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Coronavirus outbreak may put China's GDP, global economy in dire straits

Coronavirus outbreak:  The Chinese economy, which was recently facing the brunt of trade war with the US, grew only 6.1% in 2019, dropping from 6.8% in 2018 and 7% in 2017

Mansi Jaswal        Last Updated: February 13, 2020  | 15:26 IST
Coronavirus outbreak may put China's GDP, global economy in dire straits
Coronavirus outbreak: China's growth slowed at the end of 2019, when the virus outbreak occurred and it is going to slow further unless there is a concrete solution to the epidemic

Coronavirus outbreak in China has not only jeopardised human lives in the country but has also become a cause of concern for the country's economy and global growth.

The Chinese government is yet to find a cure for the deadly virus that has claimed over one thousand lives since its outbreak in December, 2019. The World Health Organisation has announced a global emergency as the virus officially known as COVID-19 is feared to have spread in over 40 countries.

China, the world's second largest economy after US, contributes about 20 per cent to the world's gross domestic product (GDP).  However, according to a report by Dun and Bradstreet, the Chinese economy might cause a drag of approximately one percentage point on global GDP if prevention of Coronavirus gets delayed beyond the summer of 2020.

Also read: Passenger onboard SpiceJet flight from Bangkok to Delhi suspected of coronavirus, quarantined

In an effort to contain the epidemic, the authorities have suspended business activities across 19 provinces of China including Hubei which has reported over 100 cases of Coronavirus infection.

The report  by Dun and Bradstreet states that over 22 million businesses that constitute 90 per cent of all active businesses in China were located in the impacted region.  

The report further adds that at least 51,000 companies around the world have one or more direct as well as Tier 1 suppliers in the impacted region, and about 50 lakh firms have Tier 2 suppliers in areas most affected by the virus outbreak.  

Considered an integral part of the global economy, these firms might see an inevitable supply deficit in the near future because of the extended shutdown.

Also read: Coronavirus epidemic an opportunity for India to boost exports: CEA Krishnamurthy Subramanian

The Chinese economy, which was recently facing the brunt of trade war with the US, grew only 6.1 per cent in 2019, dropping from 6.8 per cent in 2018 and 7 per cent in 2017. However, the Hubei province, with its wealth and international trade connections grew faster than China at 7.5 per cent in 2019. Hubei's primary, secondary and tertiary industries grew at 3.2 per cent, 8 percent and 7.8 per cent, respectively, in the same financial year.

Growth slowed at the end of 2019, when the virus outbreak occurred and it is going to slow further unless there is a concrete solution to the epidemic. The primary industries like fisheries, mining and agriculture are expected to shrink further throughout the course of the outbreak and is expected to be limited to food production only. Secondary industries on the other hand are also expected to face a slowdown due to reduced demands of retail and wholesale goods. However, tertiary industries are expected to run depending on a few subsectors based on demands.

Consumer demand is expected to become concentrated on emergency medical services, medical supplies, and food deliveries as the outbreak continues to spread.

On February 11, the Government of India issued a notification that allowed the export of surgical and disposable masks and gloves to China. Dun and Bradstreet India's chief economist Dr Arun Singh has praised India's effort to help China amid the epidemic. Singh said, "India can help countries like Kenya and Nigeria which are highly dependent on Chinese import. China's share of export to Kenya and Nigeria is 48 per cent and 41 per cent, respectively".  

From continental perspective, India can support Thailand, Vietnam, Mexico, to some extend Poland, in terms of supplies of medical devices. Japan was importing six per cent medical devices from China and two per cent from India, Singh added.

India is among the top 20 global medical devices markets and is the fourth largest medical devices market in Asia after Japan, China, and South Korea.

Citing Revealed Comparative Advantage (RCA), Singh said, India earlier had RCA advantage in just two of 32 sub-categories of medical devices. However, in the recent times, India has shown some improvements in 8-9 categories of medical devices.  RCA is an index which is used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services.

So far, India has sent around 11 lakh masks and protective clothing to China amid Coronavirus outbreak.

Also read: Coronavirus scare in India: Huge capacity to manufacture masks, gloves, but govt yet to place orders

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