The spread of the novel coronavirus which has caused a shutdown of major business hubs in China is a ‘very good lesson’ on how crucial it is to diversify supply chains, said Minister of Trade and Industries Chan Chun Sing on Wednesday (5 February).
As most countries rely on China for both imported goods and materials to make goods for exports, the virus outbreak has posed a threat to the status quo, said the minister.
Speaking on CNBC’s Sqawk Box Asia, Mr Chan said: “Today, China is not just producing low-end, low-value products, they are also in the supply chains of many of the high-end products. And that means that the impact on the supply chains will be significant across the entire globe.”
“I think this is a very good lesson for everyone to really look at the supply chain resilience,” he added.
Being heavily trade-dependent, with China being one of its biggest trading partners, Singapore was hit hard as the trade war between the US and China escalated last year. This came on top of an already slowing global economy.
This latest virus outbreak could add more pressure to an already pressured economy. However, Mr Chan noted that the extent of the impact depends on how long this outbreak—which was already killed hundreds in China and spread to more than 20 countries—lasts.
Singapore has 24 confirmed cases of the virus so far, many of whom are China nationals infected outside of Singapore, though a number of local transmissions have been confirmed this week as well. Singapore has one of the highest numbers of cases outside China so far.
“To be frank, everybody will be impacted by this, it’s a matter of degree. The key is who will recover faster and how people respond to the crisis will be even more important than what the crisis is,” said Mr Chan.
He added that Singapore has prioritised the diversification of its economy for many years, explaining that the government has also urged companies to not simply reply on particular products or markets for their business while making sure that the country’s economy is not overly exposed to just one sector.
Mr Chan noted that this enables the Singapore economy to withstand any hits from unforeseen circumstances such as this virus outbreak.
Impact of Wuhan virus outbreak on the global economy
The outbreak has caused authorities in China to shut down massive swathes of the country, including placing the entire city of Wuhan and it’s 11 million population under quarantine, and this has caused a ripple effect on the global economy.
Last weekend, Apple Inc, announced a temporary closure of all its stores and corporate offices in China until 9 February. It is also considering shutting down its factories there which produces components for its range of products that are sold around the world. Apple Inc. employs about 10,000 people in China.
Additionally, Levi Stauss & Co.—which opened its biggest China store last October in Wuhan itself, the city at the centre of the outbreak—McDonald’s Corps, and Starbucks Inc., H&M, Nike, Tiffany & Co. and more have collectively shut down thousands of outlets around the country, partly in adherence to the government’s request for people to stay off the streets.
Even Disneyland Shangai has closed its doors until further notice due to the outbreak in an effort to help curb the spread of the virus.
The Edge Markets highlighted yesterday (5 February) the magnitude of the impact the outbreak has had on numerous business and corporations that have dealings with and in China.