NOVEL CORONAVIRUS IN CHINA: AN IMPACT ANALYSIS
Introduction The outbreak of Covid-19 in China is expected to have significant global economic impact: Economic slowdown – China’s GDP is expected to decelerate by 1-1.25 percentage point over 2020 due to halting of economic activities in key production centres.
Introduction
The outbreak of Covid-19 in China is expected to have significant global economic impact:
- Economic slowdown – China’s GDP is expected to decelerate by 1-1.25 percentage point over 2020 due to halting of economic activities in key production centres. As of 14th February, 48 cities and 4 provinces are in lockdown mode. This will have knock-on impact on global economic growth as China accounts for 19.71% of global GDP at purchasing power parity. It is estimated that global GDP will suffer an impact of -0.5%.
- Trade – China is the world’s largest exporter and second largest importing nation, accounting for 13% of world exports and 11% of world imports. The lockdown affecting 500 million people in the country will deeply impact its consumption of goods.
- Supply chain disruption – With China as the world’s largest manufacturer and exporter, closure of its industries for a significant time period is likely to impact production centres across the world. China is currently the top supplier of goods for over 100 countries.
- Commodities – Oil demand is expected to fall by 30% due to the fall in Chinese consumption and this will also resonate in other commodities.
- Logistics – Shipping rates have already fallen to record lows.
Impact on India
The above factors will impinge on Indian industry to a large extent. India continues to have a very high import dependence on China. Of the top 20 products (at the two-digit HS code) that India imports from the world, China accounts for a significant share in most of them (Table 1 – given in Annexure). Further, of the top 20 products (at the two-digit HS code) that India purchased from China in 2018, the average share of China in India’s total imports of the product is close to 30% (Table 2 – given in Annexure).
China accounts for 45% of India’s total electronics imports. One-third of machinery and almost two-fifths of organic chemicals that India purchases from the world comes from China. Automotive parts and fertilisers are other items where China’s share in India’s import is more than 25%. India sources about 65-70% of active pharmaceutical ingredients and close to 90% of certain mobile phone parts from China.
Going deeper into the top 20 products at the 4-digit HS code level that India imports from China, it is found that these comprise two-fifths of its total imports from that country (Table 3 – given in Annexure). These also further add to reliance on China as they account for 43% of the total imports of India from the world of these products.
This extremely high import dependence on China has significant ramifications for Indian industry due to the current outbreak of Coronavirus in China. As on date, China has reported more than 60,000 cases of the Novel Coronavirus Pneumonia (NCP). Hubei is the worst effected province with more than 49,000 cases, followed by other provinces such as Guangdong, Henan, Zhejiang, Hunan, Anhui, Jiangxi, Jiangsu, Chongqing and Shandong. The epidemic has also spread to 24 other countries, 8 of which are from East Asia and South East Asia regions.
In exports, China is India’s 3rd largest export partner and accounts for 5% share. The impact will be felt in key sectors such as organic chemicals, plastics, fish products, cotton, ores, etc.
Most of the Indian companies are situated in the eastern part of China. About 72% of Indian companies in China have their presence in cities like Shanghai and Beijing and in provinces of Guangdong, Jiangsu and Shandong. Further, their business partners are located across China. These companies operate in various sectors such as Industrial Manufacturing, Manufacturing Services, IT & BPO, Logistics, Chemicals, Airlines and Tourism.
As per our analysis, some of the sectors in India that have been impacted / are likely to be impacted by coronavirus in China include shipping, pharmaceuticals, automobiles, mobiles, electronics, textiles, etc. Further, supply chain disruptions are expected to affect several associated industries and markets. Overall, hitherto, the impact of Coronavirus on Indian industry has been moderate.[/vc_column_text][vc_custom_heading text=”Read More..” font_container=”tag:h4|text_align:left|color:%23208cea” link=”url:https%3A%2F%2Fconstructiontimes.co.in%2Fwp-content%2Fuploads%2F2020%2F02%2FCII-report-on-Impact-of-Coronavirus-on-Indian-Industry.pdf.pdf||target:%20_blank|”][ultimate_spacer height=”10″][/vc_column][/vc_row]
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