Stagnating manufacturing, a decreasing domestic consumption and disrupted international supply chains. It’s not just the Chinese economy that is suffering from the coronavirus.
As a result of the coronavirus outbreak, factories and industries have come to a stop in China, causing massive problems for companies sourcing operations. A longer production stop in China would mean interrupted supply chains all over the world, with international companies having to find new suppliers or shutting down production. China is often referred to as “the world’s factory”, being the world’s largest exporter. The big manufacturing country is a significant supplier to the rest of the world, in almost all industries. However, the chemicals, electronics, automotive, textile and garments industries are suffering the worst at this moment, already starting to look for suppliers in alternative regions.
Hyundai, the fifth largest carmaker in the world, had to close down all its car factories in South Korea due to running short of components made in China. Further, a warning that auto plants in Europe and the US is just a couple of weeks away from shutting down were made by a number of carmakers executives. Tesla, Ford and Nissan that has auto plants located in mainland China have already been forced to shut down production due to the outbreak. Nonetheless, the global auto industry is yet to see the full impact of the virus outbreak.
Furthermore, China accounts for the second biggest consumer market in the world. Global companies relying on sales in China needs to brace themselves for a major hit in lost sales. Big brands like Apple, Starbucks, Burberry and YUM have all announced a shutdown of several stores in the region, and Canada Goose have revised its expected sales growth rate for the fiscal year. Several small domestic businesses and shops have also closed down, affecting both the private economy of the ordinary Chinese citizen, and the country’s economy as a whole.
In summary, the coronavirus is affecting many parts of the global economy, with the hardest hit towards international supply chains. Largescale brands need to start evaluating suppliers in alternative regions, partly to avoid a production stop in the nearest future, but also to diversify risk for future international emergency situations. The domestic sales in China is also suffering from the outbreak, with several stores having to close down, losing a sizable portion of their sales.
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