Chinese Manufacturing Heavily Affected by COVID-19 Outbreak

Just a month ago, when there was still hope that the novel coronavirus outbreak could be largely contained within Chinese borders, the biggest fear of many companies in the U.S. and internationally was the temporary disruption of their supply chains. Little did they know that just a couple of weeks later, China would be the least of their problems, as we’re looking down the barrel of a pandemic with unforeseeable consequences, both from a health perspective and economically.

It’s still interesting to see how heavily the COVID-19 outbreak, and (above all) the aggressive measures taken to contain it, has affected the Chinese economy in the first two months of 2020, as it gives us an idea of the disruptive force of widespread shutdowns on economic activity. The National Bureau of Statistics of China released official data on industrial output in January and February (the two months are typically viewed as one period to eliminate the distorting effect of Chinese New Year), showing which industries have been hit hardest by the epidemic and the ensuing lockdown.

Considering that Wuhan, the epicenter of the outbreak, is often referred to as China’s Motor City, it doesn’t come as a huge surprise that the car industry has been hit most severely by the epidemic. According to the NBSC, value added in motor vehicle manufacturing was down 31.8 percent in January and February compared to the same period of 2019. Manufacturing of general machinery, textiles and railways, ships and airplanes were also among the industries heavily affected, while manufacturing of medicines, computers and communication equipment weren’t hit as hard. The following chart provides an overview of output declines across all major manufacturing sectors.