In 2003, the SARS epidemic did not significantly affect the global economy. But 17 years later, the new strain of coronavirus could drag the growth of many countries.
According to the Wall Street Journal , Chinese production and consumption have driven the growth of Asia, North America, Europe and other regions for many years.
Global manufacturers are also closely tied to China. A series of supply chains depends almost entirely on the network of factories and production facilities in the country of 1.4 billion people. This system produces both intermediate and finished goods.
With the Chinese government taking strict measures to prevent the corona virus disease from spreading, a series of factories in the country fell into a state of paralysis.
In the US, General Motors Group warns that a shortage of Chinese-made parts could slow assembly lines at multipurpose sports car factories in Michigan and Texas. The US automaker said it is looking for ways to minimize risks.
Damage of 1,000 billion USD
The same story happens with many other companies around the world. Mostafiz Uddin, owner of a jeans factory in Chittagong city, southeastern Bangladesh, said his company could not make 100,000 orders because it could not import fabric from China.
“I just have to wait. We have no other choice,” Mr. Uddin lamented.
A month after the corona virus forced factories to close, economists warned that a prolonged Chinese production shutdown could cripple global manufacturing and cost the world $ 1,000 billion in damages. .
Last week, South Korean President Moon Jae-in admitted : “The current situation is more serious than we think. The Korean government needs to take urgent steps immediately.”
Hyundai Motor – after closing some Chinese factories in February – had to suspend one of its main assembly lines in Ulsan, South Korea, due to a lack of parts from China.
Asiana Airlines, South Korea’s second largest airline, required 10,500 employees to work in staggered shifts during 10 days of unpaid leave from February 19.
Large electronics corporations that depend on Chinese equipment also cut production because of the Covid-19 epidemic . Many companies have considered relocating their production lines to other countries.
“Japan’s exports to China are expected to fall by 7% this quarter from the previous quarter,” said economist Taro Saito of the NLI Research Institute.
Nintendo, a well-known Japanese game maker, said some of its Switch consoles were delayed due to lack of parts from Chinese factories.
Outbreaking shortly after the US-China trade war, the new strain of coronavirus could have serious impacts on the global economy. Experts say that GDP growth of some of the most dependent economies in China may drop more than 0.5% this year.
Asian economies are tumbling
according to estimates by the McKinsey Global Institute, China now accounts for nearly a third of world GDP growth, far exceeding the level of 3% in 2000. Asian economies depend particularly significantly on China.
According to the World Bank, in 2000, China accounted for only 1.2% of global trade. By 2018, China’s market share jumped to 30%. In Asia, China’s market share increased from 16% to 41% during this period.
China’s influence on the global economy is evident everywhere. Recently, Apple announced that it will not reach its revenue target in the first quarter due to the temporary closure of Chinese factories.
In Europe, container ship service companies warned of a drop in profits when dozens of key shipments from China were canceled.
The US government’s ban on Chinese tourists’ entry is a blow to the country’s tourism-service industry. Economies in Asia depend on travelers and trade with China is also afflicted .
Singapore last week cut its annual GDP growth forecast from 1.5% to 0.5%. Thailand estimates that the number of tourists may decrease by 13% this year because China canceled tours.
Australia, one of Asia’s major economies , is also struggling . Two decades ago, China was only a small trading partner of Australia.
But as China concentrated on investing in industry, China massively bought iron ore and coal from Australia. In 2019, the Chinese market accounts for nearly 40% of Australia’s exports.
BHP Billiton, the world’s largest mining company , said demand for goods would plummet if the disease was not controlled by the end of March.
The recession has also flooded the supporting industries. WiseTech Global, a cloud software company that tracks products, lowers its revenue forecast for 2020.
WiseTech said anti-epidemic measures in China forced it to postpone new product features. CEO Richard White described: “This is an event that only happens once every ten years.”
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