Author: Dr Dave Rymer

Lessons from China

As the epicentre of the outbreak, the first country to put in place major lockdown, and now the first country to enter a phase of re-opening for business, how has China fared, and what can Cornwall’s SMEs learn from this?

As a result of city- and province-wide shutdowns implemented to halt the spread of COVID-19, China has suffered a major reduction in economic activity. As of 25th February, there had been a reduction in output of up to 40% across various industries, with four- and five-year lows in coal use at power stations, oil refinery operations and steel product outputs. Land and property values, meanwhile, were forecasted to have fallen as much as 50% by the end of the first quarter. Estimates in February suggested that due to the high level of debt across firms, local government and households in China, wider financial disruption would be caused. This is especially harmful to small businesses, because during a shutdown the absence of economic activity makes a lot of their debt – it’s no surprise that this Coronavirus has been called an existential threat to small businesses.

In March China began what is likely to be a months-long slew of stimulus packages aimed at rebooting the economy which had virtually stalled by the end of January. Monetary easing efforts (reducing the reserve requirements imposed on banks, freeing up cash to lend to business) resulted in an initial boost of $79bn, with further stimulus packages directed at specific industries planned.

Optimistic economists have projected an economic bounce back in quarter two of 2020, following a contraction in quarter one – the first in China since 1976. Pro-growth measures are expected to see growth return to 6% in quarters three and four, matching normal figures. It’s not hard to see why.

China’s official manufacturing Purchasing Managers Index jumped to a reading of 52.0 in March from a record low of 35.7 in February, per the USA’s National Bureau of Statistics, higher than forecasts from a series of economists contacted by the Wall Street Journal. China’s nonmanufacturing PMI showed service and construction activity increased from 29.6 to 52.3 in the same time period – effectively returning them to pre-crisis levels. Although this is a measure of physical productivity, not economic activity, it is a strong indicator that appropriate government investment along with measures to stimulate demand (crucially missing from China at present) can do much to ameliorate the economic impact of the COVID-19 shutdown.

Inevitably, as the UK government slowly acceded to the need for a full shutdown and as of March 23rd put this into place, businesses in the UK have to suffer, from major airlines to smaller businesses like those that Tevi works with. Surprisingly, the level of government intervention in the UK has been high with a raft of sweeping measures put into place (for a brief summary, see this helpful article). Despite this, the immediate and forecasted impacts on businesses and people are alarming. While intervention has been strong, for many it has taken too long to be implemented, and key messaging has been lost or unclear. Fortunately, the Cornwall and Isles of Scilly Growth Hub has been tasked with acting as the front line for providing businesses with guidance on the government’s support package in response to the virus. If you need help interpreting or understanding what you need to do in order to claim or take advantage of these measures, please do get in touch with the Growth Hub via their website – the COVID-19 updates are on the front page.

The Bad News

The shutdown in China caused a total reduction in CO2 emissions of 250 million tonnes over the extended seven-week period compared to the same time frame in 2019. Total carbon emissions were reduced by 400 million tonnes over the same period, equivalent to the total carbon emission in China in a two-week period in 2019 (similar results have been observed worldwide). While this resulted in an 84.5 per cent increase in days with good air quality in 337 cities in China, what this actually means is a seven-week shutdown that crippled the Chinese economy and has required CNY billions in bounce-back investment, had comparatively meagre environmental benefits.

Indeed, the long-term environmental impact may turn out to be wholly negative. After the Chinese domestic economic downturn of 2015, the Chinese governmental economic stimulus package far outweighed the temporary benefits of reduced activity, with investment prioritised for emissions-heavy industries. The International Energy Agency has warned against the same effect being replicated across the world in response to COVID-19, suggesting we are likely to see investment in clean energy undermined in favour of fossil fuels industries. The aviation industry has already used the virus as a reason to lobby in favour of programs to reduce emissions being weakened or delayed. Cornwall has long been at the forefront of the clean energy movement for its tidal, wind and solar capacity, and the economic stimulus packages that the UK government is sure to announce in the coming weeks and months should acknowledge that these industries are important not just for Cornwall, but for the UK as a whole and its standing in the international finance and energy arenas.

One Stanford professor has suggested that China’s two month lockdown saved up to 77,000 lives of children and the elderly — a number far greater than the 3,100 killed by the coronavirus in that country over the same period. Could the reverse relationship also be true – could our air quality have affected the virus and its impact? Kerry Bowman, a bioethics and global health professor at the University of Toronto, certainly thinks so:

“It’s not that the air quality changes the nature of the virus, but it absolutely may affect people’s vulnerability to the virus [and] when they pick it up, how their body responds to it.”

At the time of writing, the worldwide COVID-19 death toll is 89,873. It appears that these are focused in large cities, which typically have notably poorer air quality. How many of these lives could have been saved if world governments had invested more in clean energy than propping up fossil fuel extractive industries?

We might consider the effects we are having on wildlife and biodiversity. Let us not forget also that COVID-19 first showed its zoonotic potential – spreading from non-human animals to humans – at a market known to sell pangolins. Of the eight extant species of these marvellous creatures, two are listed by the IUCN as vulnerable to extinction, the rest are either endangered or critically endangered. Natural capital is another of the concepts on which Tevi is built, and it is widely accepted that this is the foundation of all human activities and values, including our own health. A decline in our natural capital results in a decline in our inclusive wealth.

Moving Forward

As Cornish SMEs continue to function as best they can during the UK lockdown, how can we learn from and adapt to the situation we find ourselves in and reap the environmental benefits of this horrific pandemic? As businesses will by now be realising, supply chains cannot fully function in a country in lockdown. By relying less on industrial supply chains, reusing waste and reducing our total material inputs, we can use circular economy and resource efficiency – two of the concepts on which Tevi is built – processes to make our businesses more resilient and efficient, able to reduce costs and simultaneously become pre-prepared for the next economic, medical and environmental disaster. Tevi has funded multiple resource efficiency, circular economy and waste reduction projects across our enterprises and are continuing to do so in our latest call for applications. We are also adapting to working from home where possible, moving our series of innovative and engaging events online; we have a series of free webinars ready to attend, which we hope will help you learn not just about the circular economy, but also how you can adapt to working from home yourselves.

We know that the UK government’s actions to stimulate the economy will be vital in the coming weeks and months, but we know that the areas of the economy they focus on will be just as, if not more important. These stimulus packages should focus on clean energy and innovative methods of circular manufacturing and waste reduction. By working with Tevi, Cornish SMEs have shown their sustainable credentials and environmental aims. Many of our enterprises have worked with us to produce thorough, in-depth sustainability policies specific to their activities which can be used to monitor their output and impacts throughout the COVID-19 outbreak. These enterprises are leading the way to a brighter future. If you would like to join them, contact us at [email protected].


Next time I’ll be demonstrating the direct carbon savings you can make by adapting your activities during and after the lockdown, and introducing our next webinar where we’ll be discussing these adaptations and carbon savings.