The coronavirus is China’s biggest test since Tiananmen Square

Over 1,500 Chinese have died from the coronavirus, with tens of millions quarantined in their own homes. President Xi is keeping a low profile, mindful of the political dangers should China’s authorities fail to contain this killer bug.

In the UK, nine people have been diagnosed with the virus, including two GPs. Several public buildings have been closed – including schools, medical centre and an old-age care home – with Health Secretary Matt Hancock warning of a 'serious and imminent threat'.

Amid fears of the human fall out from what the World Health Organisation has classified as Covid-19, concerns are growing, also, about the economic and financial impact of this virus – in China and beyond.

When severe acute respiratory syndrome (Sars) broke out in southern China in 2003, the People’s Republic accounted for just 5 per cent of the world economy. The coronavirus death toll has already outstripped Sars – and now China, accounting for 20 per cent of world GDP, is pivotal to global growth.

Beijing’s foreign ministry is urging countries that have imposed travel restrictions to restore normal ties for the sake of the broader global commerce. This underlines not only the commercial dangers posed by the potential shutdown of the second-biggest economy on earth, but also the ruling Communist Party’s concerns this virus outbreak could fuel chronic domestic instability too.

'Every single Chinese person should feel proud to live in this great era,' boasted Xi in late January, just ahead of the Lunar New Year holiday, promising 'landmark progress' in 2020. Yet now Wuhan, a city of eleven million people, is in lockdown – part of a frantic state effort to stop the virus spreading from its epicentre.

China is bracing for the return of some 160 million migrant workers to their cities of employment after an extended holiday following the virus outbreak. Yet across its vast east-coast manufacturing heartland, thousands of businesses remain idle, waiting to hear from the authorities if operations can resume.

Such factories are deeply embedded in global supply chains, with the current go-slow disrupting assembly lines from Japan to South Korea, from Germany to India, due to a shortage of Chinese-made components. The global economy faces a double hit – not just the weakness of China's huge manufacturing sector, but the broader blow to manufacturing elsewhere reliant on Chinese parts.

'We’re closely monitoring the coronavirus, and disruptions in China that could spill over to the rest of the global economy,' remarked Federal Reserve boss Jerome Powell, careful to strike a non-alarmist tone. Already, though, financial markets are spooked, this virus having killed January’s vibe that 2020 could be a better year for the global economy. And, as Powell concedes, Covid-19 is 'a major unknown' – so the situation could yet get far worse.

For Xi, this crisis comes amidst multiple other challenges, with China’s growth last year already the weakest since 1990 – thanks to the protracted Sino-US trade war. Hong Kong remains recalcitrant, of course, as does Taiwan – after a recent election that rebuffed Beijing.

Now, this health scare is escalating into a profound test of China’s command-and-control regime – and, in particular, the authoritarian system Xi has built around himself. Having sidelined and eliminated rivals, declaring himself President for life, 'Papa Xi' will find it tough to dodge blame if this emergency spins out of control.

As the Chinese government struggles to contain the virus, it is struggling also to control the narrative. Increasingly sharp public criticism is piercing through the lid of censorship. The death of a Wuhan-based ophthalmologist, censured for warning medical colleagues about the virus in December, has unleashed a torrent of pent-up rage over the authorities’ handling of this crisis, including petitions calling for freedom of speech.

When tackling public health scares, both transparency and trust are vital. The Chinese state has never valued the former and the latter is ebbing away. It’s not clear if Xi will respond to the pressure by compromising or attempting to clamp down yet harder.

Yet amid widespread worker shortages, transport disruption, a lack of medical supplies and heavy-handed local officials making life difficult, China’s vast population is increasingly restive. With the trajectory of this virus uncertain, it is hard to imagine how many troops the President will need to control tens of millions of frightened, quarantined citizens, in dozens of locked-down cities, if they decide the authorities are lying about their safety and become desperate to flee elsewhere.

As the world looks on, optimists say the number of new Covid-19 cases being recorded in China appears to have peaked, suggesting the human and economic impact of this outbreak will be limited. Some even see an upside to this illness and death, suggesting the blow to Chinese manufacturing could benefit nations starting to see the 'reshoring' of previously 'offshored' industrial production. 'I think this will help accelerate the return of jobs to North America,' remarked Trump’s Commerce Secretary Wilbur Ross, without flinching.

More cautious observers wonder why we should trust China to report the spread of, and deaths from, this virus accurately, when even GDP numbers are widely disbelieved. And some scientists warn the coronavirus incubation period could be weeks, rather than days – suggesting that even if the disease is contained, there may yet be many more victims.

Back in 2017, speaking in Beijing’s Great Hall of the People, Xi claimed China’s version of one-party autocracy offered an option for 'countries that want to speed up their development while preserving their independence.' He chided western democracy, declaring that the 'banner of socialism with Chinese characteristics is now flying high and proud for all to see'. Now this coronavirus crisis threatens to rattle and discredit that same 'Chinese model' in the eyes of other emerging economies.

China is 'confident and capable' of handling the coronavirus, says Xi, while acknowledging this is a 'major test of China’s system and capacity for governance'.

This could be, in fact, the biggest test of the Chinese state’s authority, grip on power and international reputation since the tanks rolled across Tiananmen Square in 1989.