It gets worse, across all corners, across seemingly all industries.
In terms of impact, everything pales next to the loss of life, and widespread illness, wreaked by the coronavirus.
But by having the ripple effect of idling factories, causing firms to send their Chinese workers home and crippling tourism, the coronavirus has, in the worst way, gone viral.
It was reported earlier this week that the U.S. economy could see a $10 billion hit from a drop in Chinese tourism.
And more recently, as noted Friday (Feb. 7) by Reuters, Indian tourism operators have tallied the impact they might see from a dip from tourists from China, yes, but from other countries too. That dent in India’s tourism trade will equate to $500 million, according to reports. Air India has canceled flights to China and Hong Kong “until further notice.” Another carrier, IndiGo, has stopped flights to the region until later in the month. Most of the roughly 50,000 Chinese tourists that had been expected in India this month and in January have canceled their trips.
“We fear immediate loss of up to $500 million as the coronavirus outbreak has hit the arrival of tourists from China, Hong Kong and neighboring countries,” said Pronab Sarkar, national president, Indian tour operators Association, as quoted by the newswire.
Supply Chain Impact Continues
Separately, the idea that, at least when it comes to the Chinese consumer, eCommerce will at least blunt the impact to global retail may not be as true as some as had hoped.
Thus far, at least some observers seem to think fears might be overblown. As reported Friday, U.S. National Economic Council Director Larry Kudlow said it seemed unlikely the virus would have a major impact to the U.S. economy.
“There’s a lot of variables involved and things we don’t know. Internally we have looked at a drop in GDP of perhaps two-tenths of one percent — that’s all we found so far. Again, based on the past and based on what we’re seeing. We think it will be an absolute minimal impact,” Kudlow said, as reported by Reuters.
But it depends on where you look for impact.
Amazon could see some impact, as Reuters said. A number of sellers across the eCommerce giant’s platform may be “bracing for product shortages” because Chinese workers may not return to work at manufacturers.
That means products — such as, say, electronics — that are already in various supply chains may eventually make their way to virtual shelves and be bought … but retail stock outs, especially in the absence of contingency plans, loom.
More than 1 million Amazon sellers depend on Chinese workers, and that reflects a larger truth. Just as the world depends on the Chinese consumer, it depends on Chinese labor, too. The ripple effect of stock outs may eventually dent Amazon’s own (short term) fortunes, too, as revenues gleaned from serving third-party sellers translates to about 19 percent of Amazon’s top line.
If Chinese consumers pull back on spending (or don’t show up to work) and businesses see top lines disrupted, it stands to reason that both groups — individuals and companies — would start to tighten their respective belts. That means dialing back on expenses, such as remaining current on debt.
Alibaba affiliate Ant Financial has stopped updating credit scores in China tied to a credit rating service, Sesame Credit. The impact is twofold: missed payments have a real impact on lenders. And, separately, a suspension of credit ratings takes away at least some of the functions of daily economic life — i.e., the extension of credit, indicating that the fallout may hit balance sheets and income statements far into the future.