2020 is a Year Fraught with “Black Swan” Events?
2020-04-29    [Source:PUdaily]
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Pudaily, Shanghai -- This year has seen the elapse of only four months, but “black swan” events happened frequently. “Black swan” events refer to unpredictable and unusual events, which have negative knock-on effects and even cause disruptions.
Generally, a "black swan" event have three characteristics:
        1. It is out of expectation;
        2. It has a significant impact;
        3. Though it is unexpected, by instinct people tend to cook up a reason for its occurrence and consider it explainable and predictable.
  "Black swan" events can be seen in all fields, from financial markets, business, economy and personal life. "Grey rhinos event", a concept complementary to "black swan event", refers to risks that are so common that people tend to take them for granted. 
 

Black swan event 1: outbreak of COVID-19 epidemic in China

    When the novel coronavirus was reported for the first time in Wuhan in December, nobody took it seriously. No one expected the virus (black swan event) to be so infectious and deadly. It took us at least three months to defeat the virus, during which time we confirmed the fatality of the disease, locked down the city and finally curbed the epidemic. Also, no one expected the virus to be so destructive as it affected the operation of the whole Chinese society. From cancelled movies during the Spring Festival holiday, extended Spring Festival holiday, delayed resumption of normal business across the country, sharp drop in domestic consumption due to home quarantine, temporary stall of China's economy, and the closure of small and medium-sized enterprises, all these are the result of the COVID-19 epidemic, which triggered a chain reaction.

 

Black swan event 2: outbreak of COVID-19 epidemic in other countries

    On February 28, WHO raised the risk of spread and risk of impact of the COVID-19 from "high" to "very high". Since then the epidemic has spread rapidly. According to Johns Hopkins University, as of 12: 40 on April 27 (Beijing time), 2,971,669 confirmed cases and 206,542 deaths had been recorded worldwide. Data shows that the United States, Spain, Italy, France and Germany recorded the largest number of confirmed cases. Of which America reported over 960,000 confirmed cases.
    International Monetary Fund: World Economic Outlook According to IMF, if most countries see the turning point for the epidemic in the second quarter and the epidemic subsides in the second half of the year, the global GDP will contract by 3% in 2020. If the epidemic subsides in the second half of the year, the global economic growth is expected to bounce back to 5.8% in 2021. If the epidemic does not subside in the second half, the global economic growth in 2020 will further decline by 3% from the benchmark forecast, in 2021 it may decline by 8% from the benchmark forecast.
    World Trade Organization: Global Trade Forecast The decline in world merchandise trade volume in 2020 is estimated to be 13% to 32%, exceeding the decline caused by the 2008 financial crisis. There is great uncertainty in the forecast of the recovery in 2021, with the result depending to a large extent on the duration of the epidemic and how effective the government measures are.
 
Black swan event 2: the collapse of crude oil futures

    On April 20, for the first time the WTI crude oil price fell into the negative territory. Due to the lack of oil storage capacity and the resulting excess oil production, WTI crude futures suffered bear raid. At the same time, curbed demand for crude oil due to overseas epidemic, supply glut and tight storage space continue to depress the market. OPEC's latest monthly report estimates that in 2020 the global oil demand will drop 6.9 million b/d to reach its lowest level in 30 years. Standard & Poor's estimated that the unused global storage capacity for energy sources such as crude oil stands at 1.4 billion barrels. Of which about 1 billion barrels are onshore storage capacity and around 400 million barrels are offshore storage capacity. Even the OPEC cut oil output at full tilt, these storage capacity will be used up within 2 to 3 months.

 

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