Chinese companies say they can’t afford to pay workers now | Hacker News Reader

Chinese companies say they can’t afford to pay workers now

bloomberg.com

63 pointsundefined137 comments

Reading this, my initial thoughts are - will this virus be the catalyst that causes a global financial recession.

No, or maybe.

If you look at the data, the secondary (manufacturing & construction) sector in China has been mostly stagnant. Almost all of their recent growth has come from the tertiary/services sector, which isn't as export focused or tied into the global economy compared to the US or EU.

Manufacturing has been hit - hard, but keep in mind that the quarantines started during the new year holiday, when most factories would be operating at a lower pace or closed entirely. Now that people are actually starting to go back to work (depending on the city, either last week or this week), we'll be able to get a better gauge of the long term effects on industrial production through the end of the crisis.

What's harder to estimate is the impact to services, since it's harder to find solid proxies. A lot of companies are having employees work from home, but not all jobs can be done remotely. There's also the question of whether a significant slowdown here would boil over to the rest of the world.

My guess is that the total damage - assuming a return to normal in the next couple of weeks & that we're only talking about the global economy - will be a lot lower than most people think. A lot of the hit to the secondary sector was already baked in by the Chinese new years, and the tertiary sector isn't as tied in to global markets as the secondary sector. It's also a lot easier to fake #s from services.

It's a different ball game if the status quo doesn't return to something approaching normal soon (e.g., if there's a flare up in cases outside of Hubei now that people are starting to congregate together again). That said, the impact to the local economy is going to be immense anyway, and I wouldn't be surprised if there are follow on effects at some point.

Lol at saying everyone went back to work last week. Compared to last week, more people are locked down this week, some estimates saying fully 7% of the human population is under some kind of heightened restriction on movement.

Here’s TomToms real-time traffic congestion map of Shanghai: https://www.tomtom.com/en_gb/traffic-index/shanghai-traffic

Use the 7 day view and compare this week with last year at the same time. Using traffic as a proxy for economic activity and your assertion is clearly a misrepresentation. And Shanghai is not even close to the epicenter!

Remember as well that people leave home for the new year celebrations, and so now a huge chunk of people are locked down to their homes or quarantine hospices far from their places of business, plus probably scared as all get out to leave the house, and your thesis about some quick recovery into normalcy seems basically crazy.

Further, you’re relying on how much China’s growth has impacted the world economy in the last few years, and you’re right that it’s largely been domestic consumer growth fueling the country. But that is... an irrelevant measure? China’s economy may have gotten more focused on its own consumers for a while, but it didn’t like stop being the world’s factory to open up some web startups and KFCs. How many more days of basically zero containers of parts cause shutdowns of production lines in Detroit? How many of your prescription meds are either wholly made in China or are finished here but with precursors largely sourced from China?

I never said that everyone went back to work, but yes, a large part of the workforce outside of Hubei Province has actually started work again. This is easy to track - factory emissions outside of the worst hit regions (NO2, for instance, is a good proxy) are starting to recover, and social media activity is very clearly indicating 1.) a large number of furloughed workers are happy that they're now going back to the office and 2.) an even larger number of workers are now doing remote work and telecommuting (and hating it).

I also never said that the impact of the pandemic to manufacturing is irrelevant, only that 1.) provided that factories are starting up again, which many of them are (and we know this, because we can track how much they're emitting) and 2.) the fact that the pandemic hit over the Chinese New year, will mitigate some of the actual impact of the pandemic to the global economy.

Again, all of this assumes that the infection rate in China will continue to slow and that the recent spate of cases outside of China don't escalate to the point where other countries have to implement city-wide quarantines.

I think zhdc1 was saying, "now that employees are expected to be back at work"--that is, we're now exiting the time period for which everyone had planned on much of China taking time off.

It's hard to gauge the impact when we expected everyone to be out of work anyway. Now that we're past that timeframe, it'll be easier to gauge the long-term impact, especially on foreign companies.

They are starting to go back to work, and we can actually track it to a certain extent (not to the point where we can quantify it, but enough that we can say it's a definite trend).

If it leads to the default of a large province or local government financing vehicle (LGFV), it will.

Monetary authorities on both sides of the Pacific are doing their damnedest to make sure that doesn't happen though, lowering rates and printing money, so we are probably safe for a while.

Watch out if the US has to go to ZIRP (0% interest) or the day we get enough inflation that the Fed has to shift tack and start talking about tightening...

> or the day we get enough inflation that the Fed has to shift tack and start talking about tightening

I think there's a typo there, and it should have read "the FED has to shift the definition of inflation once again"

I think it's pretty unlikely. Mainly because it's unlikely we won't be able to contain the virus.

And once contained there will be pent up demand, that will if anything, improve global finances.

Do you think that the virus is the initiation point for bigger cracks in the market? China has taken up enormous debt to fund growth (especially in real estate and infra projects), perhaps the virus creates a nucleation point for avalance of recession?

I don't think it will be contained.

The market will just get used to it. Right now the fear of the unknown is stopping commerce. All the movers and shakers are elderly people with pre-existing conditions, its accurate for them to be scared.

The rest of humanity will be okay. In the meantime the market will have to deal with the fear from the elder class. The septuagenarians running for head of state and influential organizations.

> The rest of humanity will be okay.

Apparently the virus damages testes (and kidneys), male fertility is affected.

I can't find the source I've read yesterday, but it was a medical report on a site named something like medvix.

edit : found the site : https://www.medrxiv.org/content/10.1101/2020.02.12.20022418v...

In case you hadn't made the connection, "medRxiv" is named by analogy with the arXiv, both being preprint repositories for papers in their respective fields.

I saw this movie before!

[1] https://en.wikipedia.org/wiki/Children_of_Men

I honestly don't see how this virus could possibly be contained. With almost 100K people infected - and likely more flying under the radar, it seems far more likely that it will return yearly like the current flu until we get a vaccine.

There are countries that simply aren't reporting infections, such as North Korea, which will be persistent jump-off points for new outbreaks on an ongoing basis.

> more likely that it will return yearly like the current flu

The flu mutates yearly, I'm not aware of this new virus having that ability.

In your scenario over time everyone will have encountered the virus and either are now immune or they die. At that point the spread will slow.

It's not like this hasn't happened before: H1N1, Ebola, Zika. They all died down eventually.

Ebola is not dead and there's ongoing[1] epidemic in Africa. It's still big and on the verge of declaring international emergency. It's just not airborne virus which limits the spread.

[1] https://news.un.org/en/story/2020/02/1057291

USA is having an unusual "double-barreled" flu this year where two different variants are common. One of which is A/H1N1 appeared as a second wave late in the flu season.

Not sure what coronavirus will do, but clearly diseases like H1N1 can recur.

What is somewhat more scary is that particularly lethal diseases often get less aggressive over time because the less aggressive variants transmit better and offer protection against the more aggressive variants. But since coronavirus can spread before symptoms appear, it's not clear that the same feedback loop will occur.

So, it's almost like the virus is actually good for the markets in the longest bull market on record?

That almost sounds delusional to me, but hey, as long as central banks can pump money into the markets, anything goes.

I’m wondering if Wilbur Ross is cheering this virus on.

This is like a gift from the Heavens to the Trump Administration. They tried everything they could to bring China to its knees, and failed, one after another.

And then, boom, a new mysterious novel little virus suddenly appears from out of nowhere.

And instead of feeling sympathy for the deaths and suffering of innocent people in China, the Trump Administration immediately pounced on the situation for maximum effect. Suspicious..

> I’m wondering if Wilbur Ross is cheering this virus on. This is like a gift from the Heavens to the Trump Administration

The coronavirus will definitely hurt China, but I don't see how it will help the U.S. in trade policy. If anything, it'll just delay any real trade agreement the U.S. and China could make as China devotes it's political attention to the virus.

Very sad situation - deeply empathize with the working class that's battling economic pain on top of a health crisis. No real blame can be placed on the manufacturing reliant employer base either - they work at razor thin margins and are optimized for just-in-time everything, including cash flow. No production == no cash on hand for salaries.

Reminder that our great civilization is fragile. If this situation lasts longer, it'll quickly devolve into civil unrest

“There are only nine meals between mankind and anarchy.”

Alfred Henry Lewis, 1906

This event is just another wake up call that we should be prepared for such an event. Having a simple supply of food, water, and other basics is essential. Extreme prepping isn’t the answer, but most people are undoubtedly unprepared for even the smallest crack in the fabric society - whether that be a virus or an weather disaster.

But "extreme prepping" is the answer. If most households just had 20 lbs of rice and 10 lbs of beans, 2 gallons of fuel for a portable stove at home as backup, a logistics meltdown would be so much less dangerous for society. Those supplies are very cheap for like 95% of the population in developed countries and would give valuable time untill any mess is sorted out, hopefully.

As it is now there are like no margin for country wide disasters at all with these JIT food deliveries. The government can't handle this very good as any central warehouses they would put food in would be involved in the logistic meltdown. Maybe on a county level.

That's reasonable prepping.

"Extreme prepping" is the "bunker full of guns, ammo, 5 years of food, etc" version.

What happens when you run out of ammo?

I think that's totally reasonable prepping. Extreme prepping is what gets the focus of TV and media.

In 1840 Pierre-Joseph Proudhon defined anarchy in "What Is Property" as "the absence of a master, of a sovereign".

Anarchy means no authority, it does not mean no rules. I would suggest that anarchy needs a full belly instead and it's probably closer to mankind that capitalism.

Anarchy sounds like that shoe company that experimented with Holacracy. But with guns, samurai swords, and chains.

And lots of black leather. But how do you make leather in a post-civilization society? That always baffled me.

https://en.wikipedia.org/wiki/Artificial_leather

> No real blame can be placed on the...employer base either

..uh, why?

> they work at razor thin margins and are optimized for just-in-time everything, including cash flow.

This is a risk they take, and when shit hits the fan, they find out why it's a bad one - their employees, all of them (hopefully, not just the little guys) are going to suffer.

It seems like China has it contained to Wuhan, and the surrounding Hubei province. But they need to keep things on lockdown for another few weeks, and restrict movements and public socializing, to be certain the virus is contained.

It’s going to get worse before it gets better.

I suspect that over 5,000 lives will be lost from this ordeal. This is tragic because entire families are getting wiped out. Great grand parents, grand parents, and adult moms and dads. The people over 60 years old, are the greatest at risk.

China’s CDC published [1] a detailed report on the case study results for all known infected patients.

[1] https://github.com/cmrivers/ncov/blob/master/COVID-19.pdf

Another proof that China is now much more running a 19th century kind of exploitative capitalism, than communism.

China hasn't been a "Communist" country since the 80's. When Deng Xiaoping took over after Mao's death.

https://en.wikipedia.org/wiki/Deng_Xiaoping

https://en.wikipedia.org/wiki/Chinese_economic_reform

The word "Communism" is irrelevant for economists. China is still refer to as that for the sake of historical significance.

It's still widely perceived as "red" both by the general population and in media. The fact that it still has autocratic one-party system is seen as a proof of communism, while the truth is that they actually implement very few socialistic ideas nowadays in terms of workers' rights, social protection, job protection, etc. Take Iceland for instance, it's far closer to the ideas of communism than China now.

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