Apple is adjusting its supply chain; IKEA suspends operations in Hua stores; Starbucks warns of financial damage; Ford and Toyota stop working on their huge Chinese assembly plants for an additional week.
On Wednesday, British Airways and Air Canada suspended flights to mainland China, with more and more airlines reducing flights to and from China. As Japan prepares for possible shocks, the Fed is “closely watching” changes in the situation. As the world’s largest source of tourism revenue tightens borders, hotels and travel agencies across Asia are watching with anxiety.
The new coronavirus has almost shut down one of the most important growth engines in the world. The Chinese government has done everything possible to delay the spread of the virus. To this end, it extended the national holiday to February 2 and imposed restrictions on road, rail and air transportation.
China was a poor country 40 years ago, and today it is a key part of contemporary global industrial machinery. China alone accounts for about 1/6 of the global economic output and is the world’s largest manufacturing power.
China’s importance goes beyond the scope of its products. Chinese consumers buy more cars and smartphones than any other country. According to data from the World Tourism Organization, Chinese outbound tourists spend $ 258 billion annually, almost twice as much as American tourists.
China has also become so important to U.S. companies that some members of the Trump administration use dependence on China as a reason to start a trade war two years ago.
In fact, before the start of the trade war, multinational companies were reconsidering their China strategy. China’s labor costs are rising, and local companies are becoming increasingly competitive. Nevertheless, China has a large number of skilled workers, a large road and rail network, and a vast consumer market, and it is not easy to exit China.
As a major transportation hub in the country, Wuhan is particularly attractive to large companies. GM, Honda and Nissan have set up factories here, and many of their suppliers have followed suit. More than a third of France’s total investment in China is in Wuhan.
Companies in other countries are also assessing impact. “If this situation takes longer to calm down, we are concerned about the damage to Japan’s exports, output and corporate profits.” Chinese tourists account for about 30% of Japanese foreign tourists. Chinese companies are major buyers of Japanese-made components such as semiconductors and lenses.