COVID-19: Outbreak may cost global value chains US$50 billion in exports

The impacts of COVID-19 are being felt along global value chains as manufacturing slows in China, according to a new United Nations report.  Lee Kok Leong, executive editor, reports

The slowdown of manufacturing in China due to the COVID-19 outbreak is disrupting world trade and could result in a $US50 billion decrease in exports across global value chains, according to estimates published by the United Nations Conference on Trade and Development (UNCTAD).

In Feb, China’s manufacturing Purchasing Manager’s Index (PMI), a critical production index, fell by about 22 points to 37.5, the lowest reading since 2004.  Such a drop in output implies a two percent reduction in exports on an annual basis.  Because China has become the central manufacturing hub of many global business operations, a slowdown in Chinese production has repercussions for any given country depending on how reliant its industries are on Chinese suppliers.

“In addition to grave threats to human life, the coronavirus outbreak carries serious risks for the global economy,” UNCTAD Secretary-General Mukhisa Kituyi said.  “Any slowdown in manufacturing in one part of the world will have a ripple effect in economic activity across the globe because of regional and global value chains.”

According to UNCTAD estimates, the most affected sectors include precision instruments, machinery, automotive and communication equipment.  Among the most affected economies are the European Union ($15.6 billion), the United States ($5.8 billion), Japan ($5.2 billion), South Korea ($3.8 billion), Taiwan ($2.6 billion) and Vietnam ($2.3 billion).

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