Although the globalized economy has made it easier, faster, and cheaper to produce goods, it also means that disruptions in one region can cause ripple effects felt throughout industries across the world. This has never been more apparent than it is currently with the coronavirus outbreak in China. Officially called COVID-19, the coronavirus is a pneumonia-like disease that was declared a public health emergency of international concern by the World Health Organization in January. Nearly 72,000 people in 26 countries have been infected and more than 1,700 people have died, mostly in China.
China provides efficient factory work to almost every industry, meaning everything from food and fashion, to entertainment and automobiles is feeling the hit. Not only are consumers at a loss for products made in China, but are also unable to procure items that require parts from China. Supply chain disruptions are affecting industries involved in everything from smartphones to smart cars. Nissan and Hyundai, from Japan and South Korea, respectively, both shut down production lines in their factories due to supply shortages of parts from China. Volkswagen also cited problems with “the nationwide restarting of supply chains as well as limited travel options for [their] production employees.”
Orders for the Oculus Quest VR headset have been shelved and current orders have been delayed. Facebook cited the outbreak for the delay, telling Android Central: “[Like] other companies we’re expecting some additional impact to our hardware production due to the Coronavirus. We’re taking precautions to ensure the safety of our employees, manufacturing partners and customers, and are monitoring the situation closely. We are working to restore availability as soon as possible.” While many companies do have back-up suppliers, many of these are also located in China and are susceptible to the same closures.
Beyond disruptions to production facilities, travel restrictions and business closures have also had a hard impact on global companies like Disney, whose theme parks in Shanghai and Hong Kong have been closed for over a week. While it may not sound like a long time, that means Disney is reducing its operating income by $175 million in the second quarter alone. Travel restrictions also mean that consumers aren’t out and about ready to spend their money.
As more industries move jobs to China, their population is becoming increasingly affluent and global businesses have come to rely on their spending power. However, many workers in China are going without a paycheck right now, which will directly impact the amount they’re able to spend. The spread of the virus has slowed air travel and tourism, as well as forcing many Hubei Province residents to remain on a strict government-mandated lockdown, which is also contributing to residents’ inability to engage in buying and selling.
