The Contribution of China
The contribution of China to the world's economy is almost as large as the entire European Union. This has made it be the world’s second-largest economy, which worth approximately $14.55 trillion in 2019.
China is the largest manufacturer and the most important importer of crude oil in the world. In the aspect of international tourism, Chinese travellers had spent $277 billion in 2018. Moreover, its 1.3 billion population is the world's largest market for different kinds of consumer goods.
China is also a significant trading partner for many countries as it exports goods to the U.S., Japan, and India while buying from the E.U. and Brazil. Before COVID-19 was first reported to the World Health Organization in December 2019, China already faced economic pressure (shown by its low official GDP growth in 2019) due to the trade war and slow demand at home.
The Impact of COVID-19 On Global Economy As Compared To SARS
COVID-19 has been spread to more than 20 countries across the world. Malaysia alone has 15 confirmed cases as of 7th February 2020. More than 600 people were killed. Approximately 31,000 in China had been infected.
This outbreak has made the public think of Severe Acute Respiratory Syndrome (SARS), which recorded 800 death cases across the world. The economic impact of SARS was felt principally in China. It is estimated that the SARS crisis reduced China's gross domestic product (GDP) by 1.1%.
According to the experts, the outbreak of COVID-19 will strike the global economy harder than SARS did because the incomes of many Chinese have increased and so as their expenditure on travel and consumption of luxury goods. Recently, the financial markets are volatile, as many traders struggle to value the risk of the outbreak. Investors have converted their money to more stable currencies such as the U.S. dollar and the Japanese yen. The prices of some commodities have fallen sharply over concerns that the virus will lead to lower demand from China.
The Changes In Global Economic Growth:
Now, the economy of China is slowing down because its government struggles to control the spread of the COVID-19. The Chinese authorities have imposed a temporary ban on outbound group travel. According to the chief economist at SMBC Nikko Securities, this implementation would cause global economic growth to decline by 0.1 percentage points.
(A) Tourism Industry
Airlines around the world are cancelling flights to and from China. Countries like Malaysia, Singapore, and the Philippines have discontinued accepting visitors from the Hubei province of China. Russia and Mongolia also have closed their borders with China. Thailand, which is famous among Chinese tourists, is expected to have two million fewer Chinese visitors over the coming months.
(B) Manufacturing
The outbreak may prompt many multinational companies to reduce their production footprints in China. Several automakers such as General Motors and Honda which manufacture vehicles in Wuhan stated that they are deciding to determine when to resume its operation. Apple and Facebook are also limiting employee travel.
(C) Food and Beverage Industry
Moreover, KFC and Pizza Hut have shut down thousands of branches. Starbucks has stopped the operation of about half of its 4,100 outlets in the mainland. On the other hand, McDonald’s has momentarily closed its stores in Hubei province.
(D) Amusement Park
Disneyland theme parks in Shanghai and Hong Kong have been closed.
