The Economic Cost of Coronavirus is Rising Across China and Beyond
Mon, April 19, 2021

The Economic Cost of Coronavirus is Rising Across China and Beyond

Just as the global death toll for coronavirus passes 1,000, the economic cost of the virus is also rising across China and beyond / Photo by: CDC via Wikimedia Commons

 

Just as the global death toll for coronavirus passes 1,000, the economic cost of the virus is also rising across China and beyond. For the most part, the damage to the economy is not due to the Wuhan virus itself but the efforts invested to prevent it from spreading, reports BBC.

The Ripple Economic Effect of Coronavirus

At the time of publication, the Wuhan virus has spread from China to almost 30 countries, including Australia, Belgium, Cambodia, Canada, Finland, France, Germany, India, Italy, Japan, Malaysia, Nepal, Philippines, Russia, Singapore, South Korea, Spain, Sri Lanka, Sweden, Taiwan, Thailand, United Arab Emirates, United Kingdom, United States, and Vietnam. Considering the huge role that China plays in the global economy, it creates a ripple economic effect on the other countries as well and such an effect could be lasting.

There are now strict restrictions in moving out of Wuhan, where the virus outbreak started and which is a city comprising 11 million people. Fear of the coronavirus moreover means that people would intentionally avoid activities that may increase their risk of infection. This means that shops, hotels, transport providers, cinemas, and restaurants are already feeling the impact and this does not just happen in China alone. The Chinese authorities have also extended their Chinese New Year holiday, delaying employees from returning to work. This also means that businesses are affected. A delay in selling goods and production means cash-flow problems, particularly those in smaller operations. Yet, firms will have to continue paying their bills, including giving salaries to their employees.

Some manufacturers particularly sell their goods internationally. They too are affected as there could be issues with buyers, who have become more reluctant to purchase goods manufactured in China. Hair-straightener and blow-dryer manufacturer Wing Sang Electrical’s owner Herbert Wun said that the epidemic will also add pressure to consumers who are trying to change the supply chain.

There are now strict restrictions in moving out of Wuhan, where the virus outbreak started and which is a city comprising 11 million people / Photo by: Huangdan2060 via Wikimedia Commons

 

Impact Beyond China

The economic impact also affects other nations as international retailers have to cease their operations in China. Coffee company Starbucks and furniture retail company Ikea are among the companies that have shut down their stores in mainland China. Starbucks executives said that because of a “very complex situation,” they have to temporarily close over 2,000 stores in China. Its CEO said that their main priority, for now, is caring for the well-being and health of their partners and customers in their stores. They also want to play a “constructive role” in supporting the government leaders and health officials in China as they are still working their way to contain the coronavirus. Nevertheless, China is a fast-growing market for the coffee company.

Other companies that have also closed some of their retail stores in the country are KFC, McDonald, and Apple. Ikea has also released a statement that they have temporarily closed their 30 stores across China. Their stores are popular places for shoppers to hang out and nap on furniture, sofa, and bed displays. It is a shopping habit that is believed to be counterproductive to the country’s move of containing the virus. Also, people have started to avoid crowded places.

Population With Improved Sanitation Facilities

China’s share of the population with improved sanitation facilities increased from 47.50% in 1990 to 76.50% in 2015. Improved sanitation facilities include flush and pour-flush, ventilated improved pit (VIP) latrines, composting toilets, and pit latrines with slabs, according to Our World in Data, a scientific online publication that focuses on large global problems.

China’s Stock Market Downhill

In a separate report by Bloomberg, it shared that thousands of shares in China's stock market are falling in its daily limit even after just minutes of stock trading. Although investors are now using computers in making sell orders, there are still many of them that could not exit the stock market. Almost 4,000 stocks in Shenzhen and Shanghai reported losses too.

Database company Statista shared that in 2018, the yearend volume of China’s stock market amounted to approximately 8.2 trillion shares. This includes the data from the Shenzhen Stock Exchange and Shanghai Stock Exchange. These two stock exchanges from China are among the major stock exchanges in the world.  

In a separate report by Bloomberg, it shared that thousands of shares in China's stock market are falling in its daily limit even after just minutes of stock trading / Photo by: Heurik via Wikimedia Commons

 

Major Stock Exchanges by Market Capitalization

The major stock exchanges by market capitalization are New York Stock Exchange (NYSE) (24,220 billion), NASDAQ (11,860), Japan Exchange Group (6,288), Shanghai Stock Exchange (5,023), Euronext (4,649), London Stock Exchange Group (4,596), Hong Kong Stock Exchange (4,443), Shenzhen Stock Exchange (3,547), Deutsche Börse (2,339), and Bombay Stock Exchange (2,298). This data is based on the World Federation of Exchanges.

The world stock market cap by country is as follows: United States (40.01%), Japan (7.59%), China (7.51%), Hong Kong (6.51%), United Kingdom (4.49%), France (3.23%), Germany (2.91%), India (2.83%), Canada (2.81%), and Switzerland (2.03%).

Guangzhou-based investment company Snowball Wealth said that the sell-off of shares was “so quick and intense” and they expect to be busy dealing with liquidation pressure and risk controls if the stocks will continue to fall. Meanwhile, healthcare shares have gained the belief that investors will benefit from the Wuhan virus outbreak.

In the last 40 years, China has experienced an economic surge that is incomparable to other countries. It has grown to be the second biggest GDP in the world by GDP after the United States. The World Bank has reported on China's GDP for the past few years: 2000 (1.211 trillion), 2002 (1.471 trillion), 2004 (1.955 trillion), 2006 (2.752 trillion), 2008 (4.594 trillion), 2010 (6.087 trillion), 2012 (8.532 trillion), 2014 (10.439 trillion), 2016 (11.138 trillion), and 2018 (13.608 trillion). After China, it is followed, by Japan, Germany, United Kingdom, France, India, Italy, Brazil, and Canada.

China reached such a position by replacing the US as the center of global trade. The Guardian, for instance, explained how Beijing became the largest trader of merchandise worldwide and is catching up with the United States when it comes to commercial services. The domestic market of China in the past few years has also encouraged thousands of foreign investors and businesses to open their factories in China or take part in the local distribution networks. China also plays an important part in global supply china, such as manufacturing raw materials.

Some economists shared a gloomy analysis of China’s economic situation and how it could affect the world. The travel and tourism industries are most affected as they no longer enjoy the boom even in the holiday period. Electronic, automotive, and industrial industries are also affected. This means that economic contraction is not impossible globally.