China has become an indispensable part of global business since the 2003 SARS outbreak. It’s grown into the world’s factory, churning out products such as the iPhone and driving demand for commodities like oil and copper. The country also boasts hundreds of millions of wealthy consumers who spend big on luxury products, tourism and cars. China’s economy accounted for roughly 4% of world GDP in 2003; it now makes up 16% of global output.
“The outbreak has the potential to cause severe economic and market dislocation. But the scale of the impact will ultimately be determined by how the virus spreads and evolves, which is almost impossible to predict, as well as how governments respond,” said Neil Shearing, group chief economist at Capital Economics.
The virus is snarling supply chains and disrupting companies. Economists say the current level of disruption is manageable. If the number of new coronavirus cases begins to slow, and China’s factories reopen soon, the result will be a fleeting hit to the Chinese economy in the first quarterand a dent in global growth. If the virus continues to spread, however, the economic damage will increase rapidly.
“They first paralyze the region of the virus outbreak,” he said. “Then they gradually spread domestically, undermining internal trade, consumption, production and the movement of people. If the virus is still not contained, the process spreads further, including regionally and internationally by disrupting trade, supply chains and travel.”
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