Wednesday, 29 January 2020



Coronavirus crisis hits global businesses in China 
BA and Lufthansa suspend flights as companies scale back operations 

Businesses have scrambled to evacuate staff and close down operations in China as fears rise over the impact of the coronavirus crisis on the global economy. British Airways on Wednesday became the first big global carrier to suspend direct flights to and from mainland China, a move followed by Germany’s Lufthansa along with its subsidiaries Swiss and Austrian Airlines. With tech groups and carmakers closing factories in China, economists warned that the country’s growth could be slashed. “The economic pain is currently being felt by businesses dependent on travel and tourism,” said Mark Williams, chief Asia economist at Capital Economics, which estimates that China’s growth rate could halve in the first quarter. He added that “the longer . . . factories and businesses in China remain closed, the more production will be affected too, and this will ripple out to suppliers and customers outside China”. Starbucks said it had shut almost half its 4,300 outlets in the country. Hundreds of McDonald’s restaurants and dozens of H&M and Uniqlo stores have also closed.

 Zhang Ming, an economist at government-backed think-tank the Chinese Academy of Social Sciences, warned that the virus could push China’s economic growth below 5 per cent a year in the first quarter. Jim O’Neill, former economist at Goldman Sachs and chair of Chatham House, said the crisis “could not have come at a worse time. Just as China appeared to be stabilising from its slowdown, this has caused a major dilemma not just for authorities there but also countries linked to China — not least Germany.” The official Chinese death toll from the outbreak rose to 132 on Wednesday. World Health Organization experts will meet on Thursday to consider declaring an international emergency. The number of cases in China has passed 6,000, exceeding the local total from the 2003 Sars outbreak, while 15 other countries have reported a total of 71 cases. Japan and the US have begun evacuations of foreign nationals from the central Chinese city of Wuhan, the heart of the outbreak in Hubei province. Big airlines have been among the worst affected companies by the crisis, as concerns mount over the impact on global travel. The share price of BA parent IAG has slid more than 10 per cent since mid-January, while European rivals Air France-KLM and Lufthansa have also been hit. “We apologise to customers for the inconvenience but the safety of our customers and crew is always our priority,” said BA, which has blocked out sales until the beginning of March. 

Cathay Pacific has halved the number of flights to and from mainland China, causing more than $1bn to be wiped from its market value in early trading on Wednesday. Many regional airlines have also reduced or closed routes. Six mainland provinces have told non-essential businesses to delay the restart of operations following the lunar new year holiday, including tech manufacturing hubs Jiangsu and Guangdong, which are crucial for global supply chains. Big tech groups with plants in the affected provinces include Foxconn and Pegatron, the two largest assemblers of Apple’s iPhone; South Korean electronics giants Samsung and LG; and Japanese components and machinery makers such as Murata and Japan Display. Apple warned on Tuesday that the outbreak could hit its supply chain, widening its revenue guidance to take the uncertainty into account. Recommended ExplainerCoronavirus Coronavirus outbreak: what we know so far

 George Magnus, former chief economist at UBS and associate at Oxford university’s China Centre, said the crisis could cause China to lose a “couple percentage points of GDP growth” in the first quarter. The motor industry, which has plants scattered across the region, has also been badly affected. Toyota and Hyundai confirmed that they were keeping their plants shut. Honda, Nissan, PSA and Renault have started flying out non-Chinese workers. Other companies including HSBC, Standard Chartered, LG Electronics and Facebook have suspended or restricted travel by employees to China. Hong Kong’s stock market, the first in China to reopen after the lunar new year holiday, fell sharply on Wednesday, with the benchmark Hang Seng index down almost 3 per cent. The Hang Seng China Enterprises index, which tracks the performance of large mainland companies listed in the territory, was down by a similar margin. How has coronavirus affected flights to mainland China? Airline Flying? Guidance British Airways No Bookings suspended until March Air Canada Yes Some flights cancelled Cathay Pacific Yes Halved flights to and from mainland China Delta Yes Monitoring situation Emirates Yes Screening passengers departing China Iberia Yes Monitoring situation Lufthansa No Flights suspended Swiss Yes Monitoring situation United Airlines Yes Some flights suspended Virgin Atlantic Yes Monitoring situation

Reporting by Don Weinland and Christian Shepherd in Beijing; Kathrin Hille in Taipei; Philip Georgiadis, Daniel Thomas and Clive Cookson in London; Alice Woodhouse, Hudson Lockett and George Hammond in Hong Kong; Amy Kazmin in New Delhi and Alistair Gray in New York

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