The city of Wuhan was ground zero for an event that would change the entire global landscape and paralyze economies around the world. To contain the spread of the coronavirus, on January 23, 2020, the Chinese government made history by launching the most extensive quarantine ever recorded by locking down the city’s population of more than 11 million.
Wuhan is the capital of Hubei Province, the entirety of which was eventually completely shut down. The 76-day quarantine not only affected citizens’ physical, mental, and emotional health, but also brought the provincial economy to a screaming stop. Poignantly, the pandemic impacted the service industry more heavily than others, with widespread closures forced upon restaurants, hotels, bars, clubs, and other businesses that rely on a frequent flow of customers.
Wuhan and many of its industries have since escaped from the clutch of the virus. As the first city to successfully shake off the impact of the pandemic, Wuhan has been able to restore most of its economic activity comparatively early on and now serves as an excellent example for recovering cities around the globe.
A Collapse of Epic Proportions
Wuhan’s economy is heavily skewed towards production. According to Bloomberg’s supply chain database, Wuhan ranks 13th of nearly 2,000 cities in China for the densest manufacturing hub with 500 facilities that serve as factories, or nearly half of the 1,016 facilities in the greater Hubei Province. Perhaps unsurprisingly, then, the draconian quarantine order by which the coronavirus was contained in the city levied particular harm to the city’s ability to manufacture economic growth. As production facilities stalled for months on end, the city sank deeper into contractionary territory.
Meanwhile, restaurants and stores were shuttering their doors due to distribution problems, lack of foot traffic, and a basic inability to meet overhead costs. In March 2020, mere weeks after the initial outbreak, approximately five million workers across China had already lost their jobs for pandemic-related reasons. The official unemployment rate in February 2020 jumped to 6.2%, though most Western experts claim that the true number was likely much higher. All in all, Hubei Province’s first quarter GDP shrunk by almost 40% year-over-year, and retail sales dropped by more than 15% in March alone.
Bainianfeng Catering was just one business within the service industry severely impacted by the quarantine. Among its ten locations across Wuhan, half were local restaurants known for their hotpot – a traditional Chinese meal that involves guests eating boiled meats and vegetables from a communal pot of broth. Due to a steep and sudden decline in customer traffic, Xiong Fei, the company owner, was forced to write off over CN￥1 million (~US$155,000) worth of fresh food in mid-April 2020. Greater than his short-term loss were fears that the pandemic may leave a lasting impact on customers’ dining habits – a shift that could present long-term challenges for his businesses.
Another restaurant owner, Zhu Ping, told the Global Times that she had tried to open her restaurant for two days following the end of the lockdown, but after failing to attract customers, she resolved not to reopen until customers felt safe dining indoors once more. Zhu noted that the “…cost of opening was much more than I earn each day, so I closed again.” Xiong’s concerns and Zhu’s experience were corroborated by an on-the-ground CNN journalist who observed that, amid lackluster foot traffic, more than half of the businesses on a major commercial street in Wuhan remained shuttered on April 21, a full 13 days after the lockdown orders expired.
To provide support to Xiong, Zhu, and countless other business owners like them, the local government planned measures to help struggling businesses and stimulate consumption. Officials arranged for the distribution of US$71 million worth of consumption coupons for Wuhan residents; however, the campaign only saw lukewarm success as widespread concern over job security as well as high transmissibility of the virus in public areas inhibited consumption.
One Year Later: Wuhan’s Return to Health
Despite the economic hardships of early 2020, Wuhan’s draconian quarantine order allowed the city to make a remarkable recovery. One of the most promising early signs of the city’s growing economic stability has been its recovering nightlife. As of January 2021, local businesses have seen success in reopening bars and clubs, nearly a full year after the pandemic closed down the city. Meanwhile, restaurants in Wuhan are seeing increasingly higher foot traffic after the city saw an 80% work resumption rate in the food and catering industry in August 2020. The relative revival of one of these two heavily impacted sectors, though still lower than pre-pandemic levels, is undoubtedly a positive sign of recovering consumption.
Despite an aggregate 4.7% drop in GDP in 2020, Wuhan still remains a top ten Chinese city by means of economic strength. The city outperformed the broader province, with Hubei’s GDP contracting by 5% over the course of the year; notably, both the city and the province beat economists’ predictions of a double-digit decline. Additionally, despite negative 40.5% growth in the first quarter of 2020, by the end of the third quarter, Wuhan had cut down the year-to-date economic contraction to just negative 10.5%. With a new goal of positive 10% GDP growth in 2021, Wuhan’s V-shaped recovery has begun restoring the city to the tremendous industrial hub it was before the pandemic.
Cautious Optimism in a Post-Pandemic World
While Wuhan’s recovery is almost too good to be true, there still exists reason to be cautious about its unbridled re-emergence. Wu, a restaurant owner in Wuhan, believes that the pandemic has changed traditional ideas surrounding consumption; fewer people are electing to eat out or partake in outdoor activities in favor of dining in and consuming entertainment from the comfortable safety of their home. As of December 2020, Wu claimed that only about 70-80% of the people who used to go out consistently have resumed their pre-pandemic habits.
China’s domestic tourism industry has also struggled to bounce back. Authorities have incentivized tourists to visit Wuhan through tourism promotions and heavy marketing campaigns, yet despite their best efforts, tourism traffic continues to lag. Ms. Xin, a hawker that sells Wuhan’s signature “hot, dry noodles” in the touristy Hubu Alley, noted that organic tourism has only recovered to approximately 10% of pre-pandemic traffic; without government-incentivized groups and other forms of support, she would likely have to close shop.
Wu and Xin’s experiences are just two examples of the lingering effect that COVID has brought to post-pandemic consumption. Consumers’ attitudes and habits have shifted over the course of the pandemic, and though certain sectors are rebounding nicely, others will remain muted for a time to come.
Wuhan: An Example for the Times
As the city continues to shake the dust from its quarantine-induced slumber, Wuhan has much to be optimistic about. Yet, caution remains paramount given the lingering influence of shifting consumption habits. Recovery will be imbalanced, and certain sectors—particularly those within the service industry—will take longer to adjust to the new prevailing market values. Those that cannot adapt may never regain their footing; still, new services will rise up to take their place. Regardless, once the epicenter of the pandemic, Wuhan now serves as an example to the rest of the world about what may be to come once the pandemic has been contained. With any luck, its successful recovery will be the first of many across the globe.