Last weekend saw a massive jump in the number of reported cases of SARS in mainland China. The official number of cases being reported by the government shot up to 2,001 on Monday the 21st, from 1,807 the previous day. Of course, this does not represent an actual 10 percent increase in the number of cases, or even an increase in the number of cases that the central government was aware of. Rather, it is a 10 percent increase in the number of cases that the government admits to.
Tradition has it that throughout Chinese history natural disasters such as floods and earthquakes have presaged the fall of a ruling dynasty, by calling into doubt the Mandate of Heaven, which gives them legitimacy. The ancient Chinese had elaborate cosmological theories as to how events in nature were tied to the Emperor, but many historians have hypothesized that a government's ability to handle such phenomena was a useful barometer of its general effectiveness. In early Chinese civilization, for instance, irrigation was an essential role of the state, and floods spoke to a failure in this regard. More recently, a massive earthquake just outside Beijing in the late 1970's seemed to mark a changing of the guard within the Chinese Communist Party towards a more pragmatic leadership, after the government attempted to play down the damage.
Today, China's leaders are scrambling to keep the SARS epidemic from reflecting too poorly on themselves. In a rare show of public contrition last weekend, the government admitted to a cover-up and summarily dismissed from office the country's health minister and the mayor of Beijing. The capital city had seen one of the biggest "increases" in SARS cases, from 37 to 339, even before Sunday's 10 percent add-on to the country-wide numbers. This followed a previous public show of regret a couple weeks ago when Chinese leaders "apologized" for not being forthcoming about the true state of affairs in their country, and promised to be more forthcoming and cooperative in the future. In the interim between the first and the most recent round of apologies, the World Health Organization reported that it suspected SARS patients were being relocated to military hospitals, where it was barred from entering. There was even speculation that patients were being put in ambulances and were driven around the city for the duration of WHO visits to hospitals.
Is there any reason to trust Beijing's most recent commitment to be open about SARS? I for one am confident that even the revised numbers are understated. Officially, there have been 86 deaths in China and 94 in Hong Kong. Now let's think about this. SARS has been present in Hong Kong for about four weeks, but originated three months ago in China, most likely in Gunagdong province. China's population is a couple orders of magnitude greater than Hong Kong's, and China's public heath facilities are much worse. So why should China have fewer SARS deaths than Hong Kong? It probably doesn't. Incidentally, Hong Kong's death toll could be near zero if China had acted responsibly when the disease first emerged, by allowing full WHO access, and perhaps even quarantining infected areas and persons.
The truth is, you probably shouldn't believe any statistic put out by the Chinese government, whether the subject is SARS deaths, last year's inflation rate, or the number of people killed at Tiananmen in 1989. Estimates vary as to how much GDP growth is overstated every year in China, but no one disputes that it is systematically exaggerated. It's a shame that reality doesn't reflect more closely the wishes of PRC bureaucrats, though, because rapid growth is absolutely essential to avert a full-blown financial crisis in China.
Inefficient state-run enterprises have been subsidized for years by semi-private banks, leaving those banks with huge portfolios of loans that are unlikely to be repaid. Unless these banks can make huge returns on private sector investments, they are doomed to insolvency. China's economy, in short, is like a giant house of cards, with rapid growth year after year being the essential foundation. SARS might just swipe that bottom card from under the entire deck. It is already having a huge impact on China's airline and tourism industries. If it continues unabated, it will wreak havoc on the vital economic zones of Guangdong, Hong Kong and Beijing. Highlighting as it does the Communist government's unfortunate difficulty with truth and honesty, it might seriously erode future foreign investment, a crucial source of growth. Whatever statistics are put out on how the economy is affected, you can bet that the truth is far worse.
A fiscal crisis in China is likely to be catastrophic not just for the economy but also for the body politic. China's leaders long ago gave up on the Communist rhetoric, and since Deng Xiaoping have relied on their ability to deliver economic growth as the primary justification for their right to rule.
Like so many of China's rulers before them, the PRC is having its legitimacy questioned by the forces of nature. How will they react in the face of increased public anger at their incompetence? Hopefully it will be through reform, and a movement towards greater transparency and accountability in all their affairs. But possibly they will react with an internal crackdown, or even a nationalist lashing out at America or Taiwan. Let us hope for the former, but make cautious preparations for a darker future in the Middle Kingdom.
Aaron Back can be reached at aback@jhunewsletter.com.
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