How Coronavirus is Affecting the German Economy

  • German companies with factories in China are facing major headwinds as Coronavirus continues to wreak havoc across the nation.
  • In the worst-case scenario, conditions are likely to lead to production stops.
  • With consumption on the decline, E.U. companies that depend on the local market are likely to suffer.

German companies with factories in China are facing major headwinds as Coronavirus continues to wreak havoc across the nation. Ziehl-Abegg, a machine manufacturer with a facility in Shanghai, has lamented the current state of affairs. Less than half of its employees are allowed to work at the plant following a new directive by Chinese authorities driven by health fears. Uncertainty has gripped the company which is incurring weekly loses of about €2 million.

Coronavirus disease 2019 (COVID-19), also known as 2019-nCoV acute respiratory disease (2019-nCoV ARD), and novel coronavirus pneumonia (NCP) is a viral respiratory disease caused by the 2019 novel coronavirus (SARS-CoV-2). It was first detected during the 2019–20 Wuhan coronavirus outbreak.

German companies with factories in China are facing major headwinds as Coronavirus continues to wreak havoc across the nation. Ziehl-Abegg, a machine manufacturer with a facility in Shanghai, has lamented the current state of affairs. Less than half of its employees are allowed to work at the plant following a new directive by Chinese authorities driven by health fears. Uncertainty has gripped the company which is incurring weekly loses of about €2 million.

Supply Chains Cannot Adapt Quickly Enough

Many companies in Germany are in the same situation as Ziehl-Abegg. Many of them also depend on Chinese companies for supplies. In the worst-case scenario, conditions are likely to lead to production stops. According to Mohamed El-Erian, an advisor at Allianz, Coronavirus is likely to paralyze some economically prime regions in China, and this is undoubtedly going to have a domino effect on international trade.

“They first paralyze the region of the virus outbreak. Then they gradually spread domestically, undermining internal trade, consumption, production and the movement of people. If the virus is still not contained, the process spreads further, including regionally and internationally by disrupting trade, supply chains and travel.”

For many European companies that are heavily reliant on China for supplies, there are hardly any alternatives at the moment. Many have very tightly planned production schedules and lack expansive warehousing facilities in their locality. As such, reorganizing supply chains and reworking current contracts will take time.

Severe acute respiratory syndrome (SARS) is a viral respiratory disease of zoonotic origin caused by the SARS coronavirus (SARS-CoV). No cases of SARS have been reported worldwide since 2004.

Consumption in China is Falling

There is little going on in the shopping centers of Shanghai and Beijing. With consumption on the decline, E.U. companies that depend on the local market are likely to suffer. Sports product manufacturer Adidas, which is based in Herzogenaurach, Germany, has already closed its stores in China by order of the local authorities. Before the Coronavirus outbreak, sales in China had spiked by 11 percent. It manages over 11,000 outlets in the East Asian nation.

European car manufacturers BMW, Daimler, and Volkswagen, have similarly halted operations in the country.

Looking back at the 2003 SARS outbreak, it paralyzed public life and reduced economic growth. The epidemic shaved one percent off the Chinese economy’s annual growth rate. But a lot has changed in the world of business since then. According to data from the International Monetary Fund (IMF), China’s share of the global economy during the 2003 SARS breakout was just about four percent. Today it is at approximately 17 percent.

Experts predict that the Chinese economy will slow down in the medium term but start to stabilize towards the end of the year. On Thursday, close to 15,000 new infection cases were reported in Hubei Province in China. The latest development has stifled hopes of a decline in new infections.

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Samuel Gush. W

Samuel Waweru is a Technology, Entertainment, and Political News writer at Communal News.


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