What Wuhan Can Teach New York

USA World

(Bloomberg Opinion) — Is New York City the new Wuhan? In a matter of weeks, the city of 8.6 million has become the epicenter of the coronavirus outbreak in the U.S., with more than 23,000 cases and 365 deaths. Until a statewide lockdown was instituted Sunday, New Yorkers were getting mixed messages about whether (and how) they should get tested, remain in self-isolation, take public transportation or gather in groups. With the state woefully short of supplies, Governor Andrew Cuomo and Mayor Bill de Blasio are jockeying for assistance from the White House — all while letting their personal grievances rip across the airwaves.

It may be tempting to compare this chaos with Wuhan’s draconian, but apparently effective, response. Two months after locking down the city’s 11 million residents, China declared victory over the coronavirus this week, saying ground zero of the pandemic will reopen for business by April 9. (President Donald Trump would have liked this Easter deadline.) Despite a staggering 50,006 cases and 2,531 deaths, Wuhan’s numbers have stabilized. Meanwhile the U.S. has just overtaken China for the most cases worldwide.

Behind China’s success, however, is a sprawling bureaucracy that needs constant plumbing. Local officials often misread President Xi Jinping’s priorities, while jostling each other for power and chiding underlings who dare break rank. Just like the animals in H.G. Wells’s “Island of Doctor Moreau,” these characters need to be operated on every few days, or they quickly morph back into their primitive forms.

New York isn’t the only place struggling to get surgical masks and testing kits. To preserve protective gear, medical staff in Wuhan tried to skip meals and avoid bathroom breaks so they didn’t have to change. Yet Hubei province, where Wuhan is the capital, of all places shouldn’t be this short of supplies. Xiantao, another provincial city, is a major manufacturing hub for the non-woven products used in surgical masks. But local officials told factories there that unless their goods had been cleared for sales within China — many only made masks for export — they couldn’t reopen. Xiantao officials were more concerned about limiting new cases in their jurisdiction than giving a helping hand to Wuhan. Eventually, Beijing had to intervene.

Then consider testing kits. Until Jan. 19, weeks after the first signs of an outbreak, Hubei still couldn’t conduct any of its own tests. Officials sent patients’ samples all the way to Shanghai — the equivalent of shipping vials from Toledo, Ohio to Manhattan — when Wuhan boasts one of China’s best virology institutes.

When asked by local media why the province took so long to declare the coronavirus an epidemic, which would have granted sweeping emergency powers, Wuhan’s mayor said Hubei needed to receive Beijing’s approval first. That’s a paltry excuse: Such hoops didn’t stop the coastal provinces of Zhejiang and Guangdong from declaring an emergency before Hubei.

This series of missteps led to a purge of Communist Party heads in Hubei in mid-February. Even after that, the local government continued to make bad judgment calls. On Feb. 24, Wuhan said it would ease a sweeping lockdown of the city, only to retract the announcement hours later. Provincial officials misread Beijing again: While Xi’s speech at the latest Politburo meeting was widely interpreted as a call for China’s businesses to reopen, it didn’t apply to Wuhan.

Other gaffes are downright laughable. Earlier this month, Hubei’s government posted on its website a warning that the coronavirus could cause an inflammation of the testicles, which could reduce sperm count and possibly lead to infertility. A source of mine, originally from Wuhan, quipped that this virus isn’t only making his folks sick, but also annihilating his family tree. The notice was taken down a few hours later after a social media uproar.

To be sure, some officials are savvy enough to curry favor with Beijing, which can pay handsome dividends both personally and for the local economy. When he was the mayor of Shanghai, Ying Yong launched an energetic recycling campaign last July in response to Xi’s call for environmental protection. He was recently promoted to become Hubei’s new party secretary.

The bottom line is that local governments need Beijing’s money to oil the fiscal engines. Most of them are bleeding cash. Last year, municipal revenue rose by just 3.2%, the lowest in a decade, amid tax cuts and slower economic growth.

Municipalities are also reliant on “cash transfers” from Beijing, which reallocates the value-added tax revenue it collects — by far China’s largest source of fiscal inflows. Of course, favored local governments are first in line for more generous handouts. And if a municipality wants to fill its budget gap with new bonds, it needs Beijing’s approval first.

This is where New York State’s governor differs from Hubei’s bumbling local leadership. Cuomo has been careful not to antagonize Trump directly for the federal government’s anemic response to the virus. So far, it has paid off. Vice President Mike Pence stepped in and pledged to send 4,000 ventilators to the state. Mayor de Blasio’s very public swipes at Trump, by contrast, haven’t done the city any favors.

The headlines flying from New York are overwhelmingly negative right now, while Wuhan is starting to look smart. The reality, however, is a lot more nuanced. Wuhan shows that mega cities can survive this virus, even with incompetent officials. All isn’t lost for New York.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron’s, following a career as an investment banker, and is a CFA charterholder.

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