China’s next challenge: Coronavirus breaks the links in the world’s supply chain People work at a Creality 3D factory in Shenzhen, China. The company has been working at half capacity since the outbreak because of a lack of demand. (Alex Plavevski/EPA-EFE/Shutterstock) By Anna Fifield March 11, 2020 at 3:24 a.m. EDT BEIJING — China’s business sector was already facing challenges even before the coronavirus hit. President Trump had waged a protracted trade war on the world’s second largest economy and had urged American companies to “decouple” from China. His administration was leading an international campaign to shun Chinese national champion Huawei and its 5G technology. And the Chinese economy was undergoing a structural slowdown, growing at the lowest rate in three decades. Then came the coronavirus, an epidemic whose economic impact is ricocheting around the world like a pinball — with China as the drain. Leader China’s next challenge: Coronavirus breaks the links in the world’s supply chain People work at a Creality 3D factory in Shenzhen, China. The company has been working at half capacity since the outbreak because of a lack of demand. (Alex Plavevski/EPA-EFE/Shutterstock) By Anna Fifield March 11, 2020 at 3:24 a.m. EDT BEIJING — China’s business sector was already facing challenges even before the coronavirus hit. President Trump had waged a protracted trade war on the world’s second largest economy and had urged American companies to “decouple” from China. His administration was leading an international campaign to shun Chinese national champion Huawei and its 5G technology. And the Chinese economy was undergoing a structural slowdown, growing at the lowest rate in three decades. Then came the coronavirus, an epidemic whose economic impact is ricocheting around the world like a pinball — with China as the drain. Leader Xi Jinping may have signaled victory over the virus, but things are still far from normal here. Factories in the “manufacturing hub of the world” are struggling to get up to full speed. Supply chains have been severely disrupted because parts are not being made, and transportation networks have ground to a halt. Consumer demand inside China has plummeted, and international demand for Chinese products could soon follow as the virus spreads across Chinese markets as diverse as Italy, Iran and the United States. Together, all this raises the prospect that the coronavirus epidemic will do what the trade war did not: prompt American companies to lessen their reliance on China. “Everybody was thrashing around about decoupling before this happened, trying to decide: ‘Should we decouple? How much should we decouple? Is decoupling even possible?” said Shehzad H. Qazi, the managing director of China Beige Book, a publication that collects data on the country’s opaque economy. “And then suddenly we had this almost divine intervention of the virus, and everything just started to be decoupled,” he said. “That is not only going to change the entire structure of things within China, but also the global fabric connecting China to the rest of the world.” Trump’s hawkish advisers are clearly trying to capitalize on this moment. “On the supply chain issue, for the American people they need to understand that in crises like this we have no allies,” Peter Navarro said on Fox Business in February. American companies big and small have warned of the virus’s impact on its production facilities. Coca Cola hasn’t been able to get artificial sweeteners for its diet sodas. Procter & Gamble — whose brands include Pampers, Tide and Pepto-Bismol — has also said its 387 suppliers in China have faced challenges in resuming operations. But the electronics and automaker sectors are particularly hard hit. Apple has warned investors not only about supply-chain disruptions but also a sudden drop in customers in China, where all of its stores were closed for weeks. Two major General Motors factories in the United States are facing production outages as China-made parts at its Michigan and Texas plants run low, the Wall Street Journal reported, citing union officials. Ford Motor said that its joint ventures in China — Changan Ford and JMC — had started resuming production a month ago but still needed more time to return to normal. “We are presently working with our supplier partners, some of whom are located in Hubei province to assess and plan for parts supply to support current parts needs for productions,” said spokeswoman Wendy Guo. Chinese companies — especially electronics manufacturers, carmakers and auto parts suppliers — have applied for a record number of force majeure certificates to try to get out of contracts they can’t fulfill without having to pay penalties. For full post please click below link: https://www.washingtonpost.com/world/asia_pacific/chinas-next-challenge-coronavirus-breaks-the-links-in-the-worlds-supply-chain/2020/03/11/175f391e-6270-11ea-8a8e-5c5336b32760_story.html
