Global Economy under threat from coronavirus | Daily News


 

Global Economy under threat from coronavirus

Economic impact of coronavirus becoming clearer.
Economic impact of coronavirus becoming clearer.

With Chinese officials broadening their definition of confirmed cases of the coronavirus, health officials in the Hubei province reported 242 new deaths and 14,840 new cases. That brought the worldwide death toll to at least 1,357 and the number of confirmed cases to more than 60,000, and growing concerns about the impact of this on the global economy.

Investors around the world continue to worry about the impact of the epidemic on China’s and the world’s economy, with initial forecasting that global economic growth in 2020 will be reduced by 0.2% to 0.3%.

Given China’s huge importance to the global economy, the ripple effect could be rough and lasting. The Chinese economy has surged in recent decades becoming the world’s second biggest economy, with a GDP of $ 13.6tn, an annual growth of 7%. As “Guardian” reports, China has supplanted the US as the fulcrum of global trade, being the largest trader of merchandise in the world. Thousands of foreign businesses have opened their own factories on the Chinese mainland. China is also central to a diverse range of global supply chains: much of the world’s raw materials travel to China before being turned into a manufactured product.

Tourism is facing the biggest threat globally. Chinese visitor numbers have fallen by 55% compared with the lunar new year period in 2019, and with Chinese visitors spending much in Asian countries, the loss from travel bans will be enormous to the Tourism Industry globally. If the crisis persists, the global effect will be palpable. The 173 m Chinese made foreign visits in the 12 months ending September 2019, spending more than a quarter of a trillion dollars. Apart from tourism, entire supply chains – automotive, electronic, industrial – are starting to face the mounting threat. Shipping companies report a sharp drop in container volumes. China’s huge domestic market for retail and food and beverages, has dropped hugely. Example: Coffee trade hugely affected with Starbucks, which has 4,000 outlets in China, and half of them now closed.

Many global companies rely on suppliers based in China. For example, 290 of Apple’s 800 suppliers are based in China, responsible for 9% of global TV production. 50% of all manufacturing in Wuhan is related to the automotive industry and 25% to technology supplies from the region.

Automotive executives in Europe and the US are warning they are only weeks away from shortages. Hyundai has already shut down operations in South Korea because of a lack of parts from China.

The Guardian further reports, and supported by other reports too, on the integration of foreign firms in China, having a global impact. To indicate how integrated some foreign firms have become in China - Apple is supplied from factories in China and has a network of 42 Apple stores that will remain closed. Other US retailers from Starbucks to Levi’s have closed half their stores.

South-east Asia is most exposed, with local economies so tightly tied to the Chinese manufacturing and business. Japan, a richer economy, is also exposed, with China being a big buyer of Japan’s industrial machines, cars, trucks and technologically advanced consumer goods. Chinese-made feed components into Japanese factories. Japan’s tourism will also be affected by the cancellations from 400,000 Chinese visitors in the first quarter of 2020.

Australia’s economy is also hugely affected, the drop in exports, fall in the huge Chinese student population, and a massive loss from tourism, with Chinese visitors being the most costly buyers.

Delhi Polls

The ruling Aam Aadmi Party (AAP) led by Arvind Kejirwal scored a landslide victory in the Delhi Assembly elections in India, winning control of the Assembly for the second term running, which saw a huge defeat for the Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi.

The AAP (Common Man’s Party) which won 67 of the 70 seats of the Assembly in 2015, won 62 seats this time, with the BJP which won 3 seats in 2015 going up to 8 seats, just five more this time.

AAP's victory came in the backdrop of a campaign marked by the BJP moving to gain voter support for its national pro-Hindu policies, while the Kejirwal and the AAP emphasized on their service to the Delhi population, with necessary public services. This prevented the BJP hopes of forming a government in the national capital after nearly two decades. The opposition Congress Party again suffered a huge defeat not gaining a single seat, in an Assembly it controlled for two decades.

The victory, which has raised the political stature of Kejriwal, while the BJP failed in its efforts to obtain the support of Delhi voters for its controversial Citizenship Amendment Act, and its public campaign against the protestors, especially women, at Shaheen Bagh, which has been going on for more than 50 days. The BJP campaigners, were mostly against the hugely Muslim protestors in Delhi, and called on Kejirwal and the AAP to give bullets to the protesters and not ‘briyani’ a traditional Muslim dish.

The AAP victory in Delhi has shown that the BJP and its allies, led by Narendra Modi, who won a huge majority in the Lok Sabha at the national elections last year, cannot get the same support in regional and urban assembly politics. It raises questions of the overall popularity of the BJP, with problems faced by the national economy too.

AAP, which had won 54.34 per cent votes in 2015, came close to its past performance and secured 53.57 per cent votes. Arvind Kejirwal will take oath as the Delhi Chief Minister for the third time on February 16.

Ireland Polls

The general election in Ireland has given a major victory to Sinn Fein lad by Mary Lou McDonald, in a closely fought campaign, with the Sinn Fein and the Fianna Fail party gaining 38 seats each.

Sinn Fein won 24.5% of the first-preference vote in Saturday’s election, almost doubling its share from 2016 after harnessing voter anger at homelessness, soaring rents and fraying public services. Fine Gael led by Prime Minister Leo Varadkar finished with 35 seats.

Talks will begin soon to form a coalition government, with the Sinn Fein leader Mary Lou McDonald seeing the possibility of a breakthrough in politics following the realignment of Irish politics. “Sinn Féin has won the election. We have won the popular vote,” McDonald said.

McDonald said her preference was to form a government without either of the two formerly biggest parties, but that she would speak to both leaders. She called for an end to the era of her party, formerly led by Gerry Adams, being frozen out of coalitions. “The democratic thing is for them to speak to me and stop this business of saying Sinn Féin can be put on the margin … So many people now have chosen us to represent them.”

Philippines - US

President Duterte of the Philippines, has given formal notice to the US of his decision to scrap a bilateral agreement covering visiting American troops, following through on repeated threats to downgrade the defence alliance.

The visiting forces agreement (VFA), signed in 1998, accords legal status to thousands of American troops rotated in the country for humanitarian assistance and military exercises, dozens of which take place annually.

Duterte, who has made no secret of his grudge with the US and his disdain for his country’s close military relationship, believed it was time to be more militarily independent, his spokesman said. Defence ties between the Philippines and its former colonial ruler US, go back to the early 1950s and are governed by a mutual defence treaty (MTD), which remains intact, along with an enhanced defence cooperation agreement made under the Obama administration.

It is the first time Duterte has scrapped an agreement with the US, having throughout his more than three years in office denounced Washington for hypocrisy and for treating the Philippines “like a dog on a leash”.

He has argued that the presence of US forces makes the Philippines a potential target for aggression.

Duterte favours warmer ties with China and Russia than the US and has praised those countries and increased their military contributions and donations, which are dwarfed by the $1.3bn (£1bn) spent provided by the US since 1998.

UK - Europe

There are increasing disagreements between the UK and the European Union (EU) after Brexit, and the UK Prime Minister’s moves towards a possible “No Deal” with the EU if current negotiations do not end by end December this year.

UK Prime Minister Boris Johnson’s suggestion that Britain could trade with the European Union (EU) on the same terms as Australia has been rejected by the president of the European Commission Ursula von der Leyen, who said she was “surprised” to hear the prime minister propose an “Australian-style” Brexit because “the European Union does not have a trade agreement with Australia”.

Mr. Johnson made the comments in a speech last week where he rejected suggestions the UK could align to EU rules to gain more market access – the EU bloc’s key requirement. “Honestly, I was a little bit surprised to hear the prime minister of the United Kingdom speak about the Australian model,” Ms Von der Leyen said during a debate in the European Parliament on Tuesday. “Australia, without any doubt, is a strong and a like-minded partner, but the European Union does not have a trade agreement with Australia.”

She said that if the UK wanted to leave without a deal, the bloc was “fine with that”, however, “We are currently trading on WTO terms and if this is the British choice, well, we are fine with that, without any question,” she added.

Mr. Johnson has set himself a deadline of the end of this year to negotiate a trade deal with the EU. If one is not secured, the UK will crash out of the transition period and trade on WTO terms, with British businesses facing high tariffs and quotas for trade.

Two key battlegrounds are emerging in the early stages of talks: the extent to which the UK guarantees it will play by EU rules on a “level playing field” when it trades, and the extent to which the European Court of Justice will oversee the agreement.

The EU also wants fishing rights for its fleets in British waters, while the UK wants access for its financial service firms to European markets.

On Tuesday, the UK Chancellor Sajid Javid said he wanted a “reliable equivalence process” for financial services rules on which “a durable relationship” can be built with the EU.

But Michel Barnier, the EU’s chief negotiator who was also speaking in the parliamentary debate, knocked back the chancellor’s demands, stating: “I’d like to make it clear to certain people in the UK in authority that they shouldn’t kid themselves. There will not be general, open-ended, ongoing equivalence in financial services. We’ll retain a free hand to take our own decisions.” He said the bloc would simply not negotiate with the UK on this issue. As a result of Britain’s departure from the EU, City firms will lose their automatic “passporting” rights to keep doing business on the continent.

Mr. Barnier added that “the opening of our markets, access to data, and equivalencies for financial services will be proportional to the commitments made to meet a true level playing field” in the UK staying tied to EU regulations. This comes amid reports that member states are pushing the commission to toughen up conditions on Britain even further, requiring it to stay aligned with new EU rules after it leaves.

 


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