Coronavirus adversely affects international economy

LAHORE: The deadly coronavirus strain has not just fatally haunted humans in over two dozen countries, but has also adversely affected the global economy as China’s essential role in the global supply chain is phenomenal, archival research conducted by the “Jang Group and Geo Television Network” shows.

Till Tuesday, according to the “New York Times", the epidemic had claimed around 425 lives in China alone, surpassing the 2003 SARS outbreak that had caused 349 deaths in China.

By Monday, China had 20,438 cases, while more than 160 cases had been diagnosed in two dozen other countries, including 11 in the United States. The Chinese Government figures have shown that confirmed coronavirus infections are surging by more than 2,000 daily!

Both exporters and importers around the planet are thus worried as the virus that is bound to badly affect the GDP of China, which has succeeded in increasing its annual economic output more than eightfold, to nearly $14 trillion from $1.7 trillion during the 2003-2020 period, according to the World Bank.

China’s share of global trade has more than doubled, to 12.8 per cent in 2019 from 5.3 per cent some 17 years ago, helping its economic output per person surge to around $9,000 in 2019, soaring magnificently from about $1,500 in 2003.

According to an eminent American media house, the “Bloomberg", a potential $160 billion hit in lost growth that may be on the way.

The prime business publication writes: “Since China’s last health crisis, the SARS outbreak of 2003, its share of global economic output has quadrupled to about 17 per cent. It’s now the biggest market for new cars and semiconductors, the largest spender on international tourism, the leading exporter of clothing and textiles, and the land where many PCs and virtually all iPhones are made. The global hit from this new outbreak could be three to four times larger than the $40 billion blow from SARS, estimates Warwick McKibbin, a professor of economics at Australian National University.”

According to “Bloomberg", a New York-based television channel founded by City’s former Mayor Michael Bloomberg in 1981, numerous business giants like Kraft Heinz, Levi Strauss & Co, Estée Lauder counters, Starbucks, Messrs Canada Goose, Rolls-Royce, McDonald’s, Walmart, Walt Disney Company, Starbucks Corporation, Tesla, Apple and Microsoft have big exposures and stakes in China; and are feeling the pinch due to the outbreak of Coronavirus.

It maintains: “International companies have poured into China, opening up Estée Lauder counters, Canada Goose stores and Rolls-Royce showrooms in Beijing and Shanghai. Companies with big exposure to China, from Starbucks Corp. to Tesla Inc., refrained from predicting this week how the virus would affect demand, saying simply that they’d update their forecasts when they know more. Apple Inc. and Microsoft Corp. gave wider-than-usual forecast ranges for the quarter amid uncertainty about the virus impact.”

The “Bloomberg” had more to say: “Starbucks has closed more than 2000 outlets across China - half of its total - and can’t get some menu items for those that remain open. McDonald’s Corp. has shut hundreds of restaurants. Some Walmart Inc. stores are running out of products. Walt Disney Co.’s theme parks in Shanghai and Hong Kong have gone dark. Even before the US and Japan advised their citizens to avoid traveling to China, airlines had curtailed flights to the country - not because of fear of contagion, but due to lack of passengers.”

Meanwhile, the 169-yer old “New York Times” has reported: “International companies that rely on Chinese factories to make their products and depend on Chinese consumers for sales are already warning of costly problems. Apple, Starbucks and Ikea have temporarily closed stores in China. Shopping malls are deserted, threatening sales of Nike sneakers, Under Armour clothing and McDonald’s hamburgers. Factories making cars for General Motors and Toyota are delaying production as they wait for workers to return from the Lunar New Year holiday, which has been extended by the government to halt the spread of the virus. International airlines, including American, Delta, United, Lufthansa and British Airways, have canceled flights to China.”

The premier American newspaper adds: “A frightening epidemic coinciding with a major holiday will almost certainly spell a substantial loss of sales for China’s tourism and hospitality industries. Hotels and restaurants that would normally be full of revelry are empty. Concerts and sporting events have been canceled. IMAX, the large screen film company based in Toronto, has postponed the release of five films it had intended to showcase in China during the holiday. With flights to China limited and emergency public health restrictions in place, the Chinese operations of multinational companies are likely to be constrained. Major banks including Goldman Sachs and JPMorgan Chase, are directing that employees who have visited mainland China stay home for two weeks. General Motors last year sold more cars in China than in the United States. Its Chinese factories will be closed for at least another week at the request of the government. Ford Motor has told managers in China to work from home while its factories remain idled, said a company spokesman.”

Yet another American media house “CNBC” has asserted: “Should the crisis stretch out for another month, and experts now consider it more likely than not to reach well into summer, the cost could be a two-percentage point decline in Chinese growth to 4 per cent or lower this year. First quarter growth figures in China could fall to 2 per cent year-on-year - which would be the lowest in decades, and down from 6 per cent in the last quarter of 2019. The impact on the global economy will be far more significant than during the SARS pandemic of 2003, which is estimated to have provoked a global economic loss of $40 billion and a hit of 0.1 per cent on global GDP.” That’s because China’s share of global GDP has quadrupled since then to 16 per cent from 4 per cent - and fully a third of global growth has been coming from China.”

The New Jersey-based television channel, an American pay television business news channel that is owned by NBC Universal Broadcast, had more to report: “Tourism markets will take an outsized hit, as about 163 million Chinese tourists in 2018 accounted for nearly a third of travel retail sales worldwide. Thailand, for example, has already reduced its 2020 GDP forecast, based on expected revenue losses of as much as $1.6 billion from 2 million fewer Chinese visitors, should travel restrictions continue for a further three months.”