Why You Shouldn’t Borrow Too Much Money, China Edition

by John Rubino

When the US housing bubble burst in 2007, most observers were focused on the threat to Wall Street banks and their massive derivative books. This was a legitimate fear, since the worst case scenarios involved the death of Goldman Sachs and JP Morgan Chase, with all the stock market carnage that that implied.

But for China the stakes were a lot higher — picture half a billion people taking to the streets and demanding an end to a government whose only claim to legitimacy was its ability to provide millions of ever-more-lucrative jobs.

So while the US was bailing out every bank in sight with lower interest rates and loan guarantees, China upped the ante by ordering pretty much every sector if its economy start building things with borrowed money. The result was the biggest infrastructure binge in history, in which roads, bridges, airports, and — hey, why not — entire new cities sprang up in just a few years, providing jobs for millions of would-be rioters and a torrent of cash flow for foreign suppliers of iron ore, copper, cement, steel, lumber, and pretty much every other industrial commodity you can name.

China boomed, the rest of the world recovered, and today’s longest-ever economic expansion was born. And Chinese debt-to-GDP soared to record-high levels.

Now dial back the perspective to that of a single hypothetical family. Say one of the breadwinners loses their job and the family’s income is cut in half. They can chose to scale back their spending to match their newly-diminished circumstances and accept the resulting turmoil of fewer cars, smaller house, public rather than private schools, etc.

Or they can max out a series of credit cards and just go on as before, avoiding stress in the moment at the cost of bigger bills — and greater fragility — in the future.

The second strategy will work if the unemployed breadwinner gets a new job reasonably soon and — crucially — if no other crisis pops up that requires (now nonexistent) resources. No illness, no new job loss, no leaky roof, no wrecked car … and things might work out.

Now zoom back out to China, which chose strategy number two and is currently “rich” but also way too leveraged to handle another shock to the system. Just in time for a pandemic that shuts down half the country. From today’s South China Morning Post:

Forget Sars, the new coronavirus threatens a meltdown in China’s economy
Never before has China paid such an economic price for an epidemic as it has done already with the coronavirus, which originated in the Chinese city of Wuhan and causes the disease now officially known as Covid-19. And the damage is spreading. 
It is obvious that the economic impact of Covid-19 will be far more severe than that of Sars, or any other previous epidemic. 
Whole cities have been locked down, effectively grinding some local economies to a halt since Beijing declared all-out war on January 23. Currently, 30 of China’s 31 provinces have declared a top-level public health emergency, with all major cities and economic hubs effectively shut for weeks.  
The government has locked down 56 million people in quarantine in Hubei, banned tens of millions more from travelling across the nation, and imposed restrictions on activities in most urban areas. The Lunar New Year holiday has been extended for one or two weeks for most of the country. At the peak, provinces accounting for almost 69 per cent of China’s GDP were closed for business, according to Bloomberg Economics.  
For the millions of small and medium-sized enterprises (SMEs) in China, the nightmare may be just beginning. Many small manufacturers fear foreign customers will shift orders to other countries due to disruptions in production and delivery. In a survey of 995 SMEs by academics from Tsinghua and Peking universities, 85 per cent said they would be unable to survive for more than three months under the current conditions. If the disruption goes on long enough, it could trigger a wave of bankruptcy among SMEs, which contribute more than 60 per cent of China’s GDP, 70 per cent of its patents and account for 80 per cent of jobs nationwide.

A financially solid country might be able to weather this kind of crisis by drawing down reserves and using its stellar credit to take on new, temporary debt. But an already over-leveraged system may not have those options.

As for what part of China’s economy blows up first, check out the repayment schedule of municipal debt. These are the cities and states that borrowed immense amounts of money — much of it in US dollars — to build the previously mentioned roads, bridges, etc.

Much of this infrastructure was already failing to generate cash flow sufficient to cover the related debt. Now those cash flows are drying up.

China, in short, is providing a life lesson for the rest of us in how to respond to a crisis.

Remember it next time you think about maxing out a credit card.  

The Fragmentation of the European Unión

By: George Friedman

At the end of this week, the United Kingdom, the second-largest economy in Europe, will exit the European Union.

Meanwhile, Poland is under intense attack by the bloc for violating EU regulations by attempting to limit the independence of Polish judges; Hungary is also under attack for allegedly violating the rule of law; and one of the major parties in Italy has toyed with the idea of introducing a parallel currency that would allow the country to manage internal debt without regard for EU regulations and wishes.

The founding principle of the EU was the unification of hitherto warring nations into a single bloc, built around common economic and political principles and a common European identity.

The assumption was that given Europe’s history, putting aside differences was a self-evident need for all European countries. But as we see in the case of Italy, it is not clear that there is a common European economic interest.

Given the tensions with Poland and Hungary, it’s also unclear if there is a common political interest. And the U.K.’s decision to leave also raises questions over whether these common interests persist and whether national identity can be subsumed under a European identity.

The tensions within the EU do not reflect marginal disagreements; they represent fundamental questions over whether national interests and identities can be reconciled with poorly defined European interests. The EU, therefore, is moving toward an existential crisis. It may survive, but only as a coalition of nations representing a fraction of Europe.

Self-Determination or Nothing

The fundamental issue is national identity and sovereignty. The U.K., Italy, Poland and Hungary are all European nations, but they have different histories and therefore different sensibilities.

What it means to be Italian is not the same as what it means to be British. They in turn have a different sense of self from the Germans or Romanians.

The question, therefore, is:

What is this European sensibility? The common assumption is that it is liberal democracy.

The problem is that there are many types of liberal democracy and, more to the point, the fundamental principle behind liberal democracy is national self-determination – the idea that the nation must select the government and that the government is answerable to no one other than the nation. If you sever the idea of national self-determination from liberal democracy, you undercut liberal democracy’s fundamental principle and, with it, the European identity.

Liberal democracy is national self-determination or it is nothing.

The governments in the U.K., Italy, Poland and Hungary all have been elected. Some politicians who were defeated in elections have made the claim that these elections were the result of fraud or illegitimate manipulation of public opinion, as was the case with the Brexit vote. But the fact is that those of us who know these countries know that the views the governments hold are not alien to the countries.

Poland and Hungary have their own understanding of what state power should look like; Italy has a long history of complex and fragmented government needing to control its own economy; and the United Kingdom’s constituent parts have national identities that are very different from those of other countries.

Europe’s nations are all different, and while history made each adopt the garb of liberal values beyond just national self-determination, they never gave up their own identities because they could not. They are what history made them, and while German or Soviet occupation shaped them, a few decades of horror – and the adoption of the idea that national self-determination must be determined through elections – was not enough to cause them to abandon who they were. France was France before it held its first election.

In other words, national identity may exist prior to and outside of liberal democracy for some countries. This is not the case for the United States; its very identity from its founding was liberal democratic. German identity, however, has varied dramatically over the decades, and Germans were still German in spite of the variations. Hitler represented the national will well after he abandoned elections.

This takes us to extreme places we need not go, but it also points out that national identity and national self-determination can be expressed in ways that are faithful to the national will but violate the liberal democratic methodology in nations with ancient and complex foundations.

The Illusion of European Identity

If the idea of national identity is so complex, then how can we define the European identity?

The European identity that the Maastricht treaty embodied was a snapshot of a unique moment in European history in which the Anglo-American occupation of Western Europe and the Soviet occupation of Eastern Europe were ending.

The liberal democracy that was imposed on Germany’s destroyed cities seemed to be part of German identity, history notwithstanding. The Poles and Hungarians yearned to be Europeans, and the liberal democracy that emerged from World War II was their template, as it was for Italy.

But I would argue that that European identity was an illusion to which Europe clung, fearing that the only alternative was a return to its own bloody past. After the Berlin Wall came down, there finally appeared to be one Europe, and all would be gathered into it. The problem, as I have said, is that the histories of Italy, Germany, the U.K., Poland and Hungary were all wildly different.

At that moment, they all yearned for the same thing, but as the moment passed, each country recollected what it was, and they are now – without the shame it would have brought in 1991 – resurrecting it. The European invention of technocratic liberalism was alien to them, and the right of national self-determination was both an empirical reality and a moral principle.

And so they begin to go their own way, with EU officials hurling threats and condemnation over frustration that the EU bureaucracy is not only no longer authoritative but also no longer frightening. The British economy grew in January, an indication that the catastrophe Brussels had wished for the U.K. may not visit London, or Italy, if it should decide to go its own way with its currency.

And certainly, neither Poland nor Hungary, having survived Stalin and Hitler, is likely to be cowed into submission by increasingly small EU subsidies. The weakening of the EU has undercut its ability to pay for conformity.

Europe once had a magnificent idea, a free trade zone called the European Economic Community whose main focus was trade, not inventing identities. It was replaced by the European Union, but the EU can now look to another example, the North American trade zone, which has a slightly larger gross domestic product than the EU.

The two are fundamentally different; the North American bloc does not claim to represent a North American identity, its members sometimes dislike each other intensely, and it does not have a secretariat to dictate how they should live.

But then, the North Americans did not live through what the Europeans lived through and they are not trying to suppress who they were and, of course, still are.

How to Prevent the Japanification of East Asia’s Economies

Hong Kong, Singapore, South Korea, and Taiwan were long hailed for their economic dynamism, but now risk following the low-growth path of Japan over the last three decades. To avoid this fate, their governments must adopt a comprehensive set of policies to tackle structural weaknesses.

Lee Jong-Wha

lee42_SAM YEHAFP via Getty Images_taiwanstockmarketeconomy

NEW YORK – At the annual meeting of the American Economic Association (AEA) in early January, former US Federal Reserve Chair Janet Yellen, former European Central Bank President Mario Draghi, and eminent economists warned that Western economies risked “Japanification”: a future of sluggish growth, low inflation, and perpetually low interest rates. Yet, surprising as it may seem, this malaise also threatens East Asia.

Hong Kong, Singapore, South Korea, and Taiwan, once called the “Asian tigers,” now face slow growth and disinflationary pressures. Last year, Hong Kong’s economy contracted by 1.2%, while the other three grew only modestly – Singapore by 0.6%, and South Korea and Taiwan by about 2% each.

Inflation in each of these three countries was about 0.6%. East Asia’s economies suffered from weaker external demand – a result of slow growth in major industrialized countries and China – as well as domestic structural and supply factors. Moreover, their growth potential is trending downward.1

Economically and demographically, these East Asian countries seem to be tracking Japan. For starters, Japan is the world’s most rapidly aging society, with 28% of its population aged 65 and above, up from 14% in 1994. This age cohort’s share of the population in Hong Kong, Singapore, South Korea, and Taiwan now averages about 14%, and is forecast to increase rapidly in the coming decades.

A shrinking workforce will in turn reverse the demographic dividends that previously supported strong regional growth. In South Korea, for example, average annual GDP growth between 2020 and 2040 is forecast to be about one percentage point lower than now.

Moreover, like Japan in recent decades, the four East Asian economies are experiencing slowing productivity growth. Their export industries have encountered fierce competition from low-cost Chinese firms, while low service-sector productivity hampers overall productivity improvements. And because these countries are already at the high-tech frontier, they may find it harder to develop new technologies in the future.

How East Asia’s policymakers respond to these challenges will be crucial. Many economists believe that the Bank of Japan’s timid response to the collapse of the country’s real-estate bubble 30 years ago aggravated the economy’s woes, leading to the lost decades that followed. Mindful of this precedent, the Fed and the ECB have aggressively cut interest rates and injected large amounts of liquidity since the 2008 financial crisis – as has the BOJ under Prime Minister Shinzo Abe’s administration.

Speaking at the AEA meeting, former Fed Chair Ben Bernanke expressed confidence in central banks’ ability to provide further economic stimulus using new policy tools such as quantitative easing and forward guidance. But many economists are skeptical. As former US Secretary of the Treasury Lawrence Summers has noted, leading central banks have failed to meet their inflation targets despite massive monetary expansion. And with interest rates already at record lows, it will be difficult to resolve the next crisis with further aggressive rate cuts.

Furthermore, monetary easing alone cannot tackle major structural economic weaknesses. Summers, for example, argues that excessive saving and low investment in industrialized economies could result in “secular stagnation.” Mohamed El-Erian emphasizes “structural disinflationary forces” such as aging, rising inequality, and a loss of trust in institutions, while economists including Robert J. Gordon highlight slower productivity growth.

Given their significant structural problems, therefore, East Asia’s economies cannot avoid the Japanification solely by loosening monetary policy. In fact, such measures might even do more harm than good over time. Although these economies have not experienced an asset-bubble collapse like Japan, continued monetary easing could pose such a risk. Over the last year, the Hong Kong Monetary Authority and the Bank of Korea have cut their policy rates several times, to 2% and 1.25%, respectively.

Benchmark interest rates in Singapore and Taiwan also remain low, at 1.64% and 1.375%, respectively. As the experience of Japan has shown, expansionary monetary policy can keep the economy afloat, but with asset price bubbles and many zombie-like firms.

To stave off Japanification, the four East Asian economies should adopt a comprehensive set of policies to overcome their structural weaknesses.

First, governments should spend more on productivity-enhancing infrastructure, technologies, and education in order to boost potential growth. Such public investment in productive sectors could complement weak private demand and expand supply capacity.

Governments could finance this increased spending by issuing low-interest-rate bonds, but they must avoid an excessive build-up of public debt – especially the share owed to foreign investors.

Without an international reserve currency, too much debt could trigger a default and foreign-exchange crisis.

Second, East Asian governments must address the issues of population aging and a shrinking workforce. They need to encourage higher labor-force participation among women and seniors, boost worker productivity through lifelong education and skills training, and allow active migrant inflows.

Expanding access to childcare and providing flexible working arrangements would help to raise fertility rates. And governments must tackle inefficiencies in both the financial sector and regulatory policies in order to improve productivity growth.

Finally, East Asia’s governments must focus on increasing economic and social equality and bolstering public trust in institutions. Despite Japan’s prolonged economic stagnation, its society has remained harmonious and stable, providing a solid foundation for managing stable growth.

In East Asia, however, rising economic inequality amid weak growth is eroding public confidence in political institutions. The civil disturbances that have rocked Hong Kong and South Korea over the last year are evidence of this. Without strong public trust and confidence, the next economic calamity, whether a Japan-style slowdown or another financial crisis, could prove difficult to overcome.

The risk of Japanification is clear, and not only in Western Europe. Faced with this threat, East Asia’s aging tigers must take urgent steps to regain their vitality.

Lee Jong-Wha, Professor of Economics and Director of the Asiatic Research Institute at Korea University, was a senior adviser for international economic affairs to former President Lee Myung-bak of South Korea. His most recent book, co-authored with Harvard’s Robert J. Barro, is Education Matters: Global Schooling Gains from the 19th to the 21st Century.

China, not America, will decide the fate of the planet

But its coal addiction and authoritarian system mean it will struggle to take a global lead

Gideon Rachman

Chinese Coal Dragon
© James Ferguson

Donald Trump has become the pantomime villain of the climate change story. At the World Economic Forum in Davos last week, the US president played the role to perfection, denouncing climate activists as “prophets of doom”, while Greta Thunberg, the teenage campaigner, watched on from the audience.

However, if you look at the numbers — as opposed to the theatre — it becomes clear that the battle to control climate change now depends much more on what happens in China than in America.

According to the Union of Concerned Scientists, China now accounts for 29 per cent of global carbon dioxide emissions generation — compared with 16 per cent for the US, about 10 per cent for the EU and 7 per cent for India. Even on a per-capita basis, the Chinese now emit more greenhouse gases than Europeans and have done so since 2014.

As the Trump administration likes to point out, America’s greenhouse gas emissions actually fell last year — albeit only by 2.1 per cent. This is largely because coal-fired power generation in the US has dropped sharply and is now back to the level that it was in 1975. China, by contrast, continues to open new coal-fired power plants.

Nonetheless, the Trump administration’s climate scepticism (denialism, if you prefer) still matters. The US has led in the construction of most of the important international institutions and agreements that have shaped the current world order. If it opts out of the global effort to combat climate change, others will have to provide the leadership to achieve an international deal.

China’s coal addiction and authoritarian system mean that it will struggle to provide a global lead on the climate. The Europeans are passionate on the subject but probably lack the organisation and the international heft to take charge. The EU’s discussion of imposing a “carbon border tax” — essentially taxing imports from heavily-polluting countries — could also lead to bitter trade disputes that will make it even harder to achieve an international agreement.

But somebody is going to have to provide leadership quickly, because the coming year will be vital to international efforts on climate. In November, the UK will host COP26, the latest UN summit on climate change. This will be a particularly important meeting because the participating countries are expected to recognise that the pledges they made under the Paris climate accord of 2015 are insufficient to meet the goal of containing global warming. At November’s Glasgow summit, they are meant to commit to more ambitious and detailed goals for the reduction of greenhouse gases.

But COP26 will open just six days after the US presidential election. If Mr Trump is re-elected, it will confirm that the US has essentially opted out of global efforts to combat climate change.

On November 4, the day after the election, the US is also scheduled formally to withdraw from the Paris accord. That, in turn, will ratchet up the pressure on the EU, China, India and the UK (as hosts) to keep alive the effort to combat climate change through co-ordinated global action.

Adam Tooze, a Columbia University professor who is writing a history of international climate politics, says that November 2020 will be a “key moment in global history”.

One of the striking things about the climate debate in Davos was the way in which the topic seemed to hover over every session — even those that were ostensibly devoted to other subjects.

Particularly striking was Ashraf Ghani, the president of Afghanistan, saying that his biggest fear is environmental degradation — even more than the long-running conflict that still has the country in its grip: “We used to have a drought every 100 years, now it is more like every five years”.

African politicians in Davos made similar points about the increase in droughts in the Sahel region and the way in which the changing climate is driving conflicts over land and water, and displacing populations.

After a day of conversations like that, I needed a drink. So I headed to a wine-tasting, only to meet a German winemaker who told me that climate change had prompted him to start planting vines in Norway.

The bad news for the planet is that the continued growth of the Chinese and Indian middle classes will increase demands for cars, electricity, meat and foreign travel, all of which will generate more greenhouse gases. The good news is that the Chinese government has said repeatedly that it understands that climate change and pollution are direct threats to China’s future, causing droughts, water shortages and rises in sea levels that threaten major cities, such as Shanghai.

President Xi Jinping has also demonstrated some commitment to environmental action, through his efforts to improve the air quality in major cities such as Beijing. The Chinese government has also poured money and expertise into the development of renewable sources of energy.

In the months ahead, the Chinese and the Europeans are going to try to work together to develop new international goals for the reduction of greenhouse gases. If they succeed, the next UN conference on climate change may preserve the hope that an international community can still come together to tackle a common threat to humanity — whatever happens in the US election.

The New Coronavirus

New Coronavirus Has Likely Already Spread Globally

The new Covid-19 virus will inevitably spread around the world and there's little anyone can do to stop it, epidemiologists increasingly believe. What's more, far more people have likely been infected with the virus than previously thought. But it's not all bad news.

By Veronika Hackenbroch und Fritz Schaap 

    Health workers check travelers' temperatures at Kotoka International Airport in Accra, Ghana.
Francis Kokoroko/ REUTERS

Two white-clad figures, their faces concealed behind facemasks, wait for a plane full of passengers from Nairobi, Kenya, to disembark at Brazzaville airport in the Republic of Congo. They are both epidemiologists, and while one of them aims a pistol-like thermometer at every person getting off the plane, the other jots down their temperatures with a concerned look on her face. Afterward, they squirt hand sanitizer into each passenger's palms.

The new coronavirus, the World Health Organization (WHO) fears, could spread at any moment from China to Africa. Perhaps it has already arrived and is spreading, since many infected people only show mild symptoms. Maybe it's already making its way through a hospital, a market or an extended family.

"Africa has so many close connections to China, it is hard to imagine that there are no cases in Africa yet," says Peter Piot, the director of the London School of Hygiene and Tropical Medicine, which cooperates closely with scientists in Africa. The fact that no infections have yet been identified there "is really of big concern for me."

On Friday, a first case of the disease was identified in Egypt. But there still have been no cases reported in WHO's Africa region. Egypt is officially part of the Eastern Mediterranean Region.

Many countries in Africa are not sufficiently prepared for SARS-CoV-2, the pathogen that causes the respiratory illness Covid-19, the name given by WHO this week to the condition that has already claimed more than 1,350 lives in China. As of Thursday, there were only 17 laboratories testing samples sent to them from the 47 countries within the WHO's "African region" -- far too few to cover all suspected cases.

"Without diagnostic testing," Piot says, it's impossible to know the extent of the spread of the virus and "the infection may remain hidden for a while. Then you don’t have a chance to intervene early, because you don’t know where the problem actually is."

Many Unreported Cases Worldwide

It is becoming increasingly apparent that the number of confirmed cases reported to the WHO has been seriously understated in some places around the world. Even in Germany, the number of infections could be higher than the official tally of 16.

"It's conceivable that smaller, limited clusters [of infected people] exist that don't register on health officials' radar, even in Germany," says Gérard Krause, a renowned epidemiologist and department head at the Helmholtz Center for Infection Research in Braunschweig, Germany.


Just how incomplete the pool of data is, has been shown in China, where the system for registering new cases is completely overloaded. In the hardest-hit Chinese region of Hubei, authorities changed the way they counted new cases of Covid-19. Instead of only classing cases that have been confirmed by lab results, like they've been doing for the past few weeks, patients with chest infections revealed in CT scans are now also being counted.

This resulted in the number of coronavirus infections jumping by 14,840, while the number of deaths rose by 242. The improved statistics give an idea of the degree to which the epidemic has been underestimated so far.

The official number of cases reported outside China is most likely inaccurate as well. The epidemiologist Moritz Krämer from the University of Oxford, who uses computer simulations to predict the spread of epidemics, is working with colleagues to comb through the websites of public health authorities around the world, making sure to take into account where infected people had traveled prior to being diagnosed.

"One in three infected people had traveled when they were already showing symptoms," Krämer says. "That means thousands of sick people spread the virus around China and the world."

Low Chance of Zero Infections

The fact that Indonesia, for instance, a very densely populated country with close ties to China, has not had a single confirmed case of Covid-19 is all but impossible, according to epidemiologists. The same goes for Thailand, where epidemiologists from the Harvard School of Public Health say that cases have almost certainly been overlooked.

A number of new infections in Singapore have also alarmed experts, according to the Wall Street Journal. Authorities were unable to determine how those affected contracted the disease.

"When something like this happens more often," Krause says, "it shows us that we've been unable to stop the virus' spread."

Singapore of all places, which has been very by-the-book in its efforts to stem the epidemic, could become a hub of sorts for the virus' spread. On Wednesday, 300 employees of the bank DBS had to be evacuated after one of their colleagues was revealed to have contracted Covid-19.

From Wednesday to Thursday, the number of infections in Singapore jumped by 16 percent, according to the local Ministry of Health. By Thursday evening, there were 58 confirmed cases, seven of whom were being treated at intensive care units.

A British businessman brought the new coronavirus with him on a ski vacation in France after picking it up on a work trip to Singapore. From there, he carried it home to Great Britain. He ultimately managed to infect 11 people, including a doctor. Later, a health-care worker in the department of accidents and emergencies at Areal Hospital in West Sussex was also found to have contracted the virus.

"It is concerning that two health-care workers have been infected in the UK," says Tom Frieden, the former head of the U.S. Centers for Disease Control who now heads the global public health organization, "Resolve to Save Lives." A study published in the medical journal Jama a week ago showed that the Covid-19 pathogen -- similar to the SARS and MERS viruses -- can spread in hospitals exceptionally quickly.

The upshot is that epidemiologists increasingly doubt that the spread of the new coronavirus around the world can be prevented.

"At some point, the moment will come when we are forced to give up our containment strategies and focus on mitigation and minimizing the effects of an epidemic, such as through the medical treatment of the seriously ill. If we wait too long, we could wind up with too many resources in the wrong places."

Africa Is Most Vulnerable

How exactly a pandemic would unfold is unclear. It's possible that Covid-19 could turn out to be like any seasonal flu -- with the notable difference that no vaccine exists.

But experts have shared new findings that give cause for hope. Unlike the pathogen of the respiratory disease SARS, Covid-19 pathogens don't only reproduce in the lungs, but also in the back of the throat, like flu viruses.

That's why the new coronaviruses are able to spread more easily than the SARS pathogens, but it's also why they're less deadly, according to Christian Drosten, the director of the Institute of Virology at Berlin's Charite hospital. "For most people, it's probably more like the common cold, and children are seldom affected."

Meanwhile, the fatality rate of the new coronavirus is difficult to determine. Some experts assume a rate of 2 to 3 percent, while others say it's likely less due to the probability of as-of-yet-undiscovered cases -- somewhere closer to 0.2 to 0.3 percent. "We're missing the basics," Frieden says. "It is really important that the WHO team that is now traveling to China looks very closely at all the data."

Krause, the epidemiologist from Braunschweig, wants to study people's natural defenses as part of the largest-ever health study conducted in Germany. "We want to find out whether a part of the population is partially immune to the new pathogen due to previous exposure to other coronaviruses. This could explain why some people have only gotten a little sick."

At the same time, Krause says it's imperative that the population and public health officials begin preparing for the situation to worsen.

"We should not have a false sense of comfort," Frieden says. "I think back to Ebola, when only a couple of cases in the U.S. almost overwhelmed us. This novel virus is very challenging."
A pandemic, however, would be far worse for Africa.

During a meeting at the WHO's headquarters in Brazzaville at the beginning of the week, one thing was clear: Only eight of the 47 countries in the WHO's African region were adequately prepared for a true emergency.

In many other countries, there's a shortage of intensive care units, respirators, medical personnel and even facemasks.