The November 2002 outbreak in China of a new form of atypical pneumonia, Severe AcuteRespiratory Syndrome (SARS) had widespread economic, political, and social effects on the PRCand presented a serious test for new PRC party leadership, named at the November 2002 PartyCongress, and for new central government officials named at the March 2003 meeting of theNational People's Congress. (1) Having firstminimized and tried to cover up the extent of the disease,PRC officials eventually were forced by circumstances to acknowledge the problem, apologize forfailure to be more forthcoming, and respond openly and aggressively to the outbreak. Thegovernment's handling of new SARS cases emerging in January 2004 differs markedly from itsearlier experience. As a result, some U.S. foreign policy observers have suggested that the initialcrisis of 2003 was a transformative experience for the new leadership that will have lastingimplications for the PRC's future and for its role in the world. One set of questions is economic. These include the direct costs of fighting the virus, the indirect costs to and implications for the country's economy because of lost business, and thenational budget implications of continuing to address the weaknesses that SARS revealed about thePRC's health care system. Social and political questions center around what the health crisisrevealed about the limits of central government power in an age when public pressure can forcechanges in Beijing's policies. Finally, the health crisis raised questions about the PRC's globalimage and role, including its responsibilities to international organizations such as the World HealthOrganization (WHO), the impact that Beijing's decision to obfuscate about the crisis may have hadon its credibility with its neighbors, and the potential implications of the crisis for PRC relations withHong Kong and Taiwan. This report will address the political, social, and economic questions confronting China as it continues to cope with the after-effects of the health crisis and emerging new health crises. Thisreport also will assess the implications of these questions for China's future and for U.S. policy. Thereport will be updated as events warrant. In November and December 2002, authorities in China's Guangdong Province began seeingcases involving a mysterious and contagious flu-like virus that PRC medical officials first describedas an "atypical pneumonia." As later press reports eventually reconstructed it, cases first appearedin the provincial cities of Foshan, Heyuan, and Zhongshan, spreading then to Guangzhou, theprovince's capital city. Although Beijing sent a delegation of medical experts to Guangdong onJanuary 20, 2003, to help provincial officials investigate the illness, government authorities madeno official mention of the mysterious cases, nor did official PRC media sources. When provincialgovernment officials finally acknowledged the mysterious pneumonia outbreak publicly in earlyFebruary 2003, they continued to be secretive and duplicitous about the extent of the illness, onlyperiodically making reluctant further disclosures about the outbreak. The Guangdong Provincial Health Bureau made the first official PRC announcement about the mysterious illness on February 11, 2003, after the outbreak had "become obvious" in the city,according to a senior Guangdong health official. (2) Taking the then unusual step of holding a pressconference, provincial health authorities reported that 5 in Guangdong had died and more than 300had become sick -- numbers that proved much understated by later calculations. Having revealedthe problem, the following day, on February 12, 2003, the official Xinhua News Agency announcedthat the mysterious pneumonia had been "brought under control"and no new cases had been reported. This remained the official story from the PRC government through mid-March 2003, even as theWorld Health Organization (WHO) issued a global alert on March 12, 2003, following newoutbreaks of a similarly described "atypical pneumonia" in Vietnam and Hong Kong. PRC officials remained reluctant to issue information throughout March 2003. Even so, onMarch 15, 2003, the WHO issued an unprecedented "emergency travel advisory," for the first timereferring to the illness as SARS and saying that its further spread to Canada, Singapore, and Europenow made it a "global health threat." According to WHO officials, it was only at this point that theChinese government began providing them with information about the February "atypicalpneumonia" outbreak in Guangdong which Beijing still maintained had been successfully dealt with. Even so, WHO reported that the PRC at this point still declined to provide biological samples, testresults, or even details about the courses of treatment used during the February outbreak. Severaldays later, on March 18, 2003, PRC officials admitted that the SARS outbreak was continuing inGuangdong, but maintained that it had not spread to other locations in China. On March 27, 2003,PRC authorities admitted that actually more than 800 people in Guangdong had become sick and 34had died, including 3 in Beijing -- the government's first admission that the illness had spreadbeyond Guangdong Province. It was not until April 2 that PRC officials allowed WHO investigatorsto visit the Guangdong SARS areas. (3) On April 4, 2003, the head of the PRC's Center for Disease Control issued an unprecedented public apology for the government's "poor coordination" of information about the health crisis. (4) OnApril 9, a prominent Beijing surgeon publicly disclosed that the government was continuingseriously to under-report cases of SARS in Beijing, and that the number actually was far more thanthe statistics of 22 existing cases in the city that the government had released that same day. By mid-April 2003,persistent rumors, international inquiries, and foreign press reports were bringingenormous pressure to bear on government officials, who were still reporting that SARS had beencontained in Guangdong and that only 15 more cases had been reported in Beijing, for a total of 37. WHO investigators publicly announced on April 16, 2003 that the international community did nottrust the Beijing city government's figures, and that the numbers Beijing was reporting did notinclude patients in military hospitals or those with suspected but unconfirmed cases. The New YorkTimes quoted one WHO infectious disease expert as saying that the real number of cases in Beijingmore likely was "in the 100-to-200 range now." (5) On April 18, 2003, China's new Premier, WenJiabao, threatened dire consequences for any government official who did not make full and timelydisclosure about SARS cases. On April 19, 2003, the Washington Post reported that PRC doctorswere disclosing that the previous week, on orders from the Beijing city government, authorities hadphysically moved more than 70 SARS patients out of hospitals to prevent visiting WHO medicalteams from finding them on their inspections. The real official turnaround in the crisis came on April 20, 2003, when PRC leaders made an evident decision to be more forthcoming about the SARS crisis. In a series of steps that manyobservers described as unprecedented in the history of the Chinese Communist government, PRCofficials that day held a nationally televised press conference in which they admitted that SARScases in Beijing actually were more than ten times the 37 cases officially reported up to that point,and that there were 339 confirmed cases and 402 suspected cases. Officials offered a public apologyfor their "leadership failure" in addressing the SARS crisis. Later that day, both the Minister ofHealth, Zhang Wenkang, and the Mayor of Beijing, Meng Xuenong, were removed from theirpositions, presumably for misleading the public about the extent of the health crisis. By April 27, 2003 -- only ten weeks after the initial announcement that a mysterious pneumonia outbreak affecting a few hundred people in Guangdong had been brought under control-- SARS outbreaks had been reported in 26 of the PRC's 31 provinces, the number of confirmedcases in Beijing alone had passed 1,100, and the central government had placed more than 15,000people in the city under quarantine. Further, the government cancelled the week-long celebrationsfor the May 1st holiday of 2003 to discourage widespread travel in China, and ordered the emergencyclosure of movie theaters, discos, churches, and other public places in Beijing. (6) Outside the capital,villages and towns with no recorded SARS cases began to put up roadblocks to isolate themselvesfrom potentially infected travelers. Although new daily PRC announcements showed that confirmedSARS cases were now increasing on a daily basis, WHO officials on April 29, 2003 again criticizedthe government for failure to provide more detailed information. Many citizens of Beijing refusedto venture outside their homes, often wearing protective face masks when they did so. Accordingto press reports, streets and public squares in the city were virtually deserted, and those businessesand stores that remained open had virtually no customers. By July 2003, the global transmission of SARS had virtually disappeared. On July 15, 2003, the U.S. CDC discontinued the distribution of its Health Alert Notices and lifted the last of its traveladvisories, reflecting that no new cases of SARS had appeared in more than 30 days. (7) Nevertheless, the international medical community warned that SARS may duplicate the pattern ofother respiratory diseases and recur seasonally, like the flu. Many pointed out that the SARSoutbreak of late 2002-early 2003 highlighted a number of serious weaknesses in the PRC's politicaland economic systems that PRC leaders were forced to address, particularly given the potential forother national health crises. Some felt that the act of addressing these weaknesses could have alasting impact on governance in the PRC. Since 1978, the pressures and demands of modernization have forced the authoritarian Chinesecommunist political system to change in important ways. These changes have been incremental andselective, so that the political arena in the PRC today has an oddly chimerical quality about it. Forexample, while much in PRC society is increasingly open, the process by which government andparty decisions are made is still a murky matter.