Coronavirus has emerged as classic \u2018black swan\u2019 event or \u2018unknown-unknown\u2019 risk deliberated upon quite extensively in the risk management fora. The rapid spread across other countries has made it even more serious even as it appears to be getting under control in the country of its origin. Other than the loss of thousands of lives, its impact on China and in turn, global economy, is evident from the trade report released on Saturday. Here is a brief look at the same and other figures demonstrating the impact.<\/p>\n
As per the data released by customs department, China\u2019s exports shrank by a sharp 17.2% to $292 bn during Jan-Feb\u201920. Imports were relatively less impacted with a decline of 4% to $299 bn. The sharp difference in performance led to an unprecedented situation – China incurring a trade deficit, possibly the first time in decades. The department had not released Jan\u201920 data, possibly, due to the severity of crisis then and has now released the combined data for the two months. With share of about 17% in domestic GDP, decline in exports has the potential to bring down its GDP by almost 3%. However, the impact would not be limited to domestic GDP and would have a multiplier effect as significant part of its exports are intermediate products. Shortage in supply of these products would disrupt the supply chain across the world and impact global GDP.<\/p>\n
Product-wise dis-aggregation shows industrial products such as metals, aluminium suffering the most with decline of 28% and 23%. However, performance of consumer and consumer intermediate goods shows an interesting trend. Even though the total value of exports has come down, per unit prices have gone up. For instance, exports footwear, nearly $6 bn, declined by 20% but its per unit price rose by 4.3%. This is, possibly, a result of supply shortage leading to increase in prices. Similarly, exports of LCD panels, an intermediate product, came down by 20% but its prices rose by almost 13%. An item worth mentioning is \u2018garments & clothing\u2019, which registered decline of 20% to $16 bn in two months. This should be of greater interest to Indian manufacturers who should seize this opportunity to build new market. An item which managed to increase its exports is petroleum products, rising by 23%. It is quite likely that lower domestic consumption led to higher surplus and therefore, higher exports.<\/p>\n
In terms of countries, one would expect exports to largest destination suffering the most. Surprisingly, the largest destination for China\u2019s exports, USA recorded decline of only 5% whereas imports increased by 7% (against decline of 4% in aggregate imports). A possible explanation for this could be that China managed trade truce with USA only in Dec\u201919 and therefore, tried to ensure that it meets its commitment to the country.<\/p>\n
While these data provide firm picture of reversal in domestic production, the impact of Coronavirus is also getting manifested in stock markets performance and oil prices. Dow Jones, USA\u2019s stock market index, has lost over 12% since mid-Feb whereas India\u2019s market index, Sensex has lost almost 15%. Interestingly, Shanghai composite, China\u2019s index, declined by 12% between mid-Jan to mid-Feb but has recovered good part of the losses since then.<\/p>\n
Movement of crude oil prices is another interesting development. The attempt by Saudi Arab to push for a production cut across OPEC+ countries to stabilize prices was rebuffed by Russia. An enraged Saudi pushed up even more supplies in the market, leading to oil prices tumbling sharply. Crude oil prices have decline by more than fifty percent since the outbreak was first reported in early January.<\/p>\n","protected":false},"excerpt":{"rendered":"
Coronavirus has emerged as classic \u2018black swan\u2019 event or \u2018unknown-unknown\u2019 risk deliberated upon quite extensively in the risk management fora. The rapid spread across other countries has made it even more serious even as it appears to be getting under control in the country of its origin. Other than the loss of thousands of lives, […]<\/p>\n","protected":false},"author":8,"featured_media":14066,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1,859],"tags":[],"class_list":["post-14063","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-etcetera","category-international","membership-content","access-restricted"],"yoast_head":"\n