China’s Coronavirus is Hitting the Global Economy

It has gone 20 years since SARS. After that, China’s importance in the global economy is enormous. SARS was a lethal, pneumonialike virus that emerged in 2002 in China. At those times, the country’s factories were mostly churning out low-cost goods like sneakers and T-shirts for customers around the world.

After seventeen years later, another deadly virus spreads rapidly throughout the world’s most populous country. Nevertheless, now China is a principal element of the global economy. Thus, the epidemy is a substantially more potent threat to fortunes.

Many international companies rely on Chinese factories. They are relying upon them to make their products and depend on Chinese consumers for sales. Those companies are already warning of costly problems.

Ikea, Starbucks, and Apple have temporarily closed their stores in China. Threatening sales of Nike sneakers, Under Armor clothing, and McDonald’s hamburgers, shopping malls are deserted. Toyota and General Motors have their factories, which are making cars. The factories were delaying production because they were waiting for workers to return from the Lunar New Year holiday. Nevertheless, the Lunar New Year holiday extended by the government to halt the spread of the virus. International airlines, including Delta, United, Lufthansa, British Airways, and American have canceled flights to China.

This year China’s economic growth is expected to slit to 5.6 percent, down from 6,1 percent last year. This forecast is derived from Oxford Economics that is based on the impact of the virus so far. Thus, it would reduce global economic growth for the year by 0.2 percent, to an annual rate of 2.3 percent. It will be the slowest pace since the global financial crisis a decade ago.

The Factories of China

On Monday, Chinese investors returned from a long holiday for the first time since the coronavirus’s threat became apparent. They sent shares in China down about 8 percent. In recent days stock markets around the world have plunged.

On Sunday, leaders of China outlined plans injecting new credit into the economy, as a sign of deepening concern. That will include a net $22 billion to shore up money markets. It will also include looser borrowing terms for the Chinese companies.

The factories of China are still producing a mind-blending array of low -value, relatively simple products like plastic goods and clothing. It has gone a long time since achieving dominance in more lucrative and advanced pursuits like auto parts, computers, and smartphones. The country became an essential part of the global supply chain. It produces components needed by factories from Malaysia to Mexico.

The country also has risen into an enormous consumer market. China’s nation comprises 1.4 billion people. They have a growing appetite for fashion apparel, trips to Disneyland, and electronic gadgets.

The Trump administration wages the trade war with China. It has prompted a partial decoupling of China and the United States. Multinational companies used factories in China to make their wares to avoid American tariffs by shifting production to other countries. The coronavirus will most probably accelerate that trend. Let’s hope that Coronavirus will stop quickly.