you who haven’t yet read it.

Jen?

NUZZO: Yeah, I was just going to say I think another difference between SARS and now is that, you know, we’re taking about data, and data that are being released from health authorities—which is very typical and something we expect. And I think what we have seen has been insufficient data, and that there is still very glaring holes in our knowledge. But one marked difference is that there have been a number—I mean, most of what we know has come through the publication of very high-quality journal article—fast-tracked journal articles. And that scientific—and many of them involve, you know, international author teams.

And so it’s hard to somewhat reconcile because I think there’s, you know, on one hand, thinking, well, are they withholding information? But on the other hand, you see that there is a commitment to publish this information in the peer-reviewed literature. So it’s really hard to sort out. I am very welcoming of these articles. I am glad to see that they have the scientific capacity to publish these and that they’re sharing it. I wish I came from the health authorities before we saw it in the journals, but I’m glad it comes out. But I think that this shows a scientific capacity and ability that perhaps we didn’t see in 2003.

MEREDITH: Right. It may not have been as developed then.

I just want to ask one more health question, which is: SARS lasted about eight months. And in—I think importantly, in the summer that’s when it dissipated. The optimist among us might say, well, this is a coronavirus. In summertime might we see this go away, if we can just get through till then? Or is that just a completely false hope?

FRIEDEN: So you can hope that. (Laughter.) But I’ll give you a couple of facts. There are some coronaviruses that have two peaks, one in the winter and one in the summer. You’ve heard a summer cold? That can be coronavirus. Second, when we’ve studied influenza in places like New York and Beijing, which are temperate and have winters, there’s a flu season. If you go to places that are more tropical, the flu season lasts year long. So this is something that we’ve just come to recognize in the last two years with some of the work that’s been done with global influenza preparedness and tracking. And if coronavirus behaves that way, and if it gets into places that are more hotter—that are hotter, you really don’t know.

And I think the bottom line here is it emphasizes how much we don’t know—how much we still don’t know. Some of it we should find out very soon. Some of it we’ll find out. If Jennifer’s right and it’s spreading widely in a bunch of countries and we don’t know that yet, then it’s—clearly we’re in the manage it phase rather than stop it phase. But one thing that we do know is that coronavirus or something else is coming. And most systems in parts of Africa and parts of Asia are really not prepared. So what’s inevitable is that there will be more threats. What’s not inevitable is that we will continue to be so underprepared.

MEREDITH: I see. But I actually want to come back to this point about the spread beyond China, because right now the vast, vast number of reported cases are in China. So forty-five-thousand-ish in mainland China and 440-ish in the twenty-four other countries that have it. Should we have already seen transmission beyond borders if it were going to, or is that an incubation period problem?

FRIEDEN: Yeah, one question is—

NUZZO: It’s hard to say, yeah.

FRIEDEN: One question is: Has it not happened, or has it not happened yet?

HUANG: Not been reported, right.

FRIEDEN: So for example, Singapore, which has a very intense system, has found three people with no linkages. Now, they think they’ve found just about all of them now, but where are we going to be in a month? Will there be three hundred, or three thousand, or thirty thousand, or no more? And I think this is one of the things that we have to do everything we can to find out and be ready for either of those options.

Sorry, Jen.

NUZZO: No, I was going to agree. I mean, and Singapore, I’m glad you brought that up, because your earlier question about the seasonality, I think that’s one of the more worrisome signs. That it’s a warmer place.

MEREDITH: Right. Very warm.

NUZZO: And we’re seeing a lot of growing local transmission. I do think, though, that one of the complicating factors for this virus, as I said, is that they’re saying 82 percent of the cases so far are estimated—the known cases are estimated to be mild. And when you have—you know, in the United States, to be tested for the virus you basically have to have a lower respiratory infection and have traveled to Wuhan or be so sick that you’re hospitalized and have traveled to broader China. So if you’re one of those mild cases, it’s unclear. But I think it’s—you know, whether they’re here now or they’re going to be coming soon, I think we should expect that this won’t be something that we stop hearing about.

MEREDITH: Right. Fair enough.

And obviously we’re most concerned about the health issues, and the people—the human beings—that have this. But there are potential economic implications as well. Federal Reserve Chairman Jerome Powell has repeatedly warned, mentioned that the Fed is closely watching this. And it could put the—whatever happens with COVID-19 could put the global economy at risk. He also pointed out the People’s Bank of China has already stimulated the Chinese economy, and it would—the Fed would expect it to do more of the same. Brad, it seems to me that we’re having this funny response from China in which the local and economic officials are saying: Let’s get seven hundred million people back from holiday and back at work. And the health officials are saying, wait a second, we’re trying to contain what could be a really devastating disease. What do you see going on there?

SETSER: I think the evidence that I have seen would suggest that people are following the advice of the authorities rather than the advice of the get back to work, meet your target messaging. Almost every high-frequency indicator of economic activity—and they’re bad, so I mean, they’re not the standard measures—suggest that Chinese activity is running at about the same pace that it typically runs during the Chinese New Year. That there hasn’t been—

MEREDITH: When China’s shut down.

SETSER: Shut down is—you know, power generators don’t stop generating power. They generate less. People don’t entirely cease working, although many do. So shutdown is not an absolute, but the pace of activity has been very slow.

MEREDITH: Do you have a sense of what the impact on GDP numbers in the last few weeks would have been? I mean, is GDP this quarter, the reported number was expected to be six. What would you expect the actual number is?

SETSER: So before I answer your question I want to make a couple of observations. The first observation is that in China, but also in other countries, GDP naturally fluctuates from quarter to quarter. So in a typical first quarter in China activity will be about 10 percent or more lower than in the fourth quarter. That is not unusual. It is expected, planned. It is not disruptive. And when we look at data, we seasonally adjust to smooth out what would otherwise be very large fluctuations. I think that is important because in China the mechanisms for seasonal adjustment aren’t great, all right? So the data is typically reported relative to the previous quarter of the previous year. Whereas, in the U.S. the data is typically reported relative to the previous quarter. So the numbers are not at all comparable.

If China were growing at 6 percent, and you had a perfect seasonal adjustment, if the economy didn’t grow at all in the first quarter it would be 4 to 5 percent bigger than it was this quarter last year. And I think that would be a standard assumption for the—in most of the economic forecasts right now. That would imply that, you know, GDP has fallen, but it hasn’t fallen that dramatically relative to what you would normally seasonally see. I think forecasts are now being adjusted—and adjusted down. If you don’t work for a week, there are fifty-two weeks in the year, your output should be about 2 percent lower. You know, you generate 2 percent of your year’s output in a week.

And I think increasingly the expectation is that there would be, like, a 2 percent fall versus the previous quarter, if that were to be how China measured its data, which would translate to something more like a 2 to 3 percent year over year increase, if that makes any sense.

MEREDITH: So that’s a lot of caveats for me, but what estimates for GDP have you been seeing in the last couple weeks? (Laughter.)

SETSER: Well, I—

MEREDITH: Because I’ve been seeing them—the lowest number I’ve heard starts at zero.

SETSER: I think zero is a realistic best-case scenario for the Q-over-Q growth, which would translate into, like, four on a year-over-year basis. I think my baseline would be more like negative 2 (percent). Now, if you annualize that, like we do, that’ll come across as a really scary negative number. That turns into negative 8 (percent) Q-over-Q annualized, which overstates the magnitude of the impact. As I said, in a normal seasonal pattern, activity is 10 percent lower. So that would just imply you’ve had an extra week of no work.

MEREDITH: OK. So I think that from Brad’s answer we conclude definitively that the coronavirus is bad for the Chinese economy. (Laughter.) Could you talk a little bit about the impact—you know, because China is—I hate to keep coming back to the SARS comparison, but in a way it’s not only a helpful comparison for health issues but for economic issues, because it’s also the only similar thing we have to compare it with. But SARS, of course, was 2002-2003, when the Chinese economy was a fraction of the size it currently is, and when China was less connected to supply chains worldwide than it currently is as well.

And so I think it’s—you know, many people that I talk to say that it’s fair to infer the impact of this coronavirus will likely be larger than during SARS. And it won’t just impact sort of local hotels and shops and things like that, as were really hammered in Hong Kong during SARS, but it’s already filtering through to supply chains and companies outside China. So we’ve had Nissan already shut down one of its factories in Japan, where you’ve seen South Korean automakers expect to be hit as well. Apple has said that it could have an impact on iPhone production. And I’m just wondering if you have any sort of estimate for how much we’re going to see, especially in manufacturing worldwide?

SETSER: So actually I think the supply chain disruption and how that impacts the global economy is probably the hardest thing to understand, because it isn’t a function of China’s share of world output, which could easily be measured. It is, is there a particular component made in a particular factory where there is no available substitute? And with just-in-time inventories, a lack of a stockpile. And so you know, there are certainly concerns in the auto sector, not because China is that big of a global auto parts supplier—although it does supply auto parts through Asia. Compared to electronics, China is not a huge global supplier. But Wuhan was. Wuhan was the center of auto parts production inside China. So you’re seeing concentrated effects there. And it gets hard to get a measure of the magnitude.

In general terms, China was a $1.5 trillion economy at the time of SARS. It is about a $15 trillion economy now. So two-thirds the size of the U.S. It will almost certainly contract in the first quarter. That will measurably reduce overall global growth. It will clearly have a very large negative impact on those parts of Asia that are much more integrated into the Chinese supply chain than U.S. or Europe are. So Vietnam relies much more on parts than the U.S. does. Korea probably has more—Korea’s auto industry is more exposed than the U.S. auto industry.

And then there’s a disproportionally big impact on tourism, which will have the affects you observed in Hong Kong. But Chinese tourism has grown faster than China’s economy, so you’re going to see much more of an impact, particularly in Southeast Asia. It’s not a secret that Thailand and Singapore are the most exposed. So there’s—you know, 3 percent of Thailand’s GDP is tourism from China. And the realistic estimate of that is that it goes to zero for an extended period of time.

The impacts on the U.S. and Europe by comparison are quite small. So ten to twenty basis points off growth. Very manageable. Assuming it stays contained. You know, if it is not contained, then you start looking at the much bigger impacts of—that we see of a shutdown in China on a much broader part of the global economy.

MEREDITH: That’s right. Yanzhong, I guess the other difference this time is simply the huge numbers of factory workers in China and, you know, figuring out whether they can go to work. And both Chinese and multinational companies deciding whether or not they are complying with Chinese regulations by allowing them to work, or not allowing them to work. They’re kind of caught between those two impulses of, on the one hand, China to simulate the economy, put people back to work, on the other hand contain.

HUANG: Right. And I think this is a dilemma faced by both the Chinese leaders and the factory managers, actually two—this is like a to be or not to be question, right? To allow them to go to work or not. Actually one of my high school classmates is a factory manager in Jiangsu province. He went to—like, he would favor, like, the workers to go back to work as soon as he can. But he went to the local factories, trying to encourage them to go back, only to find himself quarantined there. (Laughs.)

So I think this is now more a decentralized decision, because it’s a lot of factors that could determine whether you could have the workers, you know, to go back to work. But if you don’t have to go to the factories, you know, like, you can work certainly from home. But many actually face actually some bottleneck problems. The lack of facial masks, for example, Also, the difficulty of—just of the quarantine measures. You know, the—many roads also are blocked. You know, so even though you want to, you can’t. You know, I’d say the facial masks is a major concern, because China currently has the maximum capacity of manufacturing—like, 220 to (2)30 million masks. But the daily need, demand, is, like, 1.8 billion, right?

So either you—(laughs)—you stay at home, going out maybe once every six days, or, right, you have one mask, maybe use it for six days. I have—actually my relatives in China asking me: Could you send us back some facial masks? They said, we only have two at home. We cannot go out because of it.

FRIEDEN: This issue of masks is a big one. And I think it’s important to prioritize. First come health care workers. And there are some higher tech what we call respiratory protection—positive air pressure and elastomeric—that are more expensive, but they’re reusable. And in the drills that we did for a pandemic, they would be very important to use in health care facilities because actually we know that most of the masks in the world come from China. So our—

HUANG: Yeah, 50 percent.

FRIEDEN: So our ability to deal with this is limited. Second is people who are caring for ill people at home. And third is people who are themselves sick. This can be seen as a form of source control. If you’re sick, and you put a mask on, you actually do protect the people around you. And interestingly, you’ll see that very widely in Asia. It’s socially accepted. You don’t feel well? Wear a mask when you’re going out. It’s unusual here. It’s not done generally. But what we’re seeing is the need for—the desire for everyone to wear them. And that’s not a recommendation. There are ways that it could be harmful, if it leads people to a false sense of security. If someone reuses them and the mask become contaminated when you take it off you may actually increase rather than decrease your risk. At the same time, you understand why people want to do everything possible to protect themselves. So we’re seeing this. And this is before what could be much larger spread.

MEREDITH: Right. So we not only have the problem of people in China not being able to get enough masks, or in Asia not being able to get enough masks, but to Jen’s earlier point about where all of us get these supplies. And I just wonder, are there other critical items besides masks for this or other diseases?

FRIEDEN: One in the health care field that we look at is active pharmaceutical ingredients, or APIs. Most APIs come from China. Usually just a couple of factories in China. But the field has consolidated. And API is actually the active ingredient of the medication and reflects a small portion of the cost. There had earlier been some concerns for non-health reasons of should we have less dependence on China for APIs? And the—just think about what happened with Puerto Rico and intravenous fluids. Puerto Rico had a problem and we stopped using intravenous fluids for a lot of things in the U.S. If APIs became widely disruptive, it would be a very major issue for the global supply.

MEREDITH: So should we be thinking of this as a national security issue? Jennifer and Yanzhong.

NUZZO: Oh, absolutely. I mean—

HUANG: Well, I happen to brief the UCC, this commission, end of July on this issue, on the U.S. dependence on the APIs from China. And this indeed was a major concern, because what if there’s a potential disruption in the supply chain? Well, this is exactly what is happening, right, in China, which actually together with India provided 80 percent of the APIs, you know, are used to formulate drugs in the United States. I was told, though, that the—most of the pharmaceutical companies here had, like, two years of stockpiling of the APIs. So in the short run that won’t be a major concern. But if, again, this becomes a pandemic, lasts longer, that will be a real disruption of the supply chain.

NUZZO: But it’s a little bit more complicated than saying, well, there are these products that are made in China, because that may lead you to believe, well, we could just—see if we could source it elsewhere. Some of these things, they—the first step might be in China but then it gets finished in another country. And when there are concerns about shortages, we have to be concerned whether we will have access, even if there is another place where we can get it. And so would other countries that then are a part of that step say, well, no, it’s going to be for us, you know, to reserve it. And if the world is concerned, if the world is trying to get masks, that could be a real problem.

I mean, we had in 2009 a contract with a vaccine company based in Australia, where we basically got bumped in terms of our queue to get vaccine until the Australian orders were complete. Understandable if—you know, if a country had that company in their—you know, in their borders, they would probably expect similarly. So I think we need to kind of examine this, not just as, you know, the U.S. looking to China for supplies, but how this—how this potential pandemic could affect the whole distribution of supplies and global demand.

MEREDITH: Right. And not just China, as you point out, but all countries would have an interest—a national interest—in having a home-grown supply of whatever critical medicines there are.

NUZZO: And also just increased demand from other countries as well.

MEREDITH: Right. I see.

At this time I want to invite members to joint our conversation with their questions. And a reminder, this meeting is on the record. Please wait for the microphone, speak directly into it, and keep your question concise so that I don’t have to cut you off, and so that as many members as possible can speak.

Chris Graves, who I believe was in Hong Kong during SARS. Let’s see. I haven’t seen you in a long time.

Q: Thank you for remembering, Robyn. I’m Chris Graves. I used to be in the news business with Robyn. Lived during SARS. The only upside was people stopped pushing the close door elevator button in Hong Kong in your face, because you were afraid of dying from pushing the button. (Laughter.)

My question is for Dr. Frieden. Today I run the Ogilvy Center for Behavioral Science and work in vaccine hesitancy—the cognitive biases and social norming. And we know around the world it’s different for different people why they either reject or are vaccine hesitant. My question for you is, in the face of something as salient and as scary as a pandemic, do people rethink their vaccine hesitancy?

FRIEDEN: Well, I hope we don’t get to find that out anytime soon. We have some examples. One striking one is the Menactra vac meningitis vaccine in Africa. At CDC when I was leading it we did a rigorous assessment of uptake. And it was a very broad range, up to age twenty-nine. And we saw more than 90 percent uptake in communities with very low functioning health care systems overall because people had seen people with meningitis. It’s a terrible disease. And so it was more can we—can we meet the demand than do we have to generate demand and address hesitancy. On the flip side, if you look at pandemic influenza and some of the adjuvant adverse effects with this very surprising cluster of narcolepsy in parts of Europe related to one of the adjuvants, there are some valid concerns. So I think it’s going to range from how bad does it look, and what are some concerns, and how forthrightly does the government and do the health authorities admit those concerns.

I will add one more complexity here. One of the leading vaccine candidates for coronavirus is an RNA vaccine. We’ve never used an RNA vaccine. So it raises all sorts of ethical and communications challenges in terms of safety and efficacy. But at the same time, in worst-case scenarios—and a worse-case scenario is a disease that spreads like the flu and kills more like SARS, or looks like a bad pandemic influenza, you really want a vaccine. So by all means, trying to get one is very important.

MEREDITH: Sir, in the front row.

Q: William Haseltine, ACCESS Health International.

There are two issues that I’m concerned about. One is, people don’t necessarily die, but some people get really sick. It’s about 15 percent of people get really sick. That’s a huge health problem. And I think that’s something that I’d like to hear your comments on, if those are the correct numbers there—acutely ill and need respiratory support. Second question is, is a prophylactic drug in the works? Is it possible? And if it is, why don’t we already have one?

MEREDITH: Jen after Tom.

FRIEDEN: So in the scenario planning for a pandemic of influenza, a shortage of ventilators and respiratory support is actually one of the major rate-limiting steps. And that’s why at CDC we rapidly scaled up the number of surge ventilators that could be provided to help facilities. In the U.S. we advised health departments and funded them for surge protection, including everything from how do you lighten up the regulatory requirements for a respiratory therapist, and how do you get models of ventilators that don’t look like airplane cockpits, which many of them do now. They’re very complicated to manage, compared to the old-fashioned ones.

So respiratory support is very important. And in lower-income countries, even oxygen can make a really big difference. If you look at the 1918 pandemic, a lot of the deaths were from subsequent pneumonias, not from the flu itself. And we won’t know if post-viral pneumonia will be a phenomenon here. What we’re seeing here is different. It’s kind of a slow progression to severe bilateral pneumonia. But respiratory support is very important as one of the mitigation methods for a severe pandemic.

In terms of prophylactic preventive medicine, we would first need to know who needs it, how widespread it is, whether it works, whether it’s safe, whether there’s resistance. There are some antivirals that may have promise. And we’ll know more sooner about the antivirals than we’ll know about the vaccines. So we hope we’ll have some information. And maybe there’s some ways to reduce the impact with some efficacy. If you look at flu and Tamiflu, there’s a lot of debate about it. The data is pretty clear that it will cut the duration of illness by about a day or two. It’s not a dramatic cure, like penicillin for a susceptible bacteria. But by all means, if it can help increase survival rates and clear people off ventilators faster, it’ll have a big impact.

NUZZO: Yeah. I mean, I think this is one of the areas where we need to really focus our attentions, particularly looking ahead to the possibility of having to try to mitigate the impacts, and thinking about how we can really identify and protect those who would be most vulnerable from developing severe illness, or potentially at risk for death, and examining the extent to which our medical capabilities are there to be able to help people survive their infections.

A little bit of challenge is that there are still some unknowns even in that category that you cited. There’s a real range of sickness. And so it’s hard when you’re planning to figure out what sorts of resources will we need in order to be able to manage, in particular, that category of patients. But I think this is one of the reasons why it’s been so essential, to make sure that we are focusing our efforts and thinking about the potential for there to be an increase in severely ill, critically ill patients, making sure that we are not putting mildly ill patients in a hospital unless it’s medically necessary, making sure we reserved the capacity, understanding if we have enough health workers to be able to do that.

You know, the U.S. is stretched in every flu season, but they manage. But then if we layer another virus on top, there are questions. And then to take it to other parts of the world where basic medicine is lacking, we have—this is really where our worries and efforts should be, to make sure that they are prepared so that we don’t have a situation where these health facilities where people are going to seek cures for their loved ones don’t become places that amplify, spread to the larger community.

MEREDITH: I know we have a question here on the left side, in the front. And then we’ll go to this side. Your right, my left.

Q: Thank you. I’m Allen Hyman from Columbia University Medical Center.

My question is for Tom particularly, because he’s also a graduate of that school. (Laughter.) And also because he was a bureaucrat. And my question has to do with the WHO. I really don’t understand what the WHO is supposed to do. If you were the director of the WHO, what would you do differently and what would you do now?

HUANG: The director general. (Laughs.)

FRIEDEN: Yeah. So at CDC we have an ethos, which is if a country accepts or requests aid, either you’re on the plane by nightfall or someone else is. And China said they would accept assistance from WHO, the fact that we’re two weeks later now and there’s an advanced team there, that’s concerning to me. Now, I don’t know all the dynamics and the diplomatic discussions of that, but having been invited in, one would have hoped they would have been there a lot sooner. WHO has strengths and weaknesses, right? It’s a representative organization. It’s a political organization. And it is sometimes constrained in what it can say. At the same time, they have excellent experts at many levels. They have country offices which are able to engage with countries. And they have challenges in many countries around the world in trying to get valid and validateable, if that’s a word, health information.

So I think getting a team there working shoulder-to-shoulder with the Chinese, looking at some of the primary data and insisting on seeing primary data, identifying not every place but some places where you can go deeply in and say: Are we under- or over-diagnosing? Are we under- or over-counting deaths from this? What are the risk factors? What works for control? These are all really important questions that are pretty standard for in-depth public health investigations.

MEREDITH: Yanzhong, why wasn’t the WHO there earlier ? Do you have any insights on that?

HUANG: You mean, in China?

MEREDITH: Yeah. Was it—was it the WHO or was it China that is responsible for that delay? Or do we know?

HUANG: Well, at the—in order for WHO to be in China, you’ve got to have to get the permit from the Chinese government. But we saw that during the SARS outbreak initially. WHO wanted to be Guangzhou in the SARS ground zero, but it was not allowed to. That actually leads to the WHO, the issue, eventually the travel advisory and also the kind of naming and shaming, critical of what the Chinese government did. And I think WHO, according to the constitution, right, it has that leadership. It is supposed to assume that leadership in coordinating international response to a disease outbreak. I think its ability to assume that leadership to a great extent hinges upon its ability to be less effected by politics because it’s essentially a technical agency, right, that’s supposed to only respond to what’s happening in the biological world, right, not to what is happening in the political world.

MEREDITH: But your point is that during SARS the political interference was—in China—was not—I want to be clear if you’re saying internal WHO politics is the cause of that.

HUANG: Well, I won’t make that bogus claim. I do think it is imperative for WHO now to assume a leadership role in coordinating a national response to the current coronavirus outbreak. Not only in terms of how countries, right, should respond to the outbreak in China, but also play a leadership role in terms of helping China to tackle the virus outbreak in terms—you know, finding, for example, origin of the virus, right, and also provide guidelines, you know, that advisory support in how to tackle the outbreak. I think there is a lot of things that WHO can do.

MEREDITH: OK. I know we have a question in the front, please, if we could.

Q: Thank you. Chloe Demrovsky, Disaster Recovery Institute International.

My question is on the economic side. So we’ve seen big companies—Alibaba, Disney, Pizza Hut—they have plans in place, they have new technologies, drones to deliver thing, online e-commerce. First of all, are those kinds of technological advances going to impact the economic performance in some way, different from SARS? And then there’s the other side of that, which is that, you know, 60 percent of economic input is small and medium-sized businesses. So how will this affect them? And how will that then affect China’s economy at large? Thank you.

SETSER: So I haven’t been to China that recently, so don’t know any first-hand observations about the relative frequency of bicycle, moped, car, and more standard forms of deliver versus drone delivery. But my guess is that drones are not that prevalent, and that the technological fix is probably more on the side of being—you know, there’s a greater proportion of work that can be done remotely. That’s not a prefect fix, but that’s probably where you are.

I think from the second-order effects, it’s not the big companies that are, as you noted, to worry about. They can absorb cash flow hits if their factories are not producing and they’re not getting paid for several weeks. They can continue to pay salaries. But for small businesses, it is a concern. And I think that’s where you could, if the government doesn’t put in place effective programs to support income and demand, then you would worry that essentially a supply shock—classic supply shock—gets amplified as people lose the ability to continue to purchase at the same rate because the economy broadly comes to a halt.

Conceptually, those are the kinds of shocks that fiscal and monetary policy should be able to address. And this is a time when China’s state control over the financial system probably is advantage. And almost all banks are state owned. And almost all banks would be well-advised to extend forbearance not just to big companies but to small.

MEREDITH: And we’re starting to see that already. And the Chinese government has, indeed, ordered them to do just what you said.

Can we have a microphone in the front, please?

Q: Ron Shelp.

This is a very political question. But to me, it seems that the president of China hasn’t been quite as public lately as he was in the past. If this thing goes on any amount of time, but especially for some number of months, how do you think it’ll affect his leadership position?

MEREDITH: Yanzhong?

HUANG: OK, I’ll be happy to answer that. (Laughter.) I think that the—compared to—again, compared to SARS in 2003, we said that was the most severe sociopolitical crisis the Chinese leadership faced since Tiananmen. But now we could say the same thing now, right? This is the most severe socioeconomic crisis facing the Chinese leadership since 1989. And certainly there are a lot of things at stake, you know, the Chinese economy, Chinese international reputation, and even China’s rise. You know, if you define, right, in terms of Chinese ability not to fall into the so-called middle-income trap—you know, we know what that means, right? That it’s—you have to be, like, at least a 6 percent growth rate. But now the most optimistic is that it’s going to be around, like, 5 percent growth rate this year.

So I think President Xi himself also tied himself to that handling of the crisis by telling Tedros—Dr. Tedros, the WHO director general—that: I’m in charge of the outbreak. And so if those containment measures, you know, didn’t work, you know, failed to bring down the cases in a timely fashion, that could undermine his leadership, you know, his legitimacy. You know, that’s—in his words, the country’s—the governance capacity will be in danger. You know, but in the meantime, you know, the leadership seems to be also demonstration that it has the capacity, right, to launch this very draconian large-scale, right, containment measures. The scale, the scope of the campaign also demonstrated that, at least in the short term it has the ability to mobilize the resource, mobilize the state, mobilize the society to get things done.

And in the meantime, we also need to differentiate there’s two types of legitimacy here, right? This is a hierarchy here, right? The people may blame the local leaders, you know, for the inaction, for the coverup. But so far they haven’t—you know, most of them haven’t targeted President Xi himself for causing all this, right? So I think very likely he will muddle through the crisis. And nature probably also will intervene, right? When it becomes warmer, you know, as he told, I think, President Trump, right, the situation might get better. You know, so they could still claim a victory against the virus.

MEREDITH: But it seems to me important that, so far, we haven’t seen great number of children dying, because—for this political question. In China, in my observation, when children, people’s one child, dies, it is much more politically sensitive than when other people die. Would, Jennifer, Yanzhong, want to speak about that?

HUANG: Yeah, I think certainly if you see, like, a high mortality rate among the children, that is going to be actually much severe challenging to the Chinese leadership. We saw all those cases, right, a couple of years ago the scandal of vaccines, you know, seeing children dying of—getting sick. You know, the parents were very angry.

MEREDITH: (Whose ?) schools, contaminated milk, all of those.

HUANG: Exactly. You know, so that’s a very good point, indeed.

NUZZO: But I think one of the challenges and one of the concerns that I’ve had about just the language that we’re going to war with this virus and the draconian measures is that, you know, these measures may stop the—most of the transmission that we see. I’m a bit skeptical about it, but let’s say that they do. If the virus is still elsewhere in the world, and it’s circulating and, you know, again with the challenges of not fully knowing where it is and with insufficient diagnostic capabilities to truly know at this point, China’s a global economy. People are going to come and go. And will we then see another rise? So I think the—

MEREDITH: So the second peak that you raised before, yeah.

NUZZO: Right. And so I think a potential leadership challenge could be, when you use very absolute terms about the virus, and going to war, and we will stop this. And when there is a very possible scenario that what could unfold, absent any—you know, not to say that this is a failing of the response, but just because of the virus and perhaps the transmission that we may see, we may be in a situation where this is more like a flu, where this comes back, even if, you know, the seasonality winds up prevailing and, you know, things align. This could be something that could be revisited either and will that have consequences for credibility and leadership.

MEREDITH: Interesting. Several questions. Let me take the woman in the gold sweater here, and then we’ll go to her right. Yes, please.

Q: Hi. Deborah Norville from Inside Edition.

Sort of a health/business question. Today the CDC announced that it expected the coronavirus to, quote, “establish a foothold,” here in the United States. What exactly do they mean by that? And how should American business prepare for whatever that means beyond whatever steps it may have been taking already? So it’s a question for a couple people on the panel.

FRIEDEN: Right. So when CDC says something like that it’s what we sometimes call anticipatory guidance or lowering expectations. Better under-promise and over-deliver than the reverse and get people ready for something that may happen. Unless they know something that’s not in the public domain yet, they’re basically saying: We think that scenario where this becomes—spreads and may or may not be able to be controlled is fairly likely. That’s suggested by some of the ready transmission that we’ve seen within family, and a taxicab drivers, within hospitals. So this is spreading more like the common cold or influenza than SARS or MERS did. And that suggests that we would not be at all surprised if it did establish a foothold here.

We still wouldn’t know, if that happened, is it—can it be controlled? Can that flame, if you will, be extinguished, of infections. Or is it something that will become like another common cold? And just as a footnote here, all of us have been—in the public health field—have been going back and reading more about coronaviruses. And there’s not a lot written about them. They’re kind of the Rodney Dangerfield of infectious diseases. (Laughter.) It’s the common cold, who cares? And yet, when you look at the studies that have been done rigorously, there are people who get what the minor common cold infections who get severely ill or die, particularly those who are older, or who have lung disease, or underlying conditions.

So the possibility is this will be—there are currently four strains of common cold coronavirus that are known. This might become a fifth, with considerable more severity in a large number of people. But going back to the basics, we really don’t know, and only time will tell, is this something we can control like SARS or becomes like flu or the common cold, and is with us long term?

MEREDITH: Right. Can we have the microphone over here, please? The gentleman with his hand up.

Q: Thank you. John Du. I’m a lawyer in private practice.

Another political question: One week ago there is all, you know, the discussion online about Dr. Li Wenliang. And the issue is very much related to freedom of speech. Do you think the—after this epidemic is over the freedom of speech will be increasing, or would, you know, the Chinese government go back to square one? You know, barely one week, you know, after that you see much less discussion about that. And the famous saying is the—you know, by Dr. Li Wenliang—a health society should not have only one voice. Can you comment on that? Thank you.

HUANG: Sure. I wish. I was saying that with this tragic death of Dr. Li Wenliang could be something of a beginning of serious reform, not just in terms of the public health system, right, fixing the loopholes, but also think about, you know, these fundamental causes of the problem, which, you know, we believe is essentially political and institutional. But we know that people have short-term memories sometimes, you know. And so when they were all mourning, you know, Dr. Li’s death, you know, they will feel very empathetic with him because, you know, their—this could be them, you know, because he was an ordinary doctor. He just said something that anybody in China could say. Then he got disciplined by the public health public security authorities. And then then he, himself, got infected. And he used his death to prove he was not a rumormonger, right?

So this could happen to any Chinese, right? And so that is why, you know, at midnight, when his death became known, there were, like, eight hundred million comments on the Chinese Weibo. So that was indeed tremendous, you know, because I sense even those people who refrained talking about this thing began to speak out. The thing—you know, like after one week, as you correctly point, few people talk about these things. So I think, you know, Dr. Li’s—you know, really, it’s—I hope that that same pattern should not be repeated. And if they don’t draw the real lessons from this outbreak, you know, I’m afraid that we’re going to see that great tragedy be repeated again.

MEREDITH: We have time for one very quick last question. Here, could we have a microphone here?

Q: Thank you all very much. I’m Lindsay Hayden. I’m a pediatrician.

My question is for Tom and Jen mainly, but everyone else please chirp in. With respect to pandemic prevention, what do you guys see is the absolute key interventions on the national and international level? Thank you.

MEREDITH: Three quick things.

FRIEDEN: I’ll focus on the international level. We now know way more than we knew three or four years ago about where the gaps are in global preparedness. A rigorous evaluation system has identified close to 10,000 life-threatening gaps. And we’ve closed very few of them. This really should be a wake-up call to stop nickel and diming preparedness and make a sustained commitment to a substantial investment in the kind of tracking and protection system that will make countries around the world safer and make us safer. We know that there’s another one coming, regardless of which trajectory this takes. So the only question is, are we going to continue to underinvest in preparedness at enormous potential financial cost, as well as human cost?

MEREDITH: I know we may want to continue that discussion offline after we end, but at the Council on Foreign Relations we always end on time. And we are, indeed, out of time. So this concludes our on-the-record discussion of the coronavirus. (Applause.)

(END)

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