Five things to watch as Wuhan emerges from coronavirus lockdown

The world is watching Wuhan, the Chinese city that was the site of the first COVID-19 outbreak, as it begins to ease restrictions on its residents and seek a return to normalcy.

After emerging from a 77-day lockdown, the city is taking steps to reopen businesses, reduce travel restrictions, and allow for more open movement.

How the city fares will likely offer lessons for the pandemic’s timeline and what economic recoveries will look like elsewhere, including in the United States.

“Watching their experience could have some lessons for us,” says Beth Ann Bovino, chief U.S economist at S&P Global Ratings.

Here are five things to watch as Wuhan opens back up.

 

Will Wuhan reopen too fast, leading to a second coronavirus wave?

The number one question on everyone’s mind is whether or not Wuhan, the first COVID-19 epicenter, can keep the virus under control after pulling back the harsh restrictions that helped flatten the curve.

“I think the pace of reopening is important to watch,” says Bovino.

“If they go too slow, their economy can’t pick up and they can’t take advantage of the fact that they’re the only player in town. If they go too fast, then the risk of a second wave becomes apparent,” she says.

Since March 18, the city has only announced three new confirmed symptomatic cases of the virus.

But there is reason to be skeptical of official numbers.

“It could be that the central government in Beijing is just trying to keep information hidden from their local public and the world, and local governments like Wuhan might be hiding their information as well,” says Scott Kennedy, Trustee Chair in China Business and Economics at the Center for Strategic and International Studies.

There’s also the question of asymptomatic cases, where people can continue spreading the virus even if they don’t get sick.

According to the Wall Street Journal, Wuhan reported 194 new cases that tested positive, while the Health Times, a paper closely linked to the Communist Party, reported that there could be as many as 20,000 asymptomatic cases in Wuhan. The Health Times article was quickly deleted.

A second outbreak, suggesting that additional lockdowns and a slower pace of reopening are necessary, could send shockwaves through the global economy.

So far, Wuhan is taking a measured approach to reopening, keeping some buildings and neighborhoods locked down and plenty of businesses at home.

“They’re taking more of a step-by-step approach, so it’s more of a limited openness, mindful to the risk of a second wave,” says Bovino.

In many places, the roads remain empty and shops remain closed, while a heavy system of surveillance remains in place to ensure that people suspected of being contagious do not spread the disease.

 

Is the recovery V-shaped?

In recent weeks, U.S. markets have backed off their mid-March low points as investors put faith in a “V-shaped” recovery, where the steep economic drop is followed by a steep economic return to form.

The path of Wuhan’s economic recovery could tell us if those hopes are realistic or wildly optimistic.

This week, former Federal Reserve Chair Janet Yellen said that a V-shaped recovery was a best-case scenario, but said that the economy may have more lasting damage than some people are currently expecting.

“I think a ‘V’ is possible, but I am worried that the outcome will be worse and it really depends to my mind on just how much damage is done during the time that the economy is shut down in the way it is now,” she said.

Kennedy agrees, noting that Wuhan’s cautious approach to reopening could throw cold water on dreams that its economy will come roaring back to life.

“I think we’ll get a sense of where very hard-hit areas can have a strong, robust recovery, or whether it will be much more gradual or even bumpy,” he said.

“So far, the signs suggest that even with a great deal of stimulus, a recovery is going to be gradual and that we shouldn’t have inflated expectations about a quick return,” he added.

 

When will businesses be up and running again?

Key to whether or not the economy will come surging back is the question of when businesses will reopen their doors, and indeed how many of them went under during the crisis.

But because China’s economic data can be unreliable, experts are looking for other indications that businesses are getting back to normal.

“Chinese economic data is highly political, so you can’t really depend on it,” says Kennedy.

“Probably a better measure that you can’t really fudge is looking at air pollution.”

As factories and manufacturing businesses shuttered and people stopped driving to work, the amount of chemicals spewing into the air dropped dramatically, a side effect environmentalists welcomed.

Once the producers start firing up their plants again, though, the air quality is expected to drop.

“The extent to which you watch air pollution return is a sign of a return to greater economic activity,” Kennedy says.

 

How will the pandemic impact consumer behavior? 

One of the key questions economists have is what kind of lasting effects the pandemic will leave on consumers.

In the United States, where consumer spending accounts for some two-thirds of all economic activity, the drop in consumer confidence has been sharp and quick.

The degree to which people believe it’s safe to return to their normal spending habits could have implications for how quickly the economy bounces back.

As the canary in the coal mine, Wuhan could offer answers as to how people’s habits recover from lockdown and health panic.

“It is a gradual return to normal, and I emphasize gradual and put normal in quotes because it’s a new normal,” Kennedy says of Wuhan.

“They are just taking baby steps to bring life back to normal, bring back schools, allow people to travel to other parts of China. There’s still a great deal of risk mitigation measures taken by people, wearing masks, avoiding other people, telework, tele-healthcare,” he added.

Once again, Bovina says, data from China sometimes needs to be taken with a grain of salt. One indicator she watches is traffic.

“If China opens up in terms of people getting out on the streets, taking a trip, going to the mall, that suggests that the lingering worries on COVID might be short-lived,” she says.

“Are movie receipts picking up, are people going to sports arenas? Those kinds of consumers spending on socially-not-so-distant activity would really give us a sense if people are getting back to normal, like the groundhog signaling if spring is around the corner,” she adds.

Can the US replicate key social distancing policies?

While Wuhan is expected to give some early indications of what a recovery may look like, there are a slew of measures the U.S. may be loath to implement.

“China is considered to be an authoritarian regime,” says Bovino, adding: “They can also quarantine a whole building by law. I’m not sure how much the U.S. can do that. China can restrict travel for its citizens in the Wuhan region. In the United States it’s hard to stop New Yorkers from going to Florida”

Another controversial question being debated in the U.S. is how much the government can or should infringe on privacy in order to step up contact tracing, which alongside widespread testing is a key element to preventing future outbreaks.

Sen. Ed Markey (D-Mass.) raised alarms about the possibility of using technology to trace people’s movements in an effort to contain the virus, expressing particular skepticism at the Trump administration’s ability to protect privacy rights in the effort.

“We do not have to forgo all privacy in a pandemic nor watch a surveillance state take root,” he said.

“While we should certainly use technological innovations and evidence-driven collaborations to combat the on-going coronavirus crisis, we must also reject proposals and policies that promise harmful invasions of privacy,” he added.

When asked about the possibility of using GPS locations as part of a contact tracing effort at a briefing last week, Trump said the step was “severe.”

But he added that the administration is thinking about it.