Coronavirus Has Hit China Where It Hurts Most: Supply Chains.

This post is a part of YKA’s dedicated coverage of the novel coronavirus outbreak and aims to present factual, reliable information. Read more.

Pandemics are a rare scenario.

Coronavirus, that likely originated from Wuhan, China, has killed more than 3000 people in China itself. Since the revelation of the first case in December, it has spread across 100 countries impacting business, relations and life as we know it.

The Chinese government had dealt with another family of Coronavirus, SARS, in 2002-03. SARS-CoV resulted in 774 deaths with a mortality rate of 9.6%.

In comparison, the mortality rate of COVID-19 is 3.4% and has still resulted in over 4000 deaths all over the world. Clearly, the new virus is less deadly than SARS but more contagious. This characteristic of the new virus makes it way more dangerous.

Life In A Lock Down

China had the monumental task of containing the virus. Initially, the government allegedly tried to suppress information regarding the outbreak.

Li Wenliang, a Chinese ophthalmologist, was reprimanded soon after warning his colleagues of the possible new virus. Later, he died from the same virus.

The officials tackled with the epidemic by quarantining the whole city of Wuhan. Millions of people were stranded in their homes. There was shortage of food, medicines and masks. In order to contain the virus, Chinese authorities regulated movement in the country.

Large number of factories had to be shutdown, trains were cancelled and local transport halted. Due to the restrictions, migrant workers were unable to return to work. Further, the factories haven’t worked to full potential since the lock down came into effect. This has hit supply chains badly.

Dependency On China’s Manufacturing Sector

China provides a robust manufacturing ecosystem and globally, companies are dependent on it. The worst American company to be affected by this, appears to be Apple. Apple is deeply dependent on China for manufacturing and supply chains.

Also, in terms of sales, Chinese market accounted for 18% of Apple’s revenue over the last decade. Due to the outbreak, the demand in China is continuously plummeting and everyday less and less units of iPhones are being produced.

The company’s efforts to establish manufacturing units in Brazil has failed. There are some operations in India but remain very small. Knowing that Apple is among the largest companies and its dependency on China for production, there will be an effect on Apple’s revenue and to the world economy.

A large share of global supply of antibiotics also depend on China. For instance, India exports around 70% of active pharmaceutical ingredients (APIs) from China. APIs are key ingredients in making medicines. Pharmaceutical units in Himachal Pradesh have warned of suspension of production owing to unavailability of raw materials, as imports have stopped. It puts the Indian government in a tough situation as cases of COVID-2019 has begun escalating.

Regaining Trust

The travel industry will be an evident sufferer as long as the world does not recover from the outbreak. Tens and thousands of flights have been cancelled. The worst to be affected is China.

The number of daily departures and arrivals have declined from 15,072 to 2,004 between January 23 and February 13, according to Flightradar24. Chinese travelers constitute around fifth of the world’s total spending, as per UN’s World Tourism Organisation. The continuous travel bans by other countries will only hurt this industry more.

Overall, any sector or a company dependent on China will be affected. As the virus spreads to other countries the impact will be greater. World leaders need to brace for it and work towards building trust in their governance and the market.

The world leaders have a responsibility to safeguard the market from any uncertainties and maintain viable environment of business. As it is, global leaders are notoriously famous for controlling the information during such outbreaks.

However, the current administration must understand that only awareness and flow of accurate information is the key in maintaining peace among people.

Featured image for representative purpose only.
Featured image source: Steve Jurvetson/Wikimedia Commons.
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