Large numbers of companies have their essential supply chains in China, so many essential products from pharmaceuticals to electronics are now in short supply. Foxconn, the company that builds iPhones only re-started production yesterday and Apple’s iPhone production, which is heavily concentrated in China, could drop by 10 percent. China’s economic growth is plummeting due to the coronavirus crisis and it is forcing President Xi Jinping to warn top officials that efforts to contain the new coronavirus had gone too far, and are threatening the country’s economy.
Neil Shearing, chief economist at Capital Economics said: “Given that China is now at the heart of many global supply chains, this will have knock-on effects around the world.”
Chinese authorities have recently revealed a number of measures to calm market panic, such as injecting 1.2 trillion yuan (ÂŁ131billion) in the markets.
But signs of strain are everywhere, including in the Shanghai equity markets, closing down over 7.7 percent yesterday, the worst day since August 2015.
Though employees are trickling back to work, many companies have delayed restarting production in China and elsewhere. Consumers are avoiding shops and restaurants, and transports links remain disrupted.
Deutsche Bank forecasts that, due to the current coronavirus, Chinese growth will be 1.5 percent lower in the first quarter of 2020 compared to the same period in 2019, at 4.6 percent. Global growth is expected to be 0.5 percentage points slower.
This has seen investors rush for the door of the equity markets into gold, causing it to hit a high point of $1,589 (ÂŁ1226)
But oil prices have been decimated falling 12 percent in the month of January as China demand collapses amid fears of an economic slowdown, transport and airlines stop flights in and out of the country.
China is the world’s largest exporter of electrical and electronic components, five times the value of Germany, and accounts for 30 percent of exports globally, according to data from Unctad, the United Nations Conference on Trade and Development.
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Italian-American manufacturer Fiat Chrysler has warned it is struggling to source key parts from Chinese suppliers, and could be forced to halt production in a matter of weeks.
Carmaker Hyundai was forced to close its South Korean factories in the first week of February, while Volkswagen has postponed restarting production at its China plants until February 17.
Asian emerging economies are particularly exposed to the stoppages.
More than one-third of imports of manufactured goods into South Korea, Vietnam, Indonesia and the Philippines come from China.
