LATEST UPDATE – Coronavirus Destroying Chinese Manufacturing Economy
So, the date I am writing this article is 26th February 2020 and the Coronavirus death toll has risen to over 2,715 people with almost 80,000 confirmed cases. The deadly virus has caused global disruption and fear – so much so that the national Chinese New Year holiday was postponed, and flights have been cancelled. Will the growing outbreak cause permanent damage to the global economy or is it already too late?
What is happening in Wuhan?
According to RTE, the city of 11 million has been under lockdown since 23 January with very limited access to and from the city. Non-essential vehicles have been banned from the roads to prevent spread of the virus. Things have got so serious in Wuhan that at the Hubei border, workers are checking people’s temperatures before allowing them into the city – according to BBC. Along with this, the government announced it is sending an additional 1,200 health workers – along with 135 People’s Liberation Army medical personnel – to help the city’s stretched hospital staff – a quote from CNN. However, it is not just Wuhan that is in crisis, there have been global efforts to reduce the spreading of the virus along with funding. The official number of new cases has been in the hundreds for the past five days, after being in quadruple digits every day for weeks.
According to many sources including CNN, Liu Zhiming, director of the Wuchang hospital in Wuhan, the city at the centre of the outbreak, died of the virus. China is still on lockdown and it doesn’t look like it will change anytime soon. According to analysis by CNN of Chinese government orders, 780 million people are still living under some form of restrictive movement, including all of Hubei, the north-eastern province of Liaoning, and China’s two most important cities, Beijing and Shanghai. Restrictions include everything from self-quarantines to limits on who can come and go from neighbourhoods.
According to RTE, China has decided to postpone the annual meeting of its parliament due in March for the first time since the Cultural Revolution, as the country fights to contain the coronavirus outbreak, state media reported. The standing committee of the National People’s Congress will decide on a new date later, state broadcaster CCTV said.
What is the situation with electronic manufacturing in China?
Working within the electronic industry, I have heard of many companies’ sales / profits already slipping due to the Coronavirus effecting manufacturing lead times. According to Bloomberg, Avnet, the Phoenix-based distributor of computer products and semiconductors said it hadn’t seen an impact so far. “But if it gets worse and they start shutting down airplanes, et cetera, then that will have a different effect on shipments out of China,” CEO Bill Amelio said on a conference call.
China is the capital for manufacturing globally and supports many companies. According to South China Morning Post: retailers, manufacturers are shutting doors, letting employees work from home as Wuhan viral outbreak spreads. If the manufacturing of products decreases – so will the global economy. According to South China Morning, Coronavirus originating in Wuhan has sent agriculture commodity prices tumbling and led to extended shutdown of Chinese factories and markets. Conditions have got so bad that Starbucks has closed over 2,000 China outlets and Apple has closed one retail store due to the outbreak. Tim Cook, Apple’s CEO, has said the company is worried about the outbreak because China is both a major market for its products and a location for large amounts of its manufacturing. According to BBC, Australia plans to quarantine over 600 returning citizens for two weeks on Christmas Island – some 2,000km (1,200 miles) from the mainland. The global manufacturing sector seems to be slowly deteriorating due to this outbreak. Independent quoted that German auto parts maker Webasto has said it has temporarily shut its headquarters near Munich after four members of its staff were confirmed to have been infected.
A quote from PBS: the risk is that when the global supply chain is disrupted–most recently by the shuttering of factories due to the virus in China–many companies have few alternatives to fall back on. That is especially true of smaller and medium-sized companies that do not have operations in multiple countries. To solve this, some companies have announced they are shifting their operations to other countries, largely in Southeast Asia.
Within an article from IPC – electronics manufacturers anticipate at least a five-week product shipment delay from suppliers due to the coronavirus epidemic, according to a survey conducted by IPC, a global electronics manufacturing association. The group says shipping delays from China and other countries where the virus has spread are already having negative impacts on manufacturers.
Roughly 65 percent of manufacturers report their suppliers expect, on average, a three-week delay. However, electronics manufacturers expect delays to be longer than what their suppliers are currently quoting. On average, executives expect shipment delays to be at least five weeks.
“The delays will likely have ripple effects for the rest of the year,” said John Mitchell, IPC’s president and CEO. “The longer China is affected by the epidemic, and the more it spreads to other parts of the world, the supply chain will experience more and varied strains and disruptions.”
An overwhelming majority (84 percent) of electronics manufacturers and suppliers are worried about the epidemic’s impact on their business operations. Delays in receiving supplier inputs can lead to factory downtime, higher average costs, transportation bottlenecks, pressure for alternative sourcing, delayed sales, and delayed prototyping that slows the introduction of new products.
According to Economic Times, coronavirus could cost world $1 trillion. The worrying prospect that the Covid-19 outbreak could become the first truly disruptive pandemic of the globalisation era is renewing doubts over the stability of the world economy. With the death toll approaching 3,000, over 80,000 cases officially recorded and an outbreak in Italy now shutting down the richest chunk of its economy, some economists are beginning to wargame what an untethered outbreak could mean for global growth.
Transportation on Lockdown
British Airways, Lion Air and Seoul Air have cancelled all flights to Beijing and Shanghai due to the virus outbreak. Not only this, according to The Guardian, Hong Kong cuts Chinas transport links as coronavirus toll mounts. Hong Kong will bar non-residents arriving from South Korea from tomorrow morning in response to the growing coronavirus outbreak, the city’s security chief said. The BBC said that South Korea’s infections rose to 977, with 10 deaths. Americans have been warned against all but essential travel to the nation.
According to the BBC, a hotel in Tenerife in Spain’s Canary Islands has been locked down after a visiting Italian doctor tested positive for coronavirus. Hundreds of guests at the H10 Costa Adeje Palace Hotel were initially told to stay in their rooms as medical tests were carried out.
What can I do to prevent catching the virus?
- Wash your hands often with antibacterial soap
- Avoid close contact with people who are sick
- Avoid touching your eyes, mouth and nose with unwashed hands
- Cover your coughs and sneezes with a clean tissue and then immediately discard it
- Regularly clean and disinfect frequently touched surfaces
How can I prevent this effecting my day to day life?
For the time being, I would avoid purchasing any products which are manufactured / supplied within China. According to CNBC, Coronavirus prompts automakers to evacuate workers, weigh production delays at Chinese factories. This would result in slower production timescales along with lengthy delivery delays. Also – pointing out the obvious – avoid travelling to China, especially Wuhan. According to Financial Times, China’s leaders are bracing for a blow to first-quarter economic growth as the deadly coronavirus weighs on consumption, travel and manufacturing.
By Amy Leary, Marketing Manager at eBOM.com