Beijing ... The Rush Hour Is Back ... SMEs Return to Work ...

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Subject: Beijing ... The Rush Hour Is Back ... SMEs Return to Work ...

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Saturday 28th March 2020

Hi Friend,

Beijing ... The Rush Hour is Back ...

SMEs are back to work ...

In Beijing the rush hour is back. Travel restrictions are being removed. Life is slowly returning to normal. No new cases have been reported on the mainland for over a week now.

The government is urging a swift return to normal. Businesses are urged to use smart technologies to accelerate the process. Over 70% of small and medium size businesses are now back in action.

Smaller businesses struggle to meet local authority regulations in place to control the virus. Distance working, within units, can pose problems, the supply of face masks is a further inhibiting factor. Remote working and smart manufacturing platforms are encouraged as part of the process. China is well set to facilitate the change.

China's cloud infrastructure has grown rapidly over the past few years. The market grew by almost 70% in the final quarter of 2019, with a value of $US 3.3 billion. Alibaba Cloud accounts for 47% of the market, followed by Tencent Cloud and Baidu's AI cloud. Despite the economic shock of the viral outbreak, the acceleration of of cloud, will be one of the beneficiaries of the change in working habits likely to result.

Despite the recovery from the viral outbreak, China faces the problem of a second economic wave as markets in the West face lock down. Output may have fallen by 10% in the first quarter. Further setbacks are expected in the second quarter. Forecasts for growth in the year have been reduced from 6.1% to 2.6% by CICC. Despite an expected bounce back in consumer spending and investment, exports may fall by as much as 20% as world demand slows.

China's recovery offers hope to the West and should be a model for recovery. As expected the Italian daily case load topped out last week. Despite the higher number reported yesterday, our momentum model suggests the downturn will continue. Spain is now reporting higher numbers but should peak within days. The UK is set to enter the "eye of the storm", the numbers will accelerate in the week ahead.

In the U.S. Trump is suggesting it could all be over by Easter. Our viral model suggests the end of May, early June, is more likely ...

Rumours of Our Deaths Greatly Exaggerated ...

The good news, rumours of our deaths are greatly exaggerated. According to the latest research from Imperial College, The lock down has been so successful, Britain is now on course for an estimated 5,700 deaths from Covid-19.

"Our work shows that social distancing is working" said Tom Pike. Neil Ferguson, Professor Pike's colleague at Imperial college, presented a model analysis suggesting the virus would kill 260,000 people, had Britain maintained a less restrictive policy. "Left unchecked altogether, the death rate could have been as high as 510,000" he added.

The 510,000 number, assumed an 80% infection rate. That's far higher than the Spanish Flu of 1918 and the experience of crew and passengers of the Diamond Princess in 2020. Both around 20% were higher than the reported infection rate in Wuhan province of around 1in1000.

So should we take comfort from the latest volte face from Imperial? Of course. Wuhan province reported just over 3,000 deaths from almost 70,000 cases in a population of 60 million people. Pro rata the UK case load would be around 90,000 with a projected loss of life of less than 5,000. The adjusted rate would be almost 1% lower as many would die of natural causes.

Bit gloomy this for a Saturday? I hope not. Numbers in the UK are set to accelerate over the next week. We expect the case load to peak within the next ten days. The viral episode should be over by the end of May. Social distancing measures should be easing by the end of April.

The virus is behaving as expected, the strike on Downing Street, just part of the process. For most businesses, the focus is on cash and survival over the next few months. As with all things, this too will pass, sooner than many expect. Then comes the sunshine and the opportunity to benefit from the strong recovery expected.

Fears of a second great depression, as with rumours of our deaths are greatly exaggerated ...

That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers,

Watch the numbers not the headlines,

John

© 2020 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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Subject: Beijing ... The Rush Hour Is Back ... SMEs Return to Work ...