The realities of the interconnected global trade have never been as stark as they are now. The debilitating impact of the coronavirus outbreak is being felt across the world since China is a major economic power now, exporting goods all over the world. The deadly virus has already claimed over 800 lives and infected over 37,000 people in China alone, eclipsing the death toll of the 2003 global outbreak of SARS (Severe Acute Respiratory Syndrome). China has now become an indispensable part of the global business with its economy accounting for nearly 16% of global output. Globalization has encouraged companies to build supply chains that cut across national borders, making economies much more interconnected. The coronavirus outbreak has the potential to cause severe economic and market dislocation, the signs of which are already visible. But, the actual scale of the devastating impact will ultimately be determined by how the virus spreads and evolves, which is almost impossible to predict, and how governments respond. If Chinese businesses cannot resume normal production levels soon, the global manufacturers who rely on China would have to source their supplies elsewhere. The virus is snarling supply chains and disrupting companies. Car plants across China have been ordered to remain closed, preventing global automakers from resuming operations in the world’s largest car market. The experts have warned that the spread of the virus will lead to a dent in global growth, disrupting trade, supply chains and travel.
According to a study by the World Bank, a severe pandemic could cause economic losses equal to nearly 5% of global GDP. It would resemble a global war in its sudden, profound, and widespread impact. Unfortunately, China is more vulnerable to a crisis now than it was 17 years ago when SARS broke out. It has much higher debt, trade tensions with a major trading partner and its growth has been steadily slowing down over years which gives a weak starting point to face such a crisis. If the virus keeps spreading, Beijing will have to abandon its long-running efforts to get its debt under control and pump money directly into the economy. Many of China’s usually teeming cities have almost become ghost towns during the past two weeks, as the Communist regime ordered virtual lockdowns, cancelled flights, closed factories and kept schools shut. The coronavirus may have infected at least 1 in 20 people in Wuhan, the epicenter of the global outbreak with 11 million population, by the time it peaks in coming weeks. There is anger across China over Beijing’s approach after the death of a Wuhan doctor who was silenced by the authorities when he raised alarm over threat of emerging virus like SARS in December.