The beginning of the 2000s saw the outbreak of SARS (Severe Acute Respiratory Syndrome) in China infecting more than 8,000 people and claiming 774 lives. Now the 20s have commenced with the emergence of a far more deadly virus. Coronavirus has already infected more than 34,400 people across 28 countries, claiming the lives of 724.
The human cost of coronavirus is sparking panic but the economic cost is also increasing at an alarming rate. China has become an indispensable part of global business since the 2003 SARS outbreak. Globalization has interconnected industries worldwide and integrated the economies. China’s economy accounted for roughly 4% of world GDP in 2003; it now makes up for 16% of global output.
Strict restrictions have been imposed on moving out of Wuhan, the epicentre of the virus outbreak. Therefore, severely affecting business travels and mobilisation of human resources and goods. Global companies are more reluctant in buying from China. The entertainment industry has received a fatal blow especially it being the Lunar New Year. Not only has the consumer aspect of these industries have faced major commercial losses but due to the extension of the holidays by the Chinese Authorities production is still at hold in majority of the factories especially car plants. Hyundai has closed down its factories in South Korea due to shortage of auto parts.
It has also disrupted the integrated global supply chain. Overseas flights to China have been stopped with international hotel chains offering refunds.
Leading International retailers like IKEA and Starbucks have closed down their operations there. Australia could become the worst affected country given majority of its revenue depends on tourists and students from China. China provides around 15-16% of visitors to Australia but they are the biggest contributors to the Australian bottom line when they are here, outspending American tourists by a ratio of three to one. Their spending of $12-16bn is greater than American, British, Japanese and New Zealand tourists put together.
India’s exports and imports will be hugely affected by this. China is the country’s biggest trading partner, accounting for the largest share (14%) of Indian imports in financial year 2019. It is also the third largest market for domestic goods accounting for 5% of India’s exports last financial year.
It is still too early to quantify the possible economic impact. It highly depends on the Chinese Authorities’ ability to contain the virus.The world’s second largest economy has been predicted to show a fall in growth rate from 5.75% to 5% this year as stated by S&P. This will be the case if the virus is contained and the “worst case scenario” is prevented.