An interconnected global economy is feeling the strain of China’s viral outbreak — and the potential $160 billion hit in lost growth that may be on the way.
In New Zealand, a bath furnishings seller told a customer that the German-designed shower head he ordered is unavailable — because the factory in Shanghai is closed.
Out in California executives of REC Group organized a supply chain war room to plan around an anticipated trucking shortage and port logjam in China.
In the Middle East, Saudi Arabia is rallying support for an emergency OPEC meetingon concern oil demand will falter.
Since China’s last health crisis, the SARS outbreak of 2003, its share of global economic output has quadrupled to about 17%. It’s now the biggest market for new cars and semiconductors, the largest spender on international tourism, the leading exporter of clothing and textiles, and the land where many PCs and virtually all iPhones are made.
The global hit from this new outbreak could be three to four times larger than the $40 billion blow from SARS, estimates Warwick McKibbin, a professor of economics at Australian National University.
Thus far, China has absorbed most of the economic shock from the coronavirus known as 2019-nCoV, which has killed more than 210 within its borders and infected over 9,950 globally. Wuhan, the city with 11 million residents where the virus came to light, remains closed off from the world.
Under a government-mandated extension of the Lunar New Year holiday, provinces generating at least two-thirds of economic output will be shuttered through next week, including Shanghai and key eastern manufacturing hubs.
All the while, the virus’s toll continues to rise — and with it the worry. China’s essential role in the global supply chain means business owners and executives around the world are being forced to contemplate what will happen in a prolonged crisis.
“Everyone is waiting to see how this evolves,” said Miguel Patricio, the chief executive officer of Kraft Heinz Co. The food giant has a couple thousand employees in China, including a small sales team in Wuhan. “The danger, of course, is that if this continues and people have to stay home, you start having problems in terms of distribution, production.”
Four months ago, Levi Strauss & Co. opened the doors to a flashy new flagship store in Wuhan, a booming manufacturing powerhouse that alternately gets called the Chicago or Detroit of China.
The location features three levels of premium collections and a massive tailor shop. At just over 7,500 square feet (697 square meters), the location is twice as big as any other Levi franchises in China. The mega-store was heralded by top executives as a symbol of a new era of growth for the brand in the country.
