Thursday, February 20, 2020

Multinational firms scramble to deal with coronavirus fallout in China as economic impact mounts

Jan 30. 2020
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By The Washington Post · Rachel Siegel 

A growing number of multi-national companies are moving swiftly to reroute or temporarily close their operations in China as the coronavirus outbreak intensified. The global economic impact of the virus was still difficult to determine, but companies appeared to be pulling back at a much greater frequency on Wednesday out of fear that things will only worsen.

For restaurants, airlines, manufacturers and many others, the outbreak has dealt a sudden blow to the spending habits and daily routines of millions of people in the epicenter of Wuhan, plus major economic centers in Beijing and Shanghai. And the closure of many Chinese businesses, particularly manufacturers, is likely to disrupt supply chains for products that are sold around the world.

The number of confirmed coronavirus cases in China has surpassed those of the 2002-2003 SARS epidemic. And with thousands more cases expected, businesses are grappling with difficult decisions about trying to ride out the outbreak and risk infecting employees or shut down and wait indefinitely for the public health crisis to end. 

Starbucks temporarily closed more than half of its stores - a total of over 2,000 locations - in China, it's second-largest market outside the U.S. And on Wednesday, American Airlines and British Airways reduced direct flights to and from China, joining a growing cluster of international carriers suspending service.

Chinese sales account for about 10 percent of Starbucks' global revenue, the coffee giant has roughly 4,300 locations on the mainland. Chief executive Kevin Johnson said he had planned to raise the company's financial forecast for the year on Tuesday but decided not do "due to the dynamic situation unfolding with the coronavirus." Company shares were down 2.75 percent Monday morning.

McDonald's, KFC and Apple have also announced closures, with the potential that the virus will affect quarterly performance. Walt Disney Company said it would temporarily close its Disneyland and Disneytown parks in Shanghai.

On Wednesday, American Airlines suspended some flights to China, including routes from Los Angeles to Shanghai and Beijing from Feb. 9 to March 27. British Airways, which runs daily flights from Heathrow Airport to Beijing and Shanghai, also suspended services immediately. 

United Airlines said it would temporarily suspend flights to China between Feb. 1 and Feb. 8 because of a "significant decline in demand." Those changes affect 24 round trips between the United States and Beijing, Hong Kong and Shanghai.

Seoul Air and Indonesia's Lion Air also suspended all flights to China, and Hong Kong's Cathay Pacific said it would cut flights to and from China by at least 50 percent through the end of March.

American Airlines, Delta Air Lines and United extended their change fee waivers through the end of February.

CNBC reported that the White House has told airline executives it is considering suspending flights from China, although it has not yet done so.

Meanwhile, the Centers for Disease Control and Prevention said screening for the virus at U.S. airports would be expanded.

As of Wednesday morning local time, the death toll had risen to 132 in China, with 5,974 confirmed cases of infection - a day-over-day increase of more than 1,000. The United Arab Emirates reported the first cases in the Middle East from one family traveling from Wuhan. Infections have also been confirmed in the United States, France, South Korea, Japan, Nepal, Cambodia, Singapore, Vietnam, Taiwan, Canada and Sri Lanka.

U.S. markets held steady early Wednesday morning, but investors are still unsure about the overall threat to the economy from the coronavirus. The markets rebounded Tuesday after Monday's sell-off brought the Dow and S&P 500 to their steepest drops since October, with the Dow plunging more than 450 points.

Still, analysts worry that China's economy, which leans heavily on consumer spending, could suffer first and send ripples around the world if the public health crisis persists. If the 2002-2003 spread of SARS, or severe acute respiratory syndrome, is any indication, the United States could be shielded from lasting damage, analysts say.

 

 

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