When a strict policy response is deemed necessary, companies will inevitably suffer, with short-term effects and less-expected long-term consequences.
- Travel restrictions and quarantines affecting hundreds of millions of people have left Chinese factories without labor and parts, disrupting just-in-time supply chains and triggering sales warnings in the tech, automotive, goods industries. consumer, pharmaceutical and others.
- Commodity prices have declined in response to a drop in China’s consumption of raw materials, and producers are considering cutting production.
- Mobility and job disruptions have led to sharp declines in Chinese consumption, squeezing multinational companies in various sectors, including aviation, overseas education, infrastructure, tourism, entertainment, hospitality, electronics, consumer goods and luxury.
Overall, China’s GDP growth may slow by 0.5 percentage point this year, reducing at least 0.1 percentage point of global GDP growth. This will affect developed and emerging markets with high dependencies on China, whether in the form of trade, tourism or investment. Some of these countries exhibit pre-existing economic weaknesses, others (recognizing an overlap) have weak health systems and therefore less resistance to pandemics. Many Asian and African countries lack the surveillance, diagnostic and hospital capabilities to identify, isolate and treat patients during an outbreak. Weak systems anywhere are a health security risk everywhere, increasing the possibility of contagion and the resulting social and economic consequences.