The new coronavirus is hurting the world's economy.
A couple wears masks to protect against an outbreak of a coronavirus as they ride on a carnival on Valentine’s Day in Hong Kong, China February 14, 2020. REUTERS/Tyrone Siu
First reported in Wuhan, China, the new coronavirus has so far infected over 60,000 people, claiming the lives of over 1,500. And the outbreak has not shown any signs of slowing down yet.
The ongoing coronavirus crisis in China reminded the world of other times when outbreak after outbreak would bring business and trade to a standstill.
During the Middle Ages and the Renaissance, plague pandemics often led to the quarantine of entire territories, the long-term berthing of merchant ships, and even the disbanding of theatrical troops.
And, since mid-January 2020, we are once again witnessing modern-day equivalents of such events, with adverse effects on global markets and supply chains across Asia.
Supply chains breaking down
The coronavirus epidemic has disrupted the supply chain of international companies across East Asia, not only in mainland China but also in Hong Kong, Taiwan, Vietnam, and Malaysia.
Many international manufacturers tend to outsource major parts of their operations to Asia and heavily relying on parts coming from the continent.
The Korean automaker, Hyundai, was forced to temporarily shut down some of its assembly lines due to shortage of components built in China. The total loss incurred by the company is still a matter of conjecture as no one knows when the outbreak will slow down.
The electronics industry relies even more heavily on precision parts and circuit boards manufactured in China. Foxconn, a Taiwanese manufacturer of electronic chips which contributes components to Apple’s iPhone, recently surprised the world by allocating some of its capacity to the production of surgical masks—a commodity which is in extremely short supply in Asia these days.
The company’s spokeswoman has confirmed the news, adding that by the end of February the company will raise its output to 2 million medical masks per day.
Though no direct impact on the production of smartphones has been reported so far, some disruption in the supply chain is bound to happen unless the company’s Shenzhen factory soon goes into a compensatory overdrive.
Events called off
Tradeshows, too, have been hit amid coronavirus fears, including a number of high-profile business exhibitions which were canceled in February.
The Mobile World Congress (MWC 2020) in Barcelona, known as the mobile industry’s flagship tradeshow, was cancelled ten days prior to its grand opening.
The cancellation has predictably disappointed a large number of enthusiasts who were about to head to Barcelona, but the real damage can be much bigger.
Major industry players such as HDM Global (Nokia), Xiaomi, Motorola, LG, Sony, and Amazon, among some 1,200 other companies, were planning to participate in the event—all with plans to use the MWC 2020 as an occasion to introduce new products.
With MWC 2020 being called off, many scheduled launches may be delayed, causing considerable loss, to say nothing of the fact that the mobile industry has also lost a once-in-a-year opportunity to showcase its capabilities.
Airports and international flights are ideal places for catching a virus even at the best of times. As such, it was hardly surprising that airlines started to cancel their flights in the wake of the coronavirus epidemic.
What is more, China is imposing travel restrictions on its citizens to control the outbreak, decreasing the number of outbound Chinese tourists who previously formed a large percentage of travelers in Singapore, Thailand, and Vietnam.
Some international airlines are suspending their scheduled flights to China for shockingly long periods. United Airlines, for example, has canceled its services to Beijing, Shanghai, and Hong Kong until 24 April.
International flights to and from China accounted for 5.2% of global aviation activities before the virus crisis, but up to two-thirds of flights are now canceled.
It is already certain that the new coronavirus is going to be a heavier blow for the world economy than the SARS pandemic of 2003, which set back the global economy by over USD40 billion. However, this may be regarded as a wake-up call for us, drawing our attention to an absence of robustness in many supply chains.