The United Nations estimates China’s exports of vital parts and components for products ranging from automobiles to mobile phones shrank by an annualised 2 percent in February because of the coronavirus outbreak.
China’s reduced exports cost other countries and their industries $50bn, a UN agency said on Wednesday. The world’s second-largest economy accounts for a fifth of global trade in intermediate products. Many countries rely on its manufacturing inputs, the UN said.
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“There is a ripple effect throughout the global economy to the tune of a $50bn fall in exports across the world,” Pamela Coke-Hamilton, director of UNCTAD’s division of international trade, told a Geneva news briefing.
The figure covers only the month of February and is preliminary. It may be a “conservative estimate,” she said.
It was partly based on China’s official Purchasing Managers’ Index (PMI), issued on Saturday. The index shows factory activity in China contracted at the fastest pace ever in February, even worse than during the global financial crisis, highlighting the colossal damage from the coronavirus outbreak.
Countries or regions suffering the highest export losses due to the disruption are the European Union, with nearly $15.6bn, the United States – $5.8bn, Japan – $5.2bn, the Republic of Korea – $3.8bn, Taiwan – $2.7bn and Vietnam – $2.3bn, according to the UN Conference on Trade and Development (UNCTAD).
Precision instruments, machinery, automotive, and communication equipment are the hardest-hit sectors, it said in its report, which does not cover agriculture or services.
Alessandro Nicita, an UNCTAD economist, said that carmakers Honda and Hyundai and other industries are closing plants in Japan because of a lack of Chinese parts and components.
“The impact on the automotive industry in the European Union is about $2.5bn,” he added.
Asked whether manufacturers might shift to diversify suppliers, Nicita said: “In the short term, no – because it takes a while to identify new suppliers. In the long term, probably yes.”
China has built a vast logistics transport network including ports, shipping lanes, and aeroplanes to move its goods, he said.
Referring to a gradual resumption in China’s industrial production, he said: “If it rebounds it can probably make up for the loss in February. If it stays low, those numbers are going to compound, and the situation for the global value chain is going to deteriorate even further.”
India is the world’s main supplier of generic drugs. As the coronavirus outbreak plays havoc with supply chains, India has restricted the export of 26 pharmaceutical ingredients and the medicines made from them, including paracetamol, a common pain reliever also sold as acetaminophen.