Dangerous Coronavirus has spread, affecting heavily on the US, China and Vietnam. The dark prospects of the global economy are gradually appearing.
The spread of coronavirus in many places with the sharp increase of deaths outside China has made the world economy wobble. The FTST100 Index on the London stock market has had the most tragic week since 2008, plunging 13%, by the end of Friday’s session (Feb 28). The red colour spread across the global stock markets, from Asia, Europe to the US.
Dr. Pham Do Chi from Florida, former expert of the International Monetary Fund, has commented.
Question: What is unusual about the drop of US stock market last week that made public opinion worried, sir?
Last week, the situation of the US stock market fell sharply in large numbers, and quickly at an unprecedented speed since the crisis in 2008.
The DJ Index dropped by 3500 points or 12% from its previous peak of just two weeks on Feb 13, for six consecutive days of non-stop declines, different from the market’s norm that had a bounce back (temporarily due to buyers hoarding).
In the words of the market parlance, whenever a typical stock index drops by 10%, the market is classified as a “correction territory,” if this problem continues to decrease to 20%, the market will go into “recession” or “bear market.”
Headlines in the press and media reported that about $ 3,600 billion “flew” along the corona virus’s spread, presumably entering the US territory through influenza-carrying agents from the affected regions in China or South Korea or even via “cross-contamination” (although no root cause of illness and death has been found!).
The US government and the public were really worried after President Trump’s White House press conference, in which he declared the impact of the epidemic “to be mild in the United States and even prevented.”
For the market, this represents the definitive response of US and global investors, who want to sell quickly to “run away” from the final global market, because there has been a slow reaction. compared to other Eurasian markets, which have been declining since the last few weeks.
Perhaps the people in the US reacted half-heartedly to President Trump’s political statements which aimed to pacify the crowd.
But they appear to be more attentive to warnings from the epidemic experts, as the deputy director of the CDC in Atlanta said “the problem now is not whether Covid-19 epidemic will ever come to the US, but rather when it will come and what intensity?”
Therefore, they also deliberately sought to buy preventive masks available, although some experts also said that wearing masks is not very effective; The first result was that it was difficult to find this simplest tool in many cities.
In some places with crowded Chinatown, which is thriving for living, Asian restaurants and food outlets were sparse.
The person who predicts the upcoming recession will not be a Nobel Prize-winning expert nor a famous mathematical model, but usually in the stock market because it is where all the agents (individuals and firms) in an economy gather.
This time, the market fell sharply and so quickly, although largely due to the psychological effects of fear of the global economic recession, the trigger point was the flu that paralyzed the world’s second-largest economy in the world, known as the “global manufacturing plant” has shown a sharp crack in the US economy, due to concerns that firms will lose heavy revenue due to the suspended supply of many raw materials from China.
By the end of last Friday, the DJ market recovered nearly 600 points lost in the last half hour, thanks to the news from the White House that the US Reserve Bank FED may lower interest rates again in March to support the economy.
However, the impact on the market can only reassure investors in the short term, the true effect of FED is now relatively limited to the US economy and the world.
The problem now is not the need to “stimulate demand” to encourage the economic demand of the US economy, which is already quite sufficient, with strong tax reduction policies and defense spending of the Government as well as consumers’ strong spending.
If the crisis persists, stocks continue to lose 20% or more (from 12% today), the US and China economic downturn and global recession could occur this year or next (defined by two consecutive quarters with negative GDP growth).
Particularly in the US, if the stock market collapse and job losses can occur during the election season, then the “strong economic” record and the slogan “make America great” by Mr. Trump can collap and affect the prospect of re-election, although he is prevailing at the beginning of the election season now.
Without further inference for China and for President Xi Jinping personally, the Chinese economic outlook that was so gloomy after the year of trade war with the US, has now been numbed by the pandemic.
Many commentators have analyzed the shaky political role of President Xi and even China’s political regime.
The Soviet Union collapsed after 70 years, starting with economic causes. Will it be China, after that long time?
The role of “production facilities” of Chinese materials mentioned above will cause long-term damage to the US and other countries (especially Vietnam).
The US needs to find new sources of supply from domestic production or other countries in Asia (including Vietnam), and will need to change technology, reduce cheap labor that is still supplied and changed by China by using technology as well as higher level workers in Europe.
But this will take a lot of time, and that’s why the US recession could happen in the next 12-18 months.
Question: In your opinion, how is Vietnam affected by corona virus?
Vietnam’s economy has been hit by the flu on three sides:
Direct impact on people in disease prevention as in the case of China, crippling the economy and social life.
On the demand side, China’s economic downturn will seriously affect Vietnam’s purchases. The most typical example is the closure of the border that halts the export of agricultural products.
On the supply side, Vietnam is in severe crisis due to the lack of “supply” of raw materials for production and export.
Many experts and commentators consider this a rare chance for Vietnam’s economy to “escape from China’s influence.”
It may be feasible if purely professional or technical. But the key thing politically, are Vietnamese leaders ready or not?
A few weeks ago, on the occasion of the temporary closure of the border with China to prevent epidemics, it was officially stated that Vietnam could not do this unilaterally because it signed a treaty requiring the approval of the two parties and within a minimum period must be notified in advance. The public opinion in bewildered not understand who this treaty was signed by and when?
And the question whether you want to do it, there must be research and technical projects in domestic production and sourcing from other countries in the region or around the world, as well as the application of new production methods and important human resource training at various levels. It is only a guess if it takes at least 3-5 years ?!
But it is worth mentioning that Vietnam needs to detach from China right now not purely for economic reasons as the majority wants, but for political reasons. In the face of China’s poor outlook, Vietnam may wish to be more independent than other countries.
Facing a dangerous pandemic caused by Coronavirus, any country cannot avoid the consequences. But the things will be more serious when Vietnam, with an economy almost entirely dependent on China, quickly pulled into the whirlpool of disasters.
To make matters worse, the communist dictatorial regime in Hanoi concealed disease information to the local people, giving the corona virus a chance to spread faster, so that it could become a killer of the people in this country.
Trung Hieu from Hochiminh city – Thoibao.de (Translated)
