Travellers were few at Shanghai’s vast Hongqiao Railway Station last Tuesday, the last day of the Spring Festival travel rush, reflecting the impact of the coronavirus outbreak.
Photo: aly song/ReutersHONG KONG—The last time a coronavirus outbreak hit China in 2003, the global economy emerged relatively unscathed. Now, nearly two decades later, the growth-damping effects of a similar pathogen threaten to ripple around a world transformed by China’s boom.
Chinese consumption and production power growth from Asia to North America, Europe and beyond. Manufacturers world-wide are tethered to China by the tentacles of a supply chain that relies on the country’s factories for many intermediate and finished goods.
China's Long Shadow
Two decades of economic integration has made regional economies deeply reliant on China.
China’s share by value in:
Global trade
Asia trade
41
34%
16
1.2%
2000
’18
2000
’18
Exports
38
28
22
20
19
17
11
10
7.2
6.1
6.3
6.6
4.4
2.1
2006
’19
’06
’19
’00
’18
’00
’19
’00
’18
’01
’19
’00
’18
SOUTH
KOREA
JAPAN
VIETNAM
INDONESIA
AUSTRALIA
BRAZIL
U.S.
28
26
25
23
22
22
20
14
15
12
9.8
8
8.2
8.7
’00
’19
’07
’19
’00
’18
’00
’18
’00
’18
’06
’19
2006
’19
Imports
China’s share by value in:
Global trade
Asia trade
41
34%
16
1.2%
2000
’18
2000
’18
Exports
38
28
22
20
19
17
11
10
7.2
6.1
6.3
6.6
4.4
2.1
2006
’19
’06
’19
’00
’18
’00
’19
’00
’18
’01
’19
’00
’18
SOUTH
KOREA
JAPAN
VIETNAM
INDONESIA
AUSTRALIA
BRAZIL
U.S.
28
26
25
23
22
22
20
14
15
12
9.8
8
8.2
8.7
’00
’19
’07
’19
’00
’18
’00
’18
’00
’18
’06
’19
2006
’19
Imports
China’s share by value in:
Global trade
Asia trade
41
34%
16
1.2%
2000
’18
2000
’18
Exports
38
28
22
20
19
17
11
10
7.2
6.1
6.3
6.6
4.4
2.1
2006
’19
’06
’19
’00
’18
’00
’19
’00
’18
’01
’19
’00
’18
SOUTH
KOREA
JAPAN
VIETNAM
INDONESIA
AUSTRALIA
BRAZIL
U.S.
28
26
25
23
22
22
20
14
15
12
9.8
8
8.2
8.7
’00
’19
’07
’19
’00
’18
’00
’18
’00
’18
’06
’19
2006
’19
Imports
China’s share by value in:
Global trade
Asia trade
41
34%
16
1.2%
2000
’18
2000
’18
Exports
Imports
AUSTRALIA
38
25
14
11
2006
’19
2006
’19
BRAZIL
28
20
8.7
6.1
2006
’19
2006
’19
JAPAN
23
20
15
6.3
2000
’18
2000
’18
SOUTH KOREA
22
22
10
8
2000
’19
2000
’19
VIETNAM
28
17
9.8
6.6
2000
’18
2000
’18
INDONESIA
26
19
12
4.4
2001
’19
2007
’19
U.S.
22
8.2
7.2
2.1
2000
’18
2000
’18
With fears of contagion keeping Chinese workers home, production is getting pinched. In the U.S., General Motors Co. unions have warned that a lack of China-made parts could slow assembly lines at sport-utility vehicle plants in Michigan and Texas; the company said it is working to mitigate the risk. Elsewhere, the story is the same—even in places that might seem remote.
Mostafiz Uddin, a bluejeans manufacturer in the southeastern Bangladeshi city of Chittagong, said he has been unable to fulfill an order for 100,000 women’s jeans because he can’t get the fabric he needs from China. “I am just waiting,” he said. “We have no option.”
A month after the epidemic forced factories into limbo past their usual Lunar New Year break—a handful are reopening—officials and economists are warning that an extended Chinese shutdown could cripple global manufacturing and cost the world up to $1 trillion in lost output.
“The current situation is more serious than we thought,” South Korean President Moon Jae-in said on Tuesday. “We need to take emergency steps in this time of emergency.”
Hyundai Motor Co., after shutting some of its Chinese factories this month, suspended one of its main assembly lines in Ulsan, a big South Korean city, because it couldn’t get parts from China. Asiana Airlines Inc., South Korea’s second-largest airline, put its 10,500 employees on staggered shifts of 10 days’ unpaid leave from Wednesday.
Major electronics producers that depend on Chinese parts also have suspended output because of the outbreak. Others are weighing relocation. Japan’s exports to China are expected to drop 7% this quarter from the prior one, NLI Research Institute economist Taro Saito said. Videogame giant Nintendo Co. said this month that some shipments of its flagship Switch gaming console are delayed as it can’t get parts from Chinese factories.
Piling onto two years of China-U.S. trade tensions, the impact of the new coronavirus, which has killed more than 2,000 people in China, could be severe. Countries most reliant on China could see more than half a percentage point wiped off their gross domestic product this year, some economists say.
China now accounts for nearly a third of world GDP growth, up from around 3% in 2000. Between 2000 and 2017, the world’s economic exposure to China tripled, according to estimates by the McKinsey Global Institute.
China Meets World
A rise in trade paved the way for a deluge of Chinese tourists and other spending world-wide.
China’s outbound tourism
in million trips
2018
150
2000
11
China-World Exposure Index*
Global exposure to China
2017
1.2
2000
0.4
China’s exposure to the world
2017
0.6
2000
0.8
That rising dependence weighs most heavily on Asia. In 2000, China accounted for just 1.2% of global trade, said the World Bank. Its share was one-third in 2018. In Asia, that measure went from 16% to 41% during the period.
The impact is felt everywhere. Apple Inc. said it won’t meet revenue projections for the first quarter as the epidemic shuts its China plants. In Europe, container-ship operators are preparing profit warnings as dozens of trips out of China are canceled.
A U.S. freeze on visitors from China is a blow to hotels and retailers that rely on their spending. Asian economies that have grown dependent on Chinese visitors and commerce are reeling. Singapore last week cut its annual GDP forecast to around 0.5%, down from 1.5%. Thailand estimates tourist arrivals could drop by 13% this year as Chinese are grounded.
In Vietnam, a small economy highly dependent on Chinese supply chains, exports in January fell 17.4% year-to-year to their second-lowest level since the U.S.-China trade war began, official data showed. Imports were down 13.7%, led by a 16% plunge in those from China.
The Latest on the Virus
- Outbreak in Italy leaves two dead and at least 130 people ill; 11 towns in northern Italy have been quarantined
- South Korea reported a jump in new cases, with most linked to a megachurch
- The death toll stands at more than 2,200
- In mainland China, more than 75,000 people have been confirmed infected
- Three Chinese provinces reported outbreaks at penitentiaries
From steel to furniture, Vietnam built much of its economy on importing semifinished material from China, then exporting the finished products to developed economies such as the U.S. Now, over 50% of manufacturers are experiencing difficulty sourcing supplies because of disruptions from the coronavirus, the American Chamber of Commerce in Vietnam said last week.
Australia, with an economy six times as large as Vietnam’s, is also feeling the effects. Two decades ago, China was a relatively peripheral trading partner, trailing the U.S., Japan and Korea as export destinations.
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But as Beijing massively invested in industry, China’s enormous hunger sucked up ever larger shipments of iron ore and coal from the continent. Last year, China accounted for nearly 40% of Australia’s exports.
Australia’s BHP Billiton Ltd., the world’s largest miner, said it expects to revise its expectations for commodity-demand growth downward if the epidemic isn’t contained by the end of March.
The downturn also has spilled over to ancillary industries. Sydney-based WiseTech Global Ltd., which provides cloud-based software to track products, downgraded its 2020 earnings forecast Wednesday, saying China’s shutdown had forced a delay of new product features it had hoped would lift revenue.
“This is a once-in-a-generation event,” said Chief Executive Richard White.
—Timothy W. Martin, Stuart Condie and Megumi Fujikawa contributed to this article.
Write to Chuin-Wei Yap at chuin-wei.yap@wsj.com and Jon Emont at jonathan.emont@wsj.com
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2020-02-23 17:22:00Z
https://www.wsj.com/articles/world-economy-shudders-as-coronavirus-threatens-global-supply-chains-11582474608
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