Devoid Of Chinese Clients, How Exactly Have The Global Companies Suffered From Covid-19?

It’s official: the Covid-19 virus, dubbed as Coronavirus, is a pandemic that is threatening both our lives and our economies on a global scale. In total, there have been more than 120,000 recorded cases, whereas 53,000 cases are still active and more than 4,000 people have died, unfortunately.

It goes without saying that the virus outbreak is one of the most devastating events the world has witnessed for many years. And by devastating, we mean both the lives lost and the economies damaged. In the recent survey of the CNBC Global CFO Council, the majority of chief financial officers have said that Coronavirus has severely impacted their business both supply and demand-wise.

China - the hub for tech and entertainment?

It’s no secret that over the recent years, China has become one of the biggest markets globally. If we compare the biggest economies in the world, the chances are, China will be either second or first in that list, putting up an active competition with the United States.

The Chinese government has been vigorously extending the country’s so-called soft power. By funding various infrastructural projects in Asia, Africa, and Europe, creating a welcoming environment for foreign corporations, and funding national tech companies, China has turned into a global economic power.

The same can be said about the entertainment industry in the country. For example, while gambling is totally banned in the whole country, the administrative region of Macau is the only place where the Chinese people can freely play their favorite casino games.

However, even in Macau, gambling is only permitted in the actual brick-and-mortar casinos, whereas the top VIP casinos online cannot operate in the area. That being said, the outbreak of Coronavirus encouraged some members of the gambling commissions to vouch for the permission of online gambling. They were greatly alarmed that the Chinese Lunar Year, which is the biggest holiday in the country, didn’t produce as much cash inflow in Macau as it had been for quite a while now. 

Close corporate ties with China

As noted earlier, China is developing close ties with global corporations and the numbers tell everything. According to the recent survey of the CNBC Global CFO Council, nine out of ten chief financial officers participating in the survey say that their companies have close business ties with China. 

When it comes to buying and selling products, almost 62.5% of the companies say they sell their products/services into the Chinese market, while 40% of them buy various parts from the companies operating there. What’s more, almost 33% have their factories in China, avoiding excessive transportation expenses and producing goods right on the site.

Now, when talking about the CNBC Global CFO Council, we have to be clear about one thing: this council combines some of the biggest and most influential corporations in the world, both public and private. In total, these companies control more than 5 trillion US dollars globally. 

Posting low numbers

So, it’s pretty apparent that China is, to say the least, an important market for the global economy. Therefore, when the province of Wuhan experienced the Coronavirus outbreak, which then quickly spread to the whole country, a significant chunk of the Chinese economy suddenly stopped functioning. This, in turn, left a significant mark on the biggest global corporations.

If we take a look at the actual numbers posted by the same survey, the overwhelming majority of the companies are already experiencing a heavy blow to their business. For example, 62.5% of all the chief financial officers have said that the demand from China has decreased quite significantly, whereas 21.9% say the decrease was slight. 

As for the supply impact, 22% of the surveyed companies claim that they saw a 22% decrease in a supply chain from China, whereas 37.5% of the surveyed CFOs say that the current data isn’t enough to determine the actual results as of yet.

In terms of the performance of the individual company, the expectations are more or less on the same level. For instance, Microsoft reports that the decline in Windows demand is to be expected due to the massive outbreak of the Coronavirus. As for Apple, the company is also pessimistic about the supply rates of its iPhone lineup, hitting the upcoming results quite hard.

Counter-measures within the companies

For what it’s worth, the companies that were surveyed have also noted that they’re doing all they can and all that’s been recommended by the World Health Organisation in order to stop the spread of the virus and keep their employees safe.

All of the firms have already made some changes in the way they handle the business in response to virus concerns. For example, more than 90% of companies have minimized the trave distance for their employees (or restricted altogether); 62.5% of them have contributed additional resources to allow their employees to work remotely; while three out of four are actively instructing their employees about how to remain hygienic all the time.

What’s ahead of us?

According to various claims from China and the partnering companies, some stores are already starting to reopen. For example, Apple’s stores in China, Starbucks cafes, and Chinese supply chains are already making their return to the business. However, it still doesn’t mean that we should be enthusiastic about the future of the global economy.

As the new cases are constantly reported outside of China, whether it’s Europe, Asia, or the Americas, the economic indicators are expected to deteriorate even further. In fact, we’re experiencing some of this decline already: the Dow Jones Industrial Average has fallen by 1,700 points from the end of February, whereas the one-month period shows a staggering 4,000 decline - the lowest since the 2008 housing market crisis. 

So, what’s the bottom line of all this? First things first, many analysts suggest that the current virus outbreak may not be the climactic point. Therefore, as we move forward, the situation may go south pretty significantly.

This, in turn, will have detrimental effects on our health and on the global economy likewise. The World Health Organisation has already dubbed Coronavirus a pandemic, which means the virus has already covered a large part of the earth. By preparing ourselves and bracing for impact, we may reduce the negative effects and come out of it relatively unharmed.