The Impact of Coronavirus on the Food Industry in Wuhan China Proposal

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Updated: Feb 27th, 2024

Introduction

Research background and significance

The novel coronavirus that was identified in Wuhan, China, in December 2019 has been rapidly expanding over the last months, causing pneumonia that results in thousands of fatalities. According to the data provided by John Hopkins University, 73,335 cases of NCOVID-19 have been registered worldwide, the majority of which in Mainland China. Hubei province, where the virus has originated, accounts for 59,989 cases with the highest number of deaths – 1,789 out of 1873 total (John Hopkins University). According to Li et al., the first transmission of the virus to a human host has been linked Huanan Seafood Wholesale market (2). However, the WHO states that the virus’s zoonotic (animal) origin has not been proved (WHO). Nevertheless, the market was closed immediately after the first cases of pneumonia were reported.

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The potential connection of the virus to the food industry threatens the overall economy, as well as the region’s food security. After the city has been locked down, the residents experience a severe “supply gap of production capacity” (Li et al. 2).

Many local businesses are closed due to quarantine measures, which will result in financial losses. The experience of recent epidemics suggests that mobility restrictions and quarantines have adverse effects on the economic situation as a whole and the food industry in particular. Moreover, the possible connections of viruses to the food of animal origin influence consumer behavior. The recovery of the food market after such economic shocks depends on several factors, including timely management of infection outbreaks, governmental financing of the sector, and organizational management.

Research contents and issues

Epidemics of such scale as the recent coronavirus outbreak in China cause disastrous effects on society. The burden of the disease is generally associated with deaths, health complications, and healthcare costs. However, the assessment of the economic impact should not be narrowed only to the financial costs of outbreak mitigation. As Smith et al. claim, “such events can elicit economic shock waves far beyond the realm of traditional health sectors and original geographical range of a pathogen”(1). Thus, the primary objective of the research is to evaluate the feasible indirect influence of epidemics on macroeconomic performance.

The food industry generally suffers the immediate effect of similar incidents due to a short period between production and consumption. Thus, the research focuses on such issues as the influence of the virus on the food market in the affected region. The potential short-time negative impact of novel coronavirus is caused by transportation restrictions, quarantine, and limited workforce availability. At the same time, long-term effects are connected to the financial insecurity of many businesses after the outbreak, and fears that affect consumer behavior.

Research methods

The research aims to explore the negative effect of COVID-19 on the food industry of Wuhan, China, and to develop recommendations on market recovery. Although it is too early to analyze the data on the economic influence of the virus in the food sector of Wuhan, an understanding of the possible outcomes is necessary at this stage to mitigate the adverse effects. That is why the experience of previous epidemics is analyzed in this research.

The tendencies observed in food industries of different countries during the outbreaks of SARS, MERS, and Ebola are compared to the current situation in China to identify feasible patterns. The knowledge about the factors that negatively impacted the economies during those epidemics will be used to develop recommendations on how to avoid them in China today.

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Theoretical Basis and Literature Review

The impact of epidemics on the economy

The macro-economic perspective on epidemics is necessary to assess the potential impacts of the disease. Studies of the infectious disease epidemics effects mostly utilize quantitative and qualitative comparative analyses to estimate the macro-economic performance before the outbreak and after it has been contained. The reviewed literature offers the classification of potential sources of impact in three major categories: the direct effect of the disease itself, the consequences of preventing measures, and consumers’ fears after the outbreak. The direct impact of the disease on the economy is reflected in healthcare costs. Additionally, other industries suffer because of deaths and incapacitation of personnel and consumers.

Containment measures, such as quarantines, lockdowns, and business activity bans in some industries may affect supply chains and hinder trade operations. As Thomas et al. claim, goods movement restrictions threaten both the stability of the sector and the overall food security of the affected region (12). Moreover, WHO reports evidence that suggests that such limitations may be ineffective during public health emergency crises as they disrupt economic activity and supply of aid (10). Thus, actions should be taken to avoid unnecessary losses during the outbreak.

The influence of the epidemics on consumer habits is a long-term consequence of the outbreak. According to Smith et al., “‘fear factor’ dynamic may cause irrational behaviors aimed at disease avoidance” (2). The role of fear that influences consumer choices may turn out to be a significant barrier to the food industry recovery in Wuhan. The reason for this is the possible connection of the virus to the local seafood market. Thus it is likely that people will reconsider their preferences as to what food and where to buy.

The food industry and security are often disrupted during severe public health crises. Davis studied the economic impact of Ebola on agriculture and food industries and market recovery in Sierra Leone. The scholar reports that many businesses have suffered severe losses that forced some of them to terminate their activity (Davis 5). This consequence occurred due to the trade restrictions and governmental policies that banned business operations in some sectors.

Although EVD had a significant fatality rate, the economic impact of the outbreak was mostly limited to containment measures (Davis 8). Although some patterns of Ebola and novel coronavirus outbreaks may be similar, the socio-economic environment in which they take place is the critical variable. Due to its location in a densely populated city, COVID-2019 has affected almost three times more people in less than two months than EVD during the whole outbreak. Moreover, the resiliency of the food industry and food security in China is assumed to be stronger, so the crisis may potentially have a lower impact.

Coronaviruses are zoonotic diseases that are transmitted through the air and have non-specific symptoms, such as respiratory complications, fever, and pneumonia. Recent history has seen two severe outbreaks of epidemics similar to the novel coronavirus. SARS (Severe Acute Respiratory Syndrome) and MERS (Middle-East Respiratory Syndrome) had identical patterns but different severity. The analysis of MERS’ impact on the food industry of South Korea conducted by Smith et al. identified “a 10% drop in production from the previous year” (3). However, the industry has quickly recovered after the economic shock.

SARS is often compared to COVID-19, as the epidemiology is similar, and both viruses originate in Mainland China. However, the current outbreak has already surpassed the scale of SARS. The analysis of its impact on the food industry conducted by Beutels et al. shows the significant immediate effect of the epidemics (US$ 8.5 bn loss) followed by a quick recovery of the market (85). The scholars claim that the successful revitalization of the industry was possible due to the rapid containment of the virus (Beutels et al. 90). The reviewed investigations of the prior cases of epidemic outbreaks show a similar pattern characterized by a severe impact on the food market and fast recovery of the industry that depends on the period during which the virus is contained.

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COVID-19 influence on the food industry in China: situation assessment

The situation in Mainland China and especially in Hubei province is characterized by extensive containment measures. Phelan et al. report that “China severely restricted movement across Hubei Province in 16 cities, affecting more than 50 million people.” The lockdown of Wuhan and movement restriction hinders the supply of food to the city. Moreover, many businesses are closed on quarantine with the personnel staying at home. The Ministry of Commerce of China has arranged a supply of food from overseas trading channels to enhance food security (MOFCOM). Nevertheless, local food producers and food service operators suffer economic losses due to quarantine.

Although the epidemic has not been contained yet, and the full extent of the economic impact is still unclear, some consequences have already been observed. It should be noted that Hubei province, which has been impacted the most severely, accounts for 4% of the GDP of China, so the extensive losses of this region’s economy would affect the whole country (Hayat et al. 4). According to Hayat et al., “a temporary impact of around 1‐2% on GDP is a reasonable estimate” (4). Chen claims that the food industry, especially food service, will experience a massive impact of labor shortage and road traffic control (1). A considerable period is needed to renew restocking affected by movement and trade limitations.

Moreover, the demand for food of animal origin has already reduced because of the restrictions and consumers’ fears (Chen 1). According to Rabobank research, the average incomes of the country’s food sector during the week of Lunar New Year were fell by 80% in Hubei province in comparison to the previous year (Chew 2). Although the loss of the expected profits has damaged the businesses, they still can recover by the end of Q2 if the outbreak is contained quickly.

Although food as a daily necessity is economically resilient, those sectors that produce supply for food service are substantially affected by the outbreak. Huang and Madhavan have observed a significant decline in foodservice growth during SARS epidemics in 2003, but the industry had quickly rebounded then (1). The government measures and consumer concerns will likely undermine the foodservice industry in 2020, but the extent of the threat is unknown as it depends on the containment time.

Recommendations and potential solutions

Although it is unknown how quickly the virus will continue to spread, and when it will be under control, it is evident that COVID-19 escalates quicker than SARS and has already affected more people. As the exact date of the virus containment is unknown, the food industry recovery measures should be implemented during the outbreak. Such short-term decisions should primarily focus on the mitigation of the virus’s negative impact through resilience-enhancing choices.

As bans on business activity have been damaging the economy without any evidence of public health improvements, Davis recommends “lifting of the quarantine restrictions” as a short-term solution (31). The issues that arise from the outbreak should be addressed immediately, including the supply chain review and financial support for local businesses to grant quick recovery. The long-term solutions are more complex to develop due to the difficulties in prediction. The economic situation in the food industry of Wuhan is strongly connected to the epidemiologic situation, while the latter remains unclear. General recommendations for long-term solutions address loan programs with lower interest rates for recovery support and business advocacy policies.

Research Model and Hypothesis Derivation

Research model

Research Model.
Figure 1. Research Model.

Independent variables:

  • Virus characteristics: disease contagiousness, disease severity, duration of the outbreak, fear factor intensity.
  • Economic measures: lift the quarantine restrictions, review the supply channels, government financial support.

Control variable:

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  • Food industry recovery: loss amounts, growth rate.

Hypothesis deduction

Prior knowledge of public health emergencies on the macro-economic performance of the food industry suggests that strict restricting measures inflict more damage than the diseases. Although the food industry is relatively resilient, transportation limitations and bans on economic activity provoke small businesses to terminate their work. Moreover, there is no proof of the efficiency of quarantines on the infection containment, so their influence is limited only to aggravation of the economic and humanitarian crisis. Lifting some restrictions will potentially reduce the adverse effect of the virus in the future.

  • Hypothesis 1: Quarantine measures aggravate the negative effect of the virus on the food industry.

Current data retrieved from Wuhan, China, indicates the substantial losses of the food industry comparing to the previous year, mostly due to the Lunar New Year celebration. As the city is locked down on quarantine, the government has arranged the supply of food and medical equipment from overseas companies while local food is not being produced. Moreover, the zoonotic nature of the virus causes fear and reduces the demand for meat consumption, which negatively affects local farms. The optimistic scenario of quick virus containment suggests that the impact on the food industry will be temporary, but severe.

  • Hypothesis 2: The current coronavirus outbreak will have a severe impact on the food industry of Wuhan, which may be short-term.

The assessment of total recovery costs is unknown by the end of the outbreak. In case of drastic consequences for the local food industry, recovery measures should include governmental financing of affected sectors. Additionally, specific banking programs should be developed to issue loans to afflicted businesses on mild conditions to facilitate recovery. Moreover, organizational improvements are necessary to ensure uninterrupted provision supply to foodservice and food processing industries.

  • Hypothesis 3: Governmental subsidies and lower interest rates on loans will enhance long-term recovery

Research Design

Research object and data collection research object

The food industry in Wuhan is the research object of the study. To avoid misinterpretation, the quarterly data is compared to the same quarter of the previous year. The predictions are developed based on other epidemic outbreaks. The insights from various sectors, such as food service, dairy, poultry, and agricultural goods production, are considered in the study. These data are used to explain the sources of impact and how they influence different areas of the industry.

Variable selection and measurement scale

As the COVID-19 outbreak is not yet under control, the finalized data on its impacts is not available. However, the patterns of the previous cases of severe public health emergencies demonstrate how the economies react to epidemics. The data will be collected and compared to the dynamics of the SARS outbreak ( Figure 2) to detect scenario similarities and to predict feasible recovery patterns. The first measurement under consideration will be the amount of loss that the industry has suffered due to the virus outbreak.

The economic damage of the SARS outbreak.
Figure 1. The economic damage of the SARS outbreak (Hayat et al. 4).

The case of the foodservice industry in China during SARS epidemics demonstrates rapid recovery at a faster rate than the overall GDP (Figure3). While the food industry of Wuhan will be rebounding from the virus consequences, the growth rate will be assessed to evaluate the efficiency of the recovery measures. The patterns of the current disease and previous epidemics will be compared to analyze and predict long-term growth dynamics.

The foodservice growth rate during the SARS outbreak.
Figure 3. The foodservice growth rate during the SARS outbreak (Huang and Madhavan 2).

Research Summary

Theoretical Enlightenment

From the theoretical perspective, the relationships between such economic shocks as extensive epidemics and food industry decline occur due to several factors. The research highlights that these factors have an uneven influence on the industry. Such measures as movement and trade restrictions often appear to be more damaging than the disease itself. The paper discusses the recovery measures with an extensive focus on those that take place during the outbreak.

Practical Enlightenment

The evaluation of previous outbreaks of acute infectious disease helps to predict the potential scenarios of the current coronavirus situation in China. The macro-economic performance of the food industry is assessed as highly resilient. Although it is generally severely impacted, the food market recovers quickly. The practical focus of the research emphasizes the development of recommendations on mitigation of the economic effect of infections on the example of the novel coronavirus.

Research Deficiencies and improvement methods

Current research is subject to several limitations that arise due to the economic specificity of the location and the nature of the event. First of all, the informational environment in China differs from major democracies, so the data is generally presented not by independent research centers, but by governmental institutions. Moreover, the economic impact is tightly connected with the epidemiologic situation and virus characteristics, which are beyond the scope of this research.

References

WHO. 2019 Novel Coronavirus (2019‑nCoV): Strategic Preparedness and Response Plan, World Health Organization, 2020.

Beutels, Philippe, et al. “The Economic Impact of SARS in Beijing, China.” Tropical Medicine & International Health, vol. 14, 2009, pp. 85–91. Web.

Chen, Sandy. Coronavirus Impact on Chinese Dairy Sector: an Initial Assessment. RaboResearch, 2020, pp. 1-3.

Chew, Ping, et al. China F&A Monthly: February 2020. RaboResearch, 2020, pp. 1-12.

“Coronavirus COVID-19 Global Cases by John Hopkins CSSE.” Operations Dashboard for ArcGIS, John Hopkins University. 2020. Web.

Davis, P. Ebola in Sierra Leone: Economic Impact & Recovery, Department for International Development, 2015.

Hayat, Raphie et al. Economic Implications of the Coronavirus. RaboResearch, 2020, pp. 1-7.

Huang, Michelle, and Umesh Madhavan. Coronavirus Brings Risks for Foodservice. RaboResearch, 2020, pp. 1-4.

Li, Qiu-Hua, et al. “New Coronavirus-Infected Pneumonia Engulfs Wuhan.” Asian Toxicology Research, vol. 2, no. 1. 2020, pp. 1–7. Web.

MOFCOM. “New Forms of Foreign Trade Race against Time.” Ministry of Commerce People’s Republic of China. 2020. Web.

Phelan, Alexandra L., et al. “The Novel Coronavirus Originating in Wuhan, China Challenges for Global Health Governance.” Jama, 2020. Web.

Smith, Kristine M., et al. “Infectious Disease and Economics: The Case for Considering Multi-Sectoral Impacts.” One Health, vol. 7, 2019, pp. 1-6. Web.

Thomas, Anne -Claire, et al. Impact of the West African Ebola Virus Disease Outbreak on Food Security. Joint Research Centre, 2014.

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IvyPanda. (2024, February 27). The Impact of Coronavirus on the Food Industry in Wuhan China. https://ivypanda.com/essays/the-impact-of-coronavirus-on-the-food-industry-in-wuhan-china/

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"The Impact of Coronavirus on the Food Industry in Wuhan China." IvyPanda, 27 Feb. 2024, ivypanda.com/essays/the-impact-of-coronavirus-on-the-food-industry-in-wuhan-china/.

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IvyPanda. (2024) 'The Impact of Coronavirus on the Food Industry in Wuhan China'. 27 February.

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IvyPanda. 2024. "The Impact of Coronavirus on the Food Industry in Wuhan China." February 27, 2024. https://ivypanda.com/essays/the-impact-of-coronavirus-on-the-food-industry-in-wuhan-china/.

1. IvyPanda. "The Impact of Coronavirus on the Food Industry in Wuhan China." February 27, 2024. https://ivypanda.com/essays/the-impact-of-coronavirus-on-the-food-industry-in-wuhan-china/.


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IvyPanda. "The Impact of Coronavirus on the Food Industry in Wuhan China." February 27, 2024. https://ivypanda.com/essays/the-impact-of-coronavirus-on-the-food-industry-in-wuhan-china/.

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