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Coronavirus and Economics Essay

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    The article, “China Virus Overwhelms Wuhan’s Health System, as City Rushes to Build New Hospital” explores the effects of hazardous situations on the economy. It also exposes the weakness of the Chinese medical system and how the government economically responded. The article “What Is the Coronavirus? Symptoms, Treatment and Risks” (NYT – Roni Caryn Rabin) is used to explain the virus and health effects; while the article “Disneyland In Shanghai, Mcdonald’s in Wuhan to shut temporarily amid virus outbreak,” (WSJ, By Dave Sebastian, Heather Haddon, and Alison Sider) is used to explain the effect the virus had on direct foreign portfolio investments. All the articles, come together to reveal the situation in China, which could educate the company, 3M, into becoming a better more profitable company for the future.

    The Coronavirus, according to “What Is the Coronavirus? Symptoms, Treatment and Risks” (NYT – Roni Caryn Rabin), is an illness that can infect both humans and animals; the virus affects the Respiratory system, working like the common cold or a severe Acute respiratory syndrome which could be deadly. As claimed by the article, symptoms from the virus are similar to those from the flu with fever, severe coughing, and shortness of breath. Additionally, the Coronavirus outbreak, according to Roni C. Rabin, was said to begin from a meat market that was selling “live poultry, seafood, and wild animals.” Wuhan is set to be the most affected area from the outbreak, and now it is on lockdown. The government responded by starting the construction of a new hospital, which is said to be done in six days, to sort the shortage of necessary resources, long waits, and lack of beds/space. Furthermore, in the article, Dr. Vaishampayan continued by voicing, that at the moment there are not any approved drugs to battle the virus, and the only treatment available is supportive care, which includes giving oxygen to the patient.

    As stated before, Wahun is said to be the most affected by the virus, and the citizens have taken to social media to report as well to ask for essential resources like face masks. The media in the areas affected have also revealed videos of excavation sites and constructions, with the workers also having masks. Furthermore, according to Wuhan’s medical system, the government underestimated the Coronavirus, which now, according to the article, has infected 881 and killed 26 in China, with some officials criticizing the government response and the President(Julie Wernau in Beijing and Shan Li in Wuhan, C “China Virus Overwhelms Wuhan’s Health System, as City Rushes to Build New Hospital,” WSJ). The government responded by investing and implementing new medical technology to speed up the testing of cases.

    This virus had a massive impact on the economy and medical system of China, exposing their weaknesses and exploits. Julia Waernau explains that many hospitals in Wuhan had to turn patients away because of the lack of necessary supplies. According to the Hospitals, most of the staff was lacking necessary supplies like protective gear, latex gloves, rubber boots, shoe covers, and disposable round caps. The government’s answer to this, according to the article, was to ship “protective clothing and gloves to the city from its reserve of medical supplies,”; while the finance ministry will be giving $144 million to fight against the virus. While the government tries to supply necessary supplies, local authorities are advising citizens not to hoard on quantities and panic.

    The shortage of medical supplies led to people hoarding supplies, which has created a resale market. As a case in point, Xu Wen, a local near Wuhan lung hospital, expressed that she stocked up on mask, from panic after seeing “a swarm of medical workers in hazmat suits greet the arrival of a patient”(“China Virus Overwhelms Wuhan’s Health System, as City Rushes to Build New Hospital,” WSJ – Julie Wernau and Shan Li). The fear seems to have created a resale market for protective wear, with the article stating that a seal around a person’s face may go as high as 7 dollars. According to Cao Jun, a general manager at Lanhine Corp, a face mask supplier, the company quadrupled the salary of workers to work five days in advance, but only ten to twenty percent were willing to come to work. With this in mind, Cao Jun continued by stating that the shortage of medical protective gear might continue until the end of the epidemic.

    Moreover, e-commerce platforms like Hengming Medical Devices Co., have stated that their 100,000 inventory of masks has sold out within hours, which leads to staff having to work through the holidays. Alibaba voiced that it has 46 million masks in stock, which are being sold by merchants, and it will be able to supply another 1.57 million ahead of the Lunar New year. This also created a significant impact on the stock market, with many investors taking advantage of shortages, and companies gain, with Tianjin Teda, a face mask maker, shares rising by 40%.

    On a microeconomic level, it shows individual decision making in a time of panic. Many individuals are stocking on many medical supplies, with some of them selling those products for a higher profit. Thus creating a resale market and also shifting the demand curve for said products.

    On a macroeconomic level, it showed how China’s GDP was affected, and the response of their government. As stated before, many companies sold out on their medical supplies, which increase consumption. Moreover, we saw how the government responded, supplying necessary medical supplies, and also investing in new technology to control patients and the virus. Not only that, but the government has also employed workers and started to build new hospitals to help control and battle the virus. On the other hand, it has impacted direct investments, a great example being McDonalds and Disney. As stated in “Disneyland In Shanghai, Mcdonald’s in Wuhan to shut temporarily amid virus outbreak,” (WSJ, By Dave Sebastian, Heather Haddon and Alison Sider) many McDonald’s restaurants have been closed. At the same time, Disney responded by closing its Disneyland and Disneytown parks around Shanghai. Although, foreign indirect investment was highly profitable, as stated before the high consumption from the panic led to companies gaining a large amount of profit, increasing the value of their shares.

    3M, as a medical supply company, could learn and make a profit, or it could learn from the Chinese government and companies’ mistakes to prevent similar problems, which could benefit the stakeholders. As mentioned before, the lack of supplies and fear of the virus created an increase in consumption. The rise in consumption helped the company and its shareholders because it inevitably led to an increase in its share value. This would also bring much-needed funds, with securities being sold for a premium value, as 3M stock market value is down. Furthermore, with the government investing in medical technology and medical supplies, this would also bring more revenue, as 3M is one of the biggest American medical suppliers.

    On the other hand, 3M’s significant stakeholders are customers, shareholders, employees, and society. One way to satisfy the three-quarters of the stakeholders is by decreasing the price of essential medical supplies, making it more affordable to consumers, increasing the demand, decreasing surplus inventory, increasing revenue, and preventing the spread of viruses benefiting society. Thus increasing share value, which benefits shareholders and brings more funds, which could help employees. However, as stated by the article, most of the workers of “Lanhine Corp,” were discouraged to come back to work, the company’s response was to increase their wages, but the workers were still intimidated. The employees were frightened because of the virus, one way that the 3M company could prevent this is by supplying the workers with supplies to prevent them from getting infected, a better healthcare plan, and increasing their wages until the virus is stopped.

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