Pakistan among 20 states most affected by China slowdown due to coronavirus

Updated March 09, 2020

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The biggest sufferer is the textile sector, which has lost $44 million. — AFP/File
The biggest sufferer is the textile sector, which has lost $44 million. — AFP/File

ISLAMABAD: The Uni­ted Nations Conference on Trade and Development (UNCTAD) has included Pakistan in the list of 20 economies across the world that have been affected the most after China suffered slowdown because of novel coronavirus.

The affected value chain for Pakistan is textiles and apparel which amounts to $44 million from a two per cent reduction of China exports in intermediate inputs.

The most affected countries and regions are: the European Union followed by the United States, Taiwan, United Kingdom, Japan, South Korea, Taiwan, Vietnam, Mexico, Switzer­land, Malaysia and Thailand.

The slowdown of manufacturing in China due to the coronavirus (COVID-19) outbreak is disrupting world trade and could result in a $50 billion decrease in exports across global value chains, according to estimates published by UNCTAD.

In February, the country’s manufacturing Purchasing Manager’s Index (PMI) — a critical production index — fell by about 22 points to 37.5, the lowest reading since 2004. Such a drop in output implies a two per cent reduction in exports on an annual basis.

The biggest sufferer is the textile sector, which has lost $44 million

Because China has become the central manufacturing hub of many global business operations, a slowdown in Chinese production has repercussions for any given country depending on how reliant its industries are on Chinese suppliers.

According to UNCTAD estimates, the most affected sectors include precision instruments, machinery, automotive and communication equipment. Among the most affected economies are the European Union ($15.6 billion), the United States ($5.8bn), Japan ($5.2bn), South Korea ($3.8bn), Taiwan ($2.6bn) and Vietnam ($2.3bn).

UNCTAD says while there is still uncertainty about the impact of the COVID-19 on China’s productive capacity, the most recent statistics point to a significant downturn. The full effect of COVID19 on global value chains will become clear in coming months. However, one question of importance is how a disruption in Chinese supply of intermediate inputs will affect the rest of the world.

Even if the outbreak of COVID-19 is contained mostly within China the fact that Chinese suppliers are critical for many companies around the world implies that any disruption in China will be also felt outside China’s borders. European, American and East Asian regional value chains will be disrupted, the analysis forecasts.

It is expected that the spillover effects of a disruption in Chinese supply will be diverse across economic sectors and dependent on the geographic localisation of the COVID19 outbreak and of the containment measures within China.

Overall, the most im­­pacted economies will be the European Union (machi­nery, automotive, and chemicals), the United States (machinery, automotive, and precision instruments), Japan (machinery and automotive), South Korea (machinery and communication equipment), Taiwan (communication equipment and office machinery) and Vietnam (communication equipment).

Published in Dawn, March 9th, 2020