La Libra, Facebook's digital currency, announced for 2021 in reduced format

The launch of Facebook's digital currency, Libra , could take place in 2021. The project may benefit from favorable factors in the global economy, but regulators will have to be convinced first.  Facebook could launch Libra, its digital currency in 2021, we learn from the British media Financial Times, which quotes people close to the process. The product is expected to arrive in a limited version, after the project has met with great aversion from regulators, including in the United States, the country where the headquarters of the social media management company are located. The stakeholder association behind this digital currency project is now planning to launch a single version of Libra that will itself be pegged to the dollar, at the rate of one unit of US currency for each Facebook digital currency . “The other forms of currencies will be deployed at a later stage,” the FT source added. The exact launch date will depend on when the project

Coronavirus infects Chinese and global economy

More serious than that of SARS that appeared in 2003, the corona virus epidemic is expected to have major consequences for international trade.

SARS (severe acute respiratory syndrome) appeared in November 2002 in Guangdong province where, for the first time, the virus crossed the barrier between animals and humans. Provincial authorities waited until February 2003 for an official announcement, and at the national level, the alert was only given in April. Meanwhile, billions of text messages referring to SARS had been exchanged. Washington Post correspondent John Pomfret reported that from February 8 to 10, the message "there is a fatal flu in Guandong" had been sent 126 million times to Canton. SARS reached Beijing on March 5, and in April the number of cases increased from 339 to 1,000 in one week. By the end of the month, more than a million residents (10% of the population) had gone to West Station to flee the capital.

Coronavirus infects Chinese and global economy

When the alert was confirmed internationally, SARS was presented as a super virus comparable to the Great Plague which had decimated half of the European population at the end of the 14th century. Fortunately, these forecasts were not realized. The epidemic had three episodes - that of November 2002 to June 2003, followed by two very small aftershocks between December 2003 and January 2004 and between March and May 2004 - then the virus disappeared. The final toll was 8,000 cases and 778 deaths worldwide.

The first estimates of the economic consequences were alarming: and according to the analyzes carried out later, SARS would have finally caused significant losses (3-point drop in growth) in the second quarter of 2003 when the epidemic was at its peak. Over the entire year, its cost would have represented 1% of GDP. SARS caused a break in the economy, which resumed its course and returned to growth of more than 10% until 2008.

In the case of the corona virus, provincial authorities waited more than a month to formally recognize the epidemic before announcing, on January 22, measures to isolate Wuhan city, implemented two days later. In the meantime, 5 million people had left this city for the New Year holidays.

Despite the confinement of almost 60 million people - an unprecedented measure - the corona virus epidemic is already more serious than that of SARS. Its speed of propagation is faster: with several thousand kilometers of TGV, China is more connected than in 2003 and, with the help of the holidays, the epidemic has spread to all provinces and neighboring countries.

The epidemic breaks out in a China very different from that of SARS: China is the second economic power of the globe, representing 16% of the world GDP instead of 4% in 2003. China is richer, its growth, which does not has the same engines, is much lower (6% in 2019). A slowdown that is explained less by the ongoing trade war than by the measures taken to fight debt, which had increased sharply since 2008.

Located at the epicenter of the epidemic, Wuhan is the capital of Hebei Province (4% of GDP). "Chinese Detroit" hosts Renault, PSA, Nissan, Smart and Valéo and manufactures as many cars there as in France. In the short term, the impact of the crisis will be limited, as auto sales have been declining for several months. However, the shutdown of subcontractors disorganizes the industry in the country and beyond. Already a major pole in the automotive industry, Wuhan is becoming a must in the field of electronics (screens, chips). It is called upon to play an important role in the Manufacturing 2025 program, which aims to improve the quality of Chinese productions.

The other two sectors directly affected by the government's drastic measures are transport (4% of GDP) and retail trade (7%). If there is no substitute for moving people, e-commerce offers an alternative to frequenting stalls or shopping centers. Its turnover represents 36% of the retail trade, a percentage much higher than in many countries including France where it weighs 9%. What limit the impact of the epidemic on sales, even if the products purchased on the sites are not yet delivered by drones, their distribution suffers the consequences of containment measures.

Between 2003 and 2020, the increase in household consumption was spectacular. However, despite the objective of re-balancing pursued by the State for fifteen years, not only the share of consumption in the GDP did not increase, but it was reduced from 42 to 39% in 2018. On the other hand , the contribution of consumption to growth has increased. In 2003, two years after joining the WTO, exports were booming and, with investment, had double-digit growth. This is no longer the case today. Since 2017, the credit crunch, added to Sino-US hostilities, has reduced growth to 6% in the third quarter of 2019, the lowest rate in the past 27 years. This growth is no longer based on exports, is based less on investment but more on consumption.

Under these conditions, assuming that the corona virus has the same impact as SARS, its consequences on growth could be almost twice as strong. The first estimates point to a drop in GDP growth in the first quarter of 2020 to 2%, the year which marks the end of the ten-year plan providing for a doubling of per capita income. The government will not hesitate to give the economy a boost, by stimulating, to achieve this goal.

If, on the other hand, the crisis turns out to be more serious than that of SARS, it could modify the behavior of households, by causing them to increase their precautionary savings to better ensure their health. If confirmed, this change would reduce the growth of the Chinese economy. The state could respond by increasing the share of health in budget spending.

Tourism is the primary chain of transmission of the epidemic to the outside. In 2003, 20 million Chinese vacationed abroad; there were 150 million last year. It was in Thailand, the preferred destination, that the first case of corona virus outside of China appeared on January 13 - there have been 13 others since. The distribution was made to Southeast Asia, the United States, Europe.

It is also through tourism that the first economic consequences of the Chinese crisis spread. In Japan, which will host the Olympic Games in July, 30% of foreign tourists are Chinese, or 7.4 million. In Vietnam, there were 6 million out of 18 million tourists. In 2019, 11 million Chinese - one fifth of all visitors - visited the Thai kingdom. Beijing’s decision to ban group departures is therefore a major blow to Thailand, where tourism supports 6 million people. The French tourism industry is also expected to suffer, as is the luxury industry.

The extension of the holidays beyond February 2 and the difficulties of transporting the mingong (260 million migrant workers, often from the central and western provinces) will force industrial production to be curbed. A situation that affects the global industry: according to Bloomberg, Wuhan is in 13th place in the Chinese cities classified according to their role in the global production chains. China is an essential link in the electronics industry, but also in the pharmaceutical industry with 80% of the active ingredients "made in China". This crisis will lead to a reassessment of Chinese risk by foreign companies, which will increase their efforts to seek alternatives which began since the Sino-American conflict.

Isolated, China will slow down, which will affect not only the global industry, the automobile or electronics, but the entire global economy, which has already been losing momentum for several months.