Article:
BANGKOK (AP) -- The virus outbreak in China has put South Korea's economy into an "emergency situation," its president says. Japan is on the brink of recession and big manufacturers are forecasting a whole world of woe.
Comments:
To be fair, it seems the South Korea economy, for the past year, as been in an "emergency situation. As the economy is overly dependent on exports and large companies for its economic growth, as both large companies and exports are heavily interlinked, it not a surprise that someone has now claimed the economy is in a difficult and challenging situation.
As for Japan, beyond the virus situation, which is causing multiple affects, the economy overall was/is still somewhat stable, just the virus has brought unexpected challenges.
Article:
As many Chinese finally go back to work after their longest Lunar New Year holiday ever, the economic fallout from the outbreak that began in the central city of Wuhan may be just beginning. Companies are warning their bottom lines will take a hit, and governments are ramping up stimulus measures for economies that just weeks ago were hoping to see recoveries after months of uncertainty due to trade tensions and slowing global growth.
Comments:
The virus situation will/has certainly affected many Chinese and global businesses in China, South Korea and Japan. Not to mention the airlines which are going to be greatly affected by the virus situation. Lets hope the governments step in with economic measures for all involved in this situation.
Article:
"Emergency situations require emergency measures," South Korean President Moon Jae-in said Tuesday, calling for aggressive action to support companies dependent on trade with China and encourage consumers to spend more.
"The current situation is very serious, even more so than thought," Moon said. "We should put every measure we can think of on the table, regardless of whether there were precedents or not, and employ every means possible."
Comments:
Governments need now to step in and support whomever that is affected by this situation. However, while its good to encourage consumers to spend more, at least on the ground, they may be reluctant to go to stores and spend. So most likely there will be an increase of online spending, which has been trending upward, and now may be even more. South Korea has a second to none, world class home delivery sector/industry, that will be able to handle the increase in online purchases for home delivery.
Article:
Many in the region were hoping that an easing of trade tensions thanks to a truce between the U.S. and China in their tariff war would help revive sluggish trade this year. The virus outbreak has sideswiped the region with a raft of new, potentially much broader uncertainties.
Comments:
The easing of trade tensions was a welcome sign that it would help revitalize economies and supply chains in South Korea and Japan. But now that there is a new force, the virus, much remains to be seen how much these economies are going to be revitalized and or take some kind of hit because of the virus.
Article:
Central banks across the region have already begun slashing interest rates to help ease credit as tourism arrivals plunge and manufacturing and delivery networks get entangled in bottlenecks caused by lockdowns inside China intended to help contain the spread of the virus, which has killed more than 1,870 people and infected more than 73,000 globally.
Comments:
Both monetary, central banks, and fiscal, government spending, most likely need to work together to meet this challenge. Its mostly like one or the other alone might not be able to handle the complexity of this virus problem and how it is now affecting economies in Asia. Whatever is needed and this is a real multiplier situation, meaning it will only grow more and the challenges are going to multiply.
Article:
Asian economies have grown increasingly reliant on trade with China and tourism catering to growing legions of Chinese travelers. The other regional powerhouse, Japan, saw its economy, the world's third-largest, contract by 6.3% in annual terms in the last quarter of 2019, even before the virus outbreak spiraled into a crisis.
The rebound in manufacturing and other business activity after the outbreak of Severe Acute Respiratory Syndrome, or SARS, in 2003 suggests the damage to manufacturing industries may be transient.
Comments:
Every country in the region, it seems, has, as expected, increased its trade with China even more so in recent years. The US/China trade easing certainly is a welcome relief, but the virus situation has caused even more concern.
Yes the Japanese economy might have contracted in Q4 in 2019, due to several concerns such at the sales tax increase, but it was expected to bounce back like it did in Q3 in 2014. The virus situation has not helped the Japanese tourism industry, which recently has been heavily depended on Chinese tourist.
Manufacturing industries might not come back this time as quickly, and reports are that some might be moving to other more safer areas.
Article:
But the blow to regional tourism could persist, given the much broader travel restrictions and precautions put in place by regional governments and the much higher number of people affected: SARS killed fewer than 800 people and infected only about 8,000.
China has canceled two of the biggest business happenings of the year, a trade fair in southern China's Guangzhou and the Beijing auto show, adding to the growing number of conferences and sports events being postponed or called off due to the outbreak.
Tourism arrivals in Thailand, Singapore and other regional hubs are down sharply, leaving many who depend on steady flows of Chinese and other travelers scrambling for alternative ways to get by.
Comments:
Tourism seems to be a major challenge now in all the regional economies in Asia. No country seems immune to the situation. Japan, in 2019 etc. had 8 million tourists from China. Of course now that is being greatly reduced because of the virus. South Korea, it seems had/has built and entire tourism industry around Chinese tourists, but now that too is greatly affected.
The big question is how long will it take to stem the flow of new infections in China and not even more so in South Korea and Japan, and how soon before the Chinese tourists are allowed to return to normal tourist type activities in Asia.
Article:
Economists are now forecasting that China's growth could stall into the low single digits in this quarter, while Japan, where dozens of people have been confirmed infected with the virus, is almost certainly headed for recession.
"The biggest unknown is whether the crisis will result in a major drop in spending by Japanese consumers," Marcel Thieliant of Capital Economic said in a commentary. "While the new coronavirus isn't as deadly as SARS, it's still possible that consumer spending will come under pressure as households refrain from visiting shops and restaurants."
"There's clearly a risk that Japan slides into recession at the start of this year," he said.
Comments:
Economists are now forecasting that China's growth could stall into the low single digits in this quarter, while Japan, where dozens of people have been confirmed infected with the virus, is almost certainly headed for recession.
"The biggest unknown is whether the crisis will result in a major drop in spending by Japanese consumers," Marcel Thieliant of Capital Economic said in a commentary. "While the new coronavirus isn't as deadly as SARS, it's still possible that consumer spending will come under pressure as households refrain from visiting shops and restaurants."
"There's clearly a risk that Japan slides into recession at the start of this year," he said.
Comments:
China is definitely going to have some kind of decrease in its economy. But most likely the size of the economy and the complexity of the economy, might save it from a complete meltdown or complete drop.
Japan is another situation but similar. It too is a large economy, both domestically and also export wise. Consumer spending has always been a major challenge for the Japanese economy. But at the same time, it might be an incentive for Japanese consumers to spend more online instead of going to stores and shops.
For example South Korea has a second to none world class logistics and delivery sector that delivers to home and businesses almost everything. This might be a very good incentive for Japanese business, of all types to move into more online selling and even more for Japanese logistics and delivery companies to transform themselves and get more involved, even more, in delivery of all kinds of products to homes and business, from food, groceries, take out orders, department store products to whatever. Japanese delivery companies and all kinds of stores need now to coordinate their activities to offset consumer fear of going out to store.
As in the past, many online purchases could be picked up at convenience stores. This should continue to that those who are not so adept at online shopping can still get things online and pay cash or whatever at convenience stores.
Japan should also be careful and setup easy to use online shopping for senior citizens who might be reluctant to shop online.
Online shopping and delivery doesn't have to be a complete loss for regular store as they should enhance their online presence in this situation.
Article:
Governments elsewhere are also preparing to act to cushion the blow from the virus. Singapore's government announced Tuesday a budget with an extra 6.4 billion Singapore dollars ($4.6 billion) in special measures to provide extra health care funding and subsidies for businesses and households.
Farmers in Southeast Asia, especially tropical regions along southern Chinese borders, are struggling to find markets for crops unable to make it to market due to transport disruptions and quarantine restrictions in central and eastern China.
Exports of pungent durian fruit from Thailand to Malaysia have slowed, causing prices that had surged thanks to ravenous demand from China to plunge in recent weeks.
Comments:
The virus situation has definitely affected the supply and logistics chains all over Asia. All countries to need to figure out what to do with all the disruptions that are taking place and try to find relevant measure to help those in need. Not all are going to happy with whatever is done to help, but governments everywhere now need to step in a try to minimize the situation as much as possible.
Article:
But disruptions to tourism and the manufacturing sector are having a much broader reach.
Chinese authorities are encouraging factories to get back to work, but a survey of manufacturers in the Yangtze River industrial region conducted by the American Chamber of Commerce in Shanghai last week found that nearly 80% did not have enough staff to run at full capacity. Nearly a third said logistics issues were their biggest concern.
More than two-thirds of the 109 companies surveyed had already gotten back to work, but many said their businesses were being hindered by quarantine restrictions and uncertainties over government approvals.
Comments:
It seems logistics issues all over Asia now are the major challenge. Even South Korea, car manufacturers are being suspended or shut down due to logistics challenges related to car parts. How much is this really going to have an affect of course will be determined by how long this lasts and how deep are the logistics challenges in the future.
Article:
Apple Inc.'s announcement Monday that it won't meet its second-quarter financial guidance because output of iPhones has dropped due to the outbreak sent a chill through Asian markets on Tuesday.
On Jan. 28, Apple said it expected second-quarter revenue to be between $63 billion and $67 billion.
Production is ramping up slowly, the Cupertino, California-based company said, and demand in China is down because many of Apple's 42 retail stores there are closed or operating with reduced hours. China is Apple's third-largest retail market for iPhones, after the U.S. and Europe.
Supply chains for Apple and other high-tech firms stretch deep and wide across Asia. The announcement Monday caused shares in Samsung Electronics to sink 2.8%, while Sony Corp. fell 2.5% and computer chip maker TMSC dropped 2.9%.
Comments:
Deep supply chains are definitely a major challenge right now. The bigger challenge is when will the virus crisis end and how long before the manufacturers and the supply chains can get back to normal and or meet demand for if there are orders being placed etc. and not being met because of the situation.
Article:
The outbreak struck just as makers of semiconductors and other components were looking forward to a recovery following a protracted downturn. For South Korea, Taiwan and Japan, weaker demand will slow recoveries in exports that had been expected to bounce back following the preliminary agreement between Washington and Beijing on ending a tariff war that has dragged on regional economies for nearly two years.
Comments:
Yes the semiconductor industry was looking for a recovery but now it looks like that recovery might not happen in the immediate future until the virus situation calms down and everyone can get back to business as normal.
© 2020, Tom Metts, all rights reserved
© 2020, Tom Metts, all rights reserved
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