Snehal Shambhunath KatarukaFrom being unable to produce work to having to feed 41 million people, China has begun to face monetary setbacks.
China is one of the world’s biggest export hubs, its greatest strength is manufacturing and export. In 2002, when a fatal, pneumonia-like virus known as SARS emerged in China, the country’s factories were mostly rolling out low-cost goods for customers around the world. The outbreak of the deadly disease didn’t necessarily impact China’s economy or the world economy for that matter since China contributed around only 7-8% to the world economy. But in the last two decades, China has become an example to the world, accounting for more than a quarter of global manufacturing. In December 2019, Wuhan, China confirmed its first case of the lethal Coronavirus, becoming the epicenter of the outbreak. As the death toll from the outbreak rose to 361, leaving more than 17,000 people infected, Chinese shares have dropped by a shocking 9% and are expected to fall further down. According to news reports, China has locked down almost 13 cities and an alarming number of 41 million people.
China is already starting to face monetary crunches because the lockdowns have majorly affected the economy of the country, with no work being produced and making sure to feed almost 41million people. Recently, the Chinese authorities announced that they have swamped the financial system with 1.2 trillion yuan (US$170bn) in extra liquidity, a measure designed to buy up securities from investors seeking to sell. Global economy experts claim that this won’t be enough for China to survive the Coronavirus threat for a very long time.
International companies that heavily rely on Chinese factories to make their products and count on Chinese consumers for sales are already facing inflation. Major companies like Apple, Starbucks and Ikea have temporarily closed stores in China. Shopping malls have been shut down too which is menacing sales of big brands like Nike, Under Armour and McDonald’s to name a few. Factories that make cars for General Motors and Toyota are delaying production due to the Lunar New Year holiday extension provided by the Chinese government to the workers as an attempt to stop the virus from spreading further. International airlines, including American, Delta, United, Lufthansa and British Airways, have canceled flights to China.
According to a report in the New York Times, If customers are unable to buy what they need from China, Chinese factories could, in turn, slash orders for imported machinery, components and raw material from other countries. Rohini Malkani, an economist at DBRS Morningstar stated, “This could potentially disrupt global supply chains, it is too early to say how long it is going to last.”
A decline in tourism spending in China has already hit the main cruise lines. US based Royal Caribbean Cruises has already cancelled three trips scheduled in February, which will reportedly hit 2020 earnings by about 10 cents per share. A ship owned by the Carnival Corporation, which is listed in New York and London, was briefly put in quarantine in the Italian port of Civitavecchia, trapping 66 Britons and 6,000 other passengers.
Shares in Norwegian Cruise Line Holding, Royal Caribbean and Carnival were all at least 5% lower on the New York stock exchange following the Italian incident before recovering some of their losses on Friday.
The consultancy S&P Global Market Intelligence says the decision of regional governments to extend factory closures beyond 2 February to control the virus’s spread will be a major blow to China’s GDP.
With over 25 countries with confirmed cases of the deadly Coronavirus, The World Health Organisation (WHO) has declared the outbreak as a global public health emergency. There have been 362 confirmed death cases in less than a month due to the lethal virus that is spreading rapidly all across the world. Here’s a map depicting the countries and the number of people affected by the virus.
For those of you who are not up to speed with what exactly is the Coronavirus, here’s an infographic summarising the symptoms, causes and prevention of the deadly outbreak.
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The Coronavirus has caused a global fear and but on a positive note, a lot of countries like Canada, Australia and India among many others are prepared to handle the situation with preventative measures.
In additional information, here’s a timeline that will take you through everything that has happened ever since December 31, 2019, the day when the news of the lethal virus broke out.
The latest update on Coronavirus: 4th Feb 2020. Belgium confirms its first case of the virus. Belgium has confirmed its first coronavirus case after one of the nine individuals repatriated from Wuhan tested positive for the virus. Hong Kong reported its first death case from the virus.
