April 28, 2003

This Virus Won't Stop

The deadly SARS epidemic is spreading economic havoc around the region

As a deadly virus spawned in China rages from Thailand to Toronto, readers in Beijing are snapping up copies of "SARS Is Not Terrible."

The 28-page booklet assures mainlanders they can avoid contracting the virulent new strain of pneumonia known as severe acute respiratory syndrome by eating right and washing their hands.

China's leaders, it promises, have everything under control. Would that it were so.

As any Hong Kong resident will tell you (through his surgical mask), SARS is way past terrible. It's catastrophic. The virus has killed 30 people in Hong Kong since mid-March, when it hitchhiked out of Guangdong province aboard a mainland doctor.

By the second week in April, new infections-tallied in morning papers alongside the weather forecast and daily race results-were running at 40-plus per day.

Hong Kong is bracing for as many as 3,000 SARS patients in the weeks ahead, but it's unclear who will treat them. Hospitals are swamped, and the virus is so contagious that a quarter of the people who have fallen ill so far are health-care workers.

What makes SARS so spooky is that experts can't figure out how the virus spreads. It raced through a Kowloon apartment complex, afflicting 300 people, and more recently jumped quarantine lines to residents of nearby buildings.

Authorities are now debating whether SARS can float through the air like an ordinary flu virus, swim through sewage pipes, or ride house to house on rats and roaches. Worse, some think it can be transferred by asymptomatic carriers.

If so, the contagion may already be too widely scattered to contain. Like other foreign travelers on the lookout for opportunities in Asia, the Guangdong virus is finding Hong Kong an efficient base for regional expansion.

Thanks to the city's hyper-efficient transportation network, SARS has quickly emerged as China's leading export. And it has sown chaos in its wake.

The Thai government axed a summit aimed at promoting - what else - regional tourism. Malaysia has banned all travelers from China and Hong Kong. In Singapore, where SARS has infected more than 100 people and killed nine, the Catholic archbishop has forbidden priests to hear confessions.

Until further notice, "general forgiveness" has been granted. That may not do much to save the souls of multinationals. Motorola was forced to suspend production temporarily at a Singapore factory after one of its employees was diagnosed with SARS.

Intel, the world's largest chipmaker, cancelled tech conferences in Taipei and Beijing because of concerns about the virus. It also closed its Hong Kong office. Economists have lopped one or two percentage points off their 2003 GDP forecasts for Asia.

Morgan Stanley's Steven Roach calls SARS the "nail in the coffin" ensuring global recession. Already Hong Kong is getting hammered. Thousands of frightened expats have fled. Schools are closed. Retail sales have plunged 50%.

Passenger traffic at Hong Kong's airport has dropped by half, and occupancy rates at many swank hotels have tumbled into the single digits. (The Hong Kong tourism board's latest campaign promoting the city's image as a tourist destination and international business hub isn't likely to help. Its slogan: "Hong Kong will take your breath away.")

Scrubbing away the stigma of disease may prove harder than eradicating SARS itself. Days after the outbreak, Hong Kong police arrested a 14-year-old for using the Internet to spread a rumor that Hong Kong had been declared an "infected city" and its borders sealed.

Authorities fired off an official denial via text messages to every mobile phone in the city. Yet for many, hoax and reality have converged. Clients won't come to Hong Kong and don't want anyone from Hong Kong to visit. "I'm grounded," says Morgan Stanley's Hong Kong-based China analyst Andy Xie, echoing the feelings of many that they're living in a leper colony.

At the moment, the SARS epidemic is doing less damage on the mainland. China's fast-growing economy remains alluring. But China has become dependent on overseas investment.

If foreign sentiment sours, the China boom could go bust in a hurry, throwing millions out of work and creating a headache for China's new leaders-something that would be recognized, even in Beijing, as terrible indeed - Clay Chandler (HK), Eric Ellis (Singapore).