Tensions continue to intensify as the coronavirus spreads, with more than 64,000 cases reported globally. As days then weeks passed, the number of cases of infected individuals and death toll rose tremendously, with health experts eventually concluding that this virus could cause a global health crisis. Due to the airborne effects of the virus, the majority of those in the infected area are at risk of catching it, leading to a delay in the reopening of Chinese factories on top of shortages in Chinese materials and supplies. 

The rippling effect of China’s industrial shutdown has created a delay in many manufacturing businesses and companies, such as Nissan and Hyundai, that depend on Chinese components. As reported by The Washington Post, companies in non-Asian countries, like Fiat Chrysler from Europe, “warned that [the Chinese economy] may shutter one of its European plants” and “some U.S. manufacturers could face parts shortages in one to two weeks.”

Dealing a blow to the Chinese economy, the virus has disrupted “the movement of goods and the movement of people, making companies reassess how international they want their supply chain to be,” commented Mohammed El-Erian, the chief economic adviser at Allianz, a German financial services company.

The U.S. expects the shutdowns of Chinese factories that supply the U.S. with goods and products will damage both global and U.S. growth outlooks. Federal Reserve Board Chair Jerome H. Powell said that there will “very likely be some effects on the United States” from the epidemic, which has closed thousands of Chinese factories that supply American companies, according to The Washington Post. 

After China’s lockdown, larger companies have been able to restart operations, but smaller businesses have struggled to comply with the strict health rules established by most provinces in China. Smaller companies didn’t have the option for workers to finish tasks at home like some bigger companies. 

“The coronavirus could be the straw that breaks the camel’s back,” wrote Zhao Jian, the director of the Shandong province-based Atlantis Research Institute, in a research letter. He is concerned that the virus could cause increased unemployment rates and bankruptcies, thus causing China, the second-largest economy, to experience economic woe.

“This virus is a negative lottery and everyone is doing whatever they can not to win. So, the fear that is gripping the world, the overabundance of caution at a personal, company and sovereign government levels are completely understandable. The impacts to our business are totally unpredictable,” mentioned Ken Hsiang, the head of investor relations at ASE Technology. 

As many Chinese businesses struggle to avoid tumbling into bankruptcy or unsettling global trade, they acknowledge that the Wuhan outbreak is indeed inching the country toward an economic collapse. As Chinese companies fight to prevent shutdowns and job losses, the coronavirus outbreak has snowballed into a major crisis for the world’s second-largest economy.

Photo courtesy of PBS.ORG