Coronavirus or COVID-19 has posed tremendous threat to universal business and particularly on the end-to-end global supply chain. The supply chain disruption beyond the planned Chinese Lunar New Year shutdown caused a rapid chain reaction throughout the world. Equally important, escalating pressure to reduce supply chain costs motivated companies to pursue strategies such as lean manufacturing, offshoring and outsourcing. Such cost-cutting measures mean that when there is a supply-chain disruption, manufacturing will stop quickly because of a lack of parts.
The vast majority of global companies are concerned about Asia because few, if any, have complete knowledge of the locations of all the companies that provide parts to their direct suppliers. China accounts for nearly 60-90% of the exports and 50% of tourism revenues of countries in Asia—Cambodia, Laos, Myanmar, Philippines and Vietnam and so on, leaving them particularly vulnerable to an economic slowdown.
While Japan, world’s third largest economy, might observe a fragile economy by the reduced supply of critical manufacturing parts from China. Germany could potentially have near-zero growth situation in 2020, with falling vehicle sales causing more heartburn for the German automotive industry.
India, the world’s fifth largest economy and a major importer of electronics goods from China, stands to be affected by the higher prices of Chinese electronic components caused by supply shortages. As for the world’s largest economy, the U.S. is likely to see a significant drop in retail imports in 2020 compared to 2019.
Africa, a region with deep ties to China, could overwhelm the weak healthcare infrastructure in the region, depress both commodity prices and export revenues due to the closure of Chinese ports, and diminish overall growth prospects. The coronavirus outbreak is not just a massive health crisis; it’s an economic one as well therefore, businesses across the world are faltering as China, one of the nerve centers of the global economy, struggles to cope with the pandemic.
The writer is an Editor of the English Section at Narayanganj Bulletin and a Post-Grad Student at Jahangirnagar University