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How the coronavirus hits the world economy

How the coronavirus hits the world economy

A few weeks ago we first took a look at how a bat (possible origin of the coronavirus) could have a butterfly effect on the world economy.

China accounts for about a fifth of global economic output, a third of global oil imports, and the largest share of global exports. That means that any time the Chinese economy shudders or stumbles, the shockwaves circle the globe. And China is most certainly shuddering.


So far, the country has seen more than 70,000 cases of coronavirus, with close to 2,000 deaths. Some 720 million people there are on residential lockdowns to stop its spread. That means people aren't out buying things or producing things in factories and offices.

This matters because:

China is a leading market for the world's largest consumer goods companies. The quarantine and lockdown restrictions have forced many of those businesses to go dark in China for now. Apple, for example, earlier this month closed all its stores in China, its second largest market. Starbucks, similarly dependent, has closed half its shops in the country. Estee Lauder's numbers are getting smudged and Haagen-Dazs sales are melting. Here's a look at what a few dozen of the world's leading consumer and services companies are saying.

China's oil imports, the largest in the world, are taking a hit as the virus crimps travel and industrial production there, knocking down China's oil purchases by several hundred thousand barrels per day. This is bad news for countries that depend on oil exports, like Nigeria, Africa's largest producer, where growth forecasts are already being trimmed.

China is the world's largest exporter, and with many of the country's major factories partly or totally shuttered, global businesses that rely on parts and labor in China are scrambling to figure out alternatives. DHL, who know a thing or two about supply chains, warned earlier this month of "serious disruptions." More than 30 scheduled shipping services from China to Europe and the US have been cancelled. This affects everything from your smartphone, to your vacuum cleaner to your (or your kids') video game consoles. The resourceful folks of Jaguar Land Rover say they are getting critical parts out of China in suitcases.

The good news is, after it gets worse, it generally gets better – when China's stores, factories, and travel links reopen, there will likely be a mini boom as everyone gets back to shopping and working and exporting. The bad news is: we still don't know when that might be, and with the number of cases still rising, it could be a while.

Khant Thaw Htoo is a young engineer who works in Eni's Sakura Tower office in the heart of Yangon. As an HSE engineer, he monitors the safety and environmental impact of onshore and offshore operations. He also looks out for his parents' well-being, in keeping with Myanmar's traditions.

Learn more about Khant in the final episode of the Faces of Eni series, which focuses on Eni's employees around the world.

On his first day as president, Joe Biden signed a remarkable series of executive orders. Boom! The US rejoins the Paris Climate Accord. Bang! The United States rejoins the World Health Organization. Pow! No more ban on immigration from many Muslim-majority countries. Biden's press secretary reminded reporters later in the day that all these orders merely begin complex processes that take time, but the impact is still dramatic.

If you lead a country allied with the US, or you're simply hoping for some specific commitment or clear and credible statement of purpose from the US government, you might feel a little dizzy today. The sight of an American president (Barack Obama) signing his name, of the next president (Donald Trump) erasing that name from the same legislation/bill, and then the following president (Biden) signing it back into law again will raise deep concerns over the long-term reliability of the world's still-most-powerful nation.

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Kevin Sneader, Global Managing Partner at McKinsey & Company, provides perspective on what corporate business leaders are thinking during the global coronavirus crisis:

Should businesses be pessimistic or optimistic about 2021?

It's easy to be gloomy about the year ahead when faced with the realities of a cold, bleak winter in much of the world. Add to that lockdowns across Europe, surging case numbers and hospitalizations, and dreadful events in the Capitol in the US to name a few reasons for pessimism. But I think there is a case for optimism when it comes to this year. After all, it's true to say that it's always darkest before the dawn, and my conversations with business leaders suggest there are reasons to be positive by 2021.

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Renowned tech journalist Kara Swisher has no qualms about saying that many of the country's social media companies need to be held accountable for their negative role in our current national discourse. Swisher calls for "a less friendly relationship with tech" by the Biden administration, an "internet bill of rights" around privacy, and an investigation into antitrust issues.

Swisher, who hosts the New York Times podcast Sway, joins Ian Bremmer for the latest episode of GZERO World, airing on public television nationwide beginning this Friday, January 22th. Check local listings.

Brexit pettiness lingers: Here we were naively thinking the Brexit shenanigans were over after the EU and UK agreed to an eleventh-hour post-Brexit trade deal last month. We were wrong — the saga continues. Now, a new row has erupted after the Johnson government said it will not give the EU ambassador in London the same diplomatic status awarded to other representatives of nation states. Unsurprisingly, this announcement peeved Brussels, whose delegates enjoy full diplomatic status in at least 142 other countries. The UK says it will give the EU envoy the same privileges as those given to international organizations, which are subject to change and do not include immunity from detention and taxation given to diplomats under the Vienna Convention on diplomatic relations. EU members are furious, with officials accusing London of simply trying to flex its muscles and engaging in "petty" behavior. The two sides will discuss the matter further when UK Prime Minister Boris Johnson meets EU representatives next week, their first face-to-face since the two sides settled the Brexit quagmire on December 31. Alas, the Brexit nightmare continues.

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The GZERO World Podcast with Ian Bremmer. Listen now.

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