China is one of the fastest growing economies in the world. China accounts for 1/6th of the global economy having GDP growth of 6.9% annually. Not only just GDP, China is biggest market for manufacturing cars, semiconductors, PCs, Iphone etc and Chinese spend great on international tourism, and is the biggest exporter of clothing and textile. Not just manufacturing China has a role to play in global supply chain, distribution and production of goods.
Wuhan is the largest city in Hubei and the most populous city in Central China, with a population of over 11 million, the ninth most populous Chinese city, and one of the nine National Central Cities of China. Wuhan today is considered the political, economic, financial, commercial, cultural and educational. During the New Years Eve Corona Virus first case was recorded in Wuhan capital of Hubei province. The Virus has taken 636 lives as of now and around 9000 people are expected to be infected by it and this number is increasing on a daily basis.
Since New Year eve factories have been shut, people were advised to stay at home, that means very less people are working and contributing towards economy. Cash flow has been hit the most. Demands for commodities have reduced, due to which travel and purchasing has been reduced and economy of china is on a standstill and so it’s affecting the global economy as well.
The virus is not the driving factor behind those losses, however. Instead, it’s the way consumers, businesses and governments respond to an outbreak that matters most. People are more likely to stay home during an outbreak to avoid getting sick, preventing them from travelling, shopping and working. Doing so limits demand for consumer goods and energy. Decisions by companies and governments to close shops and idle factories, meanwhile, curtail production.
If it continues it will automatically result in a severe pandemic that would resemble a global war in its sudden, profound, and widespread impact. However Chinese government has started taking measures to lower down these possibilities such as The People’s Bank of China cut a key interest rate this week and injected huge amounts of cash into markets in order to help take the pressure off banks and borrowers. Officials have also announced new tax breaks and subsidies designed to help consumers. It has much higher debt, trade tensions with a major trading partner and its growth has been steadily slowing down for a number of years, which gives a weak starting point to face such a crisis.
If the situation continues economies of countries like Hong Kong, South Korea, Japan, Germany, USA, UK will be affected. Possibly Japan and Germany would have a loss of 0.2% of GDP whereas for USA and UK it would be 0.1% which won’t have a major effect.
The situation has not just hit manufacturing and automobile industry but other industries like entertainment has been affected equally like for more than a week, Disney’s theme parks in Shanghai and Hong Kong have been shut. The closures are expected to reduce the company’s operating income by $175 million. In technology Apple has a large sales presence in China and assembles most of its products there. Mr. Cook said that some Apple suppliers would remain closed and that traffic into its stores in the country had fallen off. Hyundai, the world’s fifth-largest automaker, said it would temporarily stop production lines at its factories in South Korea because of shortages of Chinese parts.
Many corporate have advised their employees not to visit china and so travelling industry has also been hit the most and a series of airlines have cancelled their flights to china not just because of the virus but because they don’t have enough passengers to visit china. One thing is sure that the situation is going to affect the first quarter of economy of china as well as of the world as a whole.
Bajaj.Tech 