China's economy was "dizzy" by the Covid-19 pandemic

The situation surrounding the Corona virus epidemic cannot help but affect stock markets around the world. Shares of companies are falling. For example, the STOXX 600 Europe index fell 2.5%. In particular, companies from Italy, which became the hub for Corona virus infection in Europe, shares saw a sharp drop. In the US, shares of Microsoft, one of the most expensive companies not only in the country but also in the world, fell 3%.

The world business depends on the movement of goods and people. Travel to and from China has decreased significantly in recent weeks. Furthermore, many countries have temporarily suspended flights to China and its neighbors, especially with South Korea and Japan. Such restrictions negatively affect tourism and reduce consumption of goods. However, in addition to this, airlines and other shipping companies suffer losses due to reduced traffic volume, and as a result, companies' incomes also fall.

China's population reached 1.4 billion, China is the largest market in the world. However, due to the Corona virus, many stores in the country were closed. In addition, due to the temporary shutdown of factories, a part of the population has reduced ability to spend money. All of this cannot help but affect corporate profits: sales are declining. However, it is not only the companies operating in China that suffer. China is a significant source of consumption in the tourism market. Countless tourists from this country visiting other countries often spend a lot of money. For example, in 2018, Chinese tourists spent $ 34.6 billion in the US, and $ 17 billion on expenses related directly to travel. Now that China has introduced restrictions on the movement of citizens, the tourism industry in many countries will suffer significant losses, as the number of Chinese tourists drops, so spending also will decrease. According to Tourism Economics, the impact of the Corona virus on tourism will be worse than the impact of the SARS epidemic in 2003.

Many factories in China have been shut down while the government tries to stop the spread of the Corona virus. The suspension of factories has led to a shortage of goods in China and other countries. This will negatively affect not only the bottom line of Chinese companies, but also the financial position of international companies with their production facilities in China. Against this backdrop, demand for oil and electricity is also decreasing.

Companies importing goods and accessories from China need to look for new suppliers. In some cases, there is not enough developed infrastructure to find a replacement for Chinese goods in a short period of time. Even when there are other suppliers, negotiation, contracting and delivery will take quite a while and will cost additional costs.

Amid countless reports of the Corona virus epidemic, many analysts warn that this year, American companies are likely to be unprofitable. For example, in a recent report, Goldman Sachs made similar assumptions regarding the profits of American companies in 2020 related to the Corona virus outbreak. Stocks are falling on exchanges around the world. In particular, according to forecasts of Goldman Sachs analysts, the income of S&P 500 companies this year may fall 13%.

#china #asia #IE #COVID19

References

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Tran Phuong Thao