Why China's sneeze is giving the world economy chills

Could a single bat in central China make the global economy catch a cold? Call it an undead variation of the butterfly effect, but as the Wuhan coronavirus (which may have originated in bats) continues to spread, companies and consumers around the world are bracing for chills.

Why? Well, for one thing, China accounts for about a fifth of global economic output and it's number one in global trade. That means that any time the Chinese economy shudders or stumbles, the shockwaves circle the globe. And China is most certainly shuddering.


To slow the disease's advance, officials extended the traditional Chinese New Year holiday, and locked down cities that are home to more than 50 million people. In Wuhan itself, a major manufacturing and export hub, factories are shuttered for at least another week, and about a dozen other industrial regions have followed suit.

While China's own people are clearly bearing the brunt of the epidemic, here are three reasons why the outbreak, and the response to it, are also affecting the global economy:

China is a leading market for the world's largest consumer goods companies. But the quarantine and lockdown restrictions have forced many of those businesses to go dark in China for now. Apple, for example, has closed all its stores in China, its second largest market. Starbucks, similarly dependent, has closed half its shops in the country. China's oil imports, the largest in the world, are also reportedly taking a hit as the virus crimps travel and industrial production there. Dozens of air carriers, meanwhile, have cut service to China.

China is the world's largest exporter, and with many of the factories that do that exporting now closed, 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, have warned of "serious disruptions." This affects everything from your smartphone, to your vacuum cleaner to your (or your kids') video game consoles.

Markets get jittery. People who trade the stocks of all the companies affected by this are understandably jittery. US markets have taken a hit in recent days and China's main stock indices fell about 8 percent when they opened yesterday for the first time since the beginning of the Chinese New Year holiday.

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.

Kevin Sneader, global managing partner of McKinsey & Company, answers the question: Are CEOs getting real about climate change?

The answer, yes. Why? One, it's personal. Many have watched with horror the wildfires that took place recently. Others have even been evacuated. And for some, the snow set in Davos, they experienced incredibly mild temperatures that laid all to quip that climate change really has arrived. But the other reasons are a growing understanding of the nature of climate change.

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Welcome to the eleventh parliamentary elections in Iran's 40-year history.

Want to run for a seat? You can…if you're an Iranian citizen between the ages of 30 and 75, hold a master's degree or its equivalent, have finished your military service (if you're a man), and have demonstrated a commitment to Islam. Check all these boxes, and you can ask permission to run for office.

Permission comes from the 12-member Guardian Council, a body composed of six clerics appointed by Supreme Leader Ayatollah Ali Khamenei and six jurists that Khamenei appoints indirectly. If the Council says yes, you can win a seat in parliament. If they say no, you can't.

This parliament, also called the Majlis, does have real power. It approves the national budget, drafts legislation and sends it to the Guardian Council for approval, ratifies treaties, approves ministers and can question the president. The current Majlis represents a wide range of values and opinions.

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As the head of a leading management consulting firm, global managing partner of McKinsey & Company Kevin Sneader has an inside view into the challenges facing the world's top executives. Every Thursday, Sneader will address questions about key issues like attracting and retaining talent, growing revenue, navigating change, staying ahead of the competition, and corporate responsibility – all in 60 seconds.

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