An article in The Economist recently noted that the World Bank has estimated that as much as 90% of the economic damage from epidemics stems from people’s fear of associating with others, which leads offices and stores to close. In China, this is being magnified by the government’s lockdown of over 50 million people in the affected areas and limiting interpersonal contact throughout the country. The most direct impact is being felt in Hubei province, home to the city of Wuhan where the virus was first detected. The fast-growing city was expected to record a regional economic growth rate of up to +7.8% in 2020. The province of Hubei as a whole generates 4.5% of China’s GDP. With the lockdown of Hubei in place, economic activity has mostly ground to a halt. Wuhan itself is a manufacturing hub, especially for the auto industry. Nissan, Honda and General Motors, among others, have plants there. Bloomberg ranks Wuhan 13th out of 2,000 Chinese cities for its role in supply chains. One local company, Yangtze Optical Fibre and Cable, is the world’s biggest maker of the wires that carry data around the planet. Adding it all up, the Chinese economy is in for a grim start to the Year of the Rat, and this will cast a shadow globally. Chen Long of Plenum, a consultancy, thinks China’s growth could slouch to 2% year-on-year in the first quarter, its weakest in decades and down from 6% in the final quarter of 2019. But he expects a strong rebound when the country gets back to normal. The unknown is when normality might resume. Read more HERE.

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