context: The COVID-19 epidemic has caused major disruptions to international travel, trade and global supply chains. The Financial Times described the situation as ‘an experiment in de-globalisation’.
China’s status in global supply chains is irreplaceable, but its dominance may be weakened by the epidemic, argues Chen Jibing 陈季冰 Economic Observer columnist.
The fight against the epidemic is like a forced ‘de-coupling’. It is also a test for the world economy: how will it cope without China, an engine of the global economy and ‘factory of the world’?
- disruption to travel and transportation
- at least 30 airlines have suspended or reduced China flights
- dozens of countries announced travel bans or advisories
- tourist destinations hit hard
- international freight shipping suffers heavy losses
- supply chains disrupted
- South Korean and Japanese carmakers suspend production
- European and US carmakers may be forced to close in weeks
- China is at the centre of supply chains of multiple industries
- resumption of production threatened by risk of further infections
- drop in Chinese demand hits global commodities market
- oil prices decline due to lack of demand
- Chinese importers may invoke force majeure
- other commodities, such as Australian iron ore, will also be hit
- China may defer purchases promised in US Phase 1 deal
- impact on global economy much worse than SARS
- Asian countries, including Australia, will be hit hardest
- may cause instability in oil-producing countries: Russia, Saudi Arabia, Iran
- global supply chains will be gradually restored after outbreak
- but economic planners will be forced to consider supply chain diversification