When SARS hit China in 2003, it sent shock waves through the economy. The markets fell initially followed by a strong rebound. Even though the coronavirus has taken more lives, investors see markets following a similar path. Indeed china’s stocks and commodities are higher now than in January when the virus announced its self as a danger.
There is a connection between China’s ability to contain the infection and its markets. Chinas officials have erred on the side of caution. They have shut down whole provinces, in which 90% of exports from factories have reminded closed. Coal consumption is a third lower. Property sales are down 90%. People are staying at home, not taking the risk to eat out, Starbucks has closed over 4000 shops in the areas.
Back in 2003, China only accounted for 4% of world GDP today it’s sitting at 16%. It is the world’s second-biggest importer, and any weakness it has will affect worldwide markets. The world’s manufacturing chain is so complex that no one knows how even one company shut down will affect the world markets. Hyundai has stopped car production in South Korea due to parts shortages. Oculus, Nintendo, Foxconn, Apple, and Huawei all suffered the same fate, and the list goes on. Increasingly companies that think they are isolated from china are getting hit.