Following the outbreak of the Coronavirus in Wuhan, China and the fact that about 40,000 cases have been reported so far both in and outside China, there is speculation as to the effect of this deadly virus on the economy of China and Asia as a whole. This isn’t far fetched considering that the SARS outbreak in 2002 caused a drop in GDP of up to 1%. There is no telling just how much such a disease could affect the economy in the following year. After the outbreak, a lot of airlines were shut down and some restricted flights inside China. A number of countries have chartered airlines to bring back their citizens and quarantine them until they show no signs of the virus. The US has also stated that if the situation worsens, they might place a ban.
All these point to the fact that the situation is getting worse and whether there is subsequently a cure for the virus, it is no argument that it will impact on the economy of China. It is no longer a question of if it will but how much of an impact we are talking about.
Companies shut down
Since the outbreak, a lot of companies have been forced to stop production and manufacturing activities and others have shut down operations completely. Toyota and Ford for example have stopped producing cars in some of their factories and other companies like Apple, which has major distribution channels in China, is heading for a shut down.
Scott Kennedy, a senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies said as follows, “The outbreak and response will, at a minimum, affect treatment of firms’ employees, manufacturing and production, support from suppliers, and delivery plans for customers. Slower activity up and down the supply chain will have financial repercussions, putting stress on banks’ balance sheets and securities markets.” Economists have taken to the fact that there will be a massive global decline considering the rate at which the virus is spreading. So far, there has been 910 confirmed dead from the virus and 40,000 cases reported. There has also been a number of reports from about a dozen countries other than China and this is not good for the economy.
Trade and Manufacturing
There is a lot of manufacturing, production, and trade going on in China and with the current level of absent clients or workers due to the total shutdown of economic processes, this will cause a great deal of trouble for the economy. Even if the virus was to be contained within China, it still would take a while before business resumes fully. Another aspect that is greatly affected by this is tourism. Chinese tourists are currently on a total lock down as no one is allowed inside Vietnam.
The bottom line is that for a country like China which is known for its production and trade in both spare parts and finished products, this is a major economic blow and of course like every epidemic, Coronavirus will have a negative impact on the economy.
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