For businesses, virus in China fans fear and uncertainty

AP China’s worst health crisis in years has sparked fear and uncertainty for businesses from North America to Asia that depend on trade in the affected region.

Experts said it’s too soon to know how disruptive the crisis will prove. But it’s already having an impact.

McDonald’s has shuttered restaurants in five Chinese cities, including the inland port city of Wuhan where the crisis is centred. Shanghai Disneyland has temporarily closed as a precaution. Restrictions on travel and fears of flying to the region are threatening to depress demand for oil and jet fuel just as China’s Lunar New Year is beginning.

In a sign of China’s vast economic reach, even niche companies in America have begun feeling squeezed. In Houston, Rockstar Wigs worries that production delays in China will hold up shipments. Omaha, Nebraska-based Home Instead Health Care has stopped sending caregivers to the homes of elderly clients in Wuhan.

So far, there are 830 confirmed cases of the virus and 26 deaths. Wuhan and 12 other Chinese cities are on lockdown, isolating a combined population of more than 36 million.

“Personally, I now cannot go to Wuhan to negotiate new orders, meet with new vendors, take foreign companies for supplier visits, and visit trade shows,” said Stanley Chao, a consultant in Rancho Palos Verdes, California, who helps foreign companies do business in China. “I may lose three to five trips to China, which is my bread and butter. In turn, my team in China cannot work, and I may have to temporarily lay them off for a while.”

Investors monitor stock prices at a brokerage in Beijing. PHOTO: AP

Moreover, because the outbreak coincides with the Lunar New Year holiday, many businesses are closed as tens of millions of migrant workers return from big cities to their hometowns in the countryside.

Still, Wuhan is a central hub for China. Isolating the region could devastate Chinese production in automobiles, aviation, high-tech mechanical and electrical manufacturing, said Ahmed Rahman, an economist at Lehigh University.

“Its central role in facilitating exchange between the Chinese hinterlands and the rest of the planet cannot be overstated,” Rahman said. “Arguably, out of all the regions of China, closing off Wuhan may be the most disruptive to the global economy.”

Tourism could be hurt, too, because of the region’s many flights to Bangkok and Tokyo.

Many businesses are scrambling to contain the potential damage.

McDonald’s said it has closed all of its restaurants in five cities in Hubei province — Wuhan, Ezhou, Huanggang, Qianjiang and Xiantao — until further notice. Its operations are running in other cities in Hubei where public transportation is available.

The Shanghai Disney Resort announced on Friday that it is temporarily closing Shanghai Disneyland “in response to the prevention and control of the disease outbreak and in order to ensure the health and safety of our guests.’’

The outbreak arrives just after the United States and China reached a truce in an 18-month trade war that involved the two world’s two biggest economies burying each other’s products in tariffs.

President of Synchronis Medical in Ann Arbor, Michigan Stuart Shulman said the Wuhan shutdown is “the double whammy”. Already reeling from tariffs that have devoured as much as 30 per cent of his profits, he now may not have any workers at the Chinese factory where medical gowns are cut and sewn.

“The timing is so catastrophic. I don’t think a lot of people understand the situation,” Shulman said. Because workers have left for the new year holiday, they may not be able to get back to work.

Restrictions on travel and fears about flying to the region could take a toll on demand for oil, gasoline and jet fuel. The suspension of public transportation services and quarantine enacted Thursday could cause a short-lived oil demand drop of 50,000 to 70,000 barrels per day in the Hubei province, according to an analysis from S&P Global Platts.

The Severe acute respiratory syndrome (SARS) outbreak in 2003 led to a drop of 300,000 barrels of oil per day during the height of the epidemic.