The outbreak of coronavirus in Wuhan, China, has taken toll not just on China but the world.
Multinational companies are greatly burdened by the abrupt economic disruption caused by the outbreak, which has led to the economic isolation of China.
The virus, which has infected more than 17,000 people, disrupted worldwide trade and chains, as well as asset prices, and forced multinational businesses to go back to the drawing board to take quick and uncertain business decisions.
Governments of several nations across the world are not left out in enacting and enforcing new measures, especially the restriction placed on visitors from China. The United States, Europe and other Asian countries are taking the lead in enforcing new regulations to restrict visitors from China, while major airlines have already suspended flights to their countries; several companies are also pulling out their expatriate executives from China.
United States President Donald Trump, while speaking to Fox television in an interview, said that the U.S. had taken decisive action to protect Americans from the threat of a fast-moving coronavirus, while offering help to China.
His words, “We’re gonna see what happens, but we did shut it down, yes. We can’t have thousands of people coming in who may have this problem – the coronavirus.”
Trump added that U.S. officials had offered China “tremendous help” in dealing with the epidemic.
Multinational companies across different sectors are also registering their concerns while counting losses to the epidemic.
Apple Inc. said it would close all its stores and corporate offices in China briefly. The company, with 10,000 staff in China, is contemplating shutting down its factories there.
United Airlines said that it would bring forward its temporary suspension of U.S.-bound flights from mainland China by one day. The airline, which is the last of U.S. still operating China flights, said that it had planned its last flight from China because of the coronavirus outbreak.
Delta Airlines, in the same vein, suspended flights, while American Airlines ended its flights from mainland China. United said it still planned to resume flights to and from China on March 28.
Wolfe Research analyst, Hunter Keay, estimated that United could lose $629m in revenue this year if the impact of the outbreak lasts persists. He said United was the most exposed to the scourge, partly because it made so much corporate travel to China, “which is likely to stay on lockdown for some time.” The analyst further stated that American Airline, Delta Airline and Air Canada would lose between $244m. United shares also plunged to 3.8 per cent at the capital market, while American dropped 3.2 per cent and Delta lost 2.4 per cent.
Levi Strauss & Co., in October last year opened its biggest China store in Wuhan, the centre of the outbreak. It closed thousands of outlets across the country, including McDonald’s Corp. and Starbucks Inc., in part to comply with a government directive for people to stay off the streets.
The epidemic is unsettling global oil market, as crude oil plunged to 16 per cent in price due to dwindling demands for oil since China identified the coronavirus.
This situation has pushed Saudi Arabia, a major stakeholder in the Organisation of the Petroleum Exporting Countries (OPEC), to compel other members of the organisation to convene for an emergency meeting, OPEC officials said.
Wuhan, China, where the virus emerged, is one of the country’s oil and gas hubs where two big Saudi customers – China National Chemical Corp. and Hengli Petrochemical, with refinery capacity of almost one million barrels a day – are reducing their purchases, according to an oil trader and a Persian Gulf oil official.
Beijing-based energy consultancy, JLC Network Technology Co., reported a 15 per cent drop in refinery use in the last one week.
The global economic impact of coronavirus cannot be underestimated; the outbreak is responsible for the 3.7 per cent fall in the Dow Jones industrial average since it hit a record on January 17, wiping out this year’s gains.
Economists recently made quick and positive predictions on Chinese economic growth this year, believing that the economic trade war between Washington and Beijing had ceased. The narrative is beginning to change, as Chinese industrial activity and consumer spending appear to be slowing down.
Ten economists interviewed by The Wall Street Journal lowered their expectations for first-quarter Chinese growth by over a percentage point to a median 4.9 per cent. Those forecasts were made hours before the U.S. airline announcements. A likely fall in arrivals to the U.S. by Chinese – the globe’s biggest-spending travellers – is one factor that could dent first-quarter U.S. growth, economists said.
On a global scale, Chinese oil demand has dropped by about three million barrels a day, or 20 per cent of total consumption, as the coronavirus squeezes the economy.
The drop is probably the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009. It could force OPEC and its allies to cut production and stunt the decline in prices, which are headed for the lowest close in four months.