Coronavirus makes for precarious politics in East Asia

Outlook

The Wuhan coronavirus outbreak is the most serious crisis President Xi Jinping's administration has yet faced. This makes for unpredictable politics. The United States might try to take advantage of China’s preoccupation with the outbreak to further its regional agenda, for example with ‘freedom of navigation’ patrols in the South China Sea.

Beijing will want to avoid any entanglements outside its borders while it deals with the outbreak at home, but may feel compelled to prove that its current weakness cannot be exploited. There is a risk that Chinese leaders under stress will respond excessively to perceived provocations.

Impacts

• If the disruption in China continues, the economic damage will accelerate as financially fragile firms and households begin going under.
• The virus looks likely to damage the global economy via its effect on China rather than its spread overseas.
• North Korea’s draconian travel restrictions to prevent an outbreak will come at a heavy economic cost and weaken regime legitimacy.