Our research for the 2020 White Paper on the Business Environment in China and analysis of data for our 2020 Special Report on the State of Business in South China showed signs of the world’s supply chain being overstretched. American companies as well as most companies on the planet depend on this supply chain for various reasons. Many goods assembled in China or the US depend on raw material from and parts manufactured in many different countries in the world. As it is also presented in our White Paper, it will take 2-3 trillion US dollars to replace the current supply chain. A cost which the world, in the face of today’s problems it cannot afford. Therefore, it is of paramount importance that, as we deal with the immediate problems already caused and to be caused by the COVID-19 outbreak, the two major economies of this supply chain must sit down to establish the stabilizer we have suggested in the above referenced two studies.
The above assessment is reinforced by the results of this Special Report on the Impact of COVID-19 Outbreak on the Supply Chain. This study sounds not just a loud alarm but rather blurs out a siren not unlike the ones used during the cold war. This should be a wakeup call for every business and government leader around the globe and not just for those producing goods and services in China. Considering the fact that factories in China only returned to work less than two weeks ago, 32% of companies surveyed are already experiencing difficulties and are already out of, or expect to be out of, needed components, supplies and/or material. I believe this to be a tip of the iceberg.
While much of the disruption was due to the logistics industry in China not having reached previous operational levels, many of the companies reported a great deal of their needed items regularly being shipped from Japan, South Korea, Italy and the US – countries which are now under pressure from the outbreak and who have limited travel and transportation. One must keep in mind that a great deal of goods are air shipped via commercial flights and the cancellation of thousands of flights will with no doubt lead to shortage of transportation capacity, higher shipping prices and even further delays in shipments between various nations.
As I have suggested in my message in the White Paper, we remain hopeful and determined that the US and China accelerate negotiations for a Phase Two trade agreement.
Please stay safe.
Dr. Harley Seyedin
President, American Chamber of Commerce in South China
Winner of the 2017 Oslo Business for Peace Award (together with Elon Musk)
Awarded by the Award Committee of Nobel Laureates in Peace and Economics
Visiting Scholar, Jinan University
President, Allelon Energy Partners
Key Take Aways
关 键 要 点
To determine the impact of COVID-19 outbreak on supply chain, the American Chamber of Commerce in South China conducted a study of 237 random companies from March 9 to14, 2020. As in the past, American companies make up just over half while EU, Mainland China and other APEC countries represent the remaining participants. Multinational companies make up nearly half of the companies in the study and manufacturers represent 76% of the total.
◎ Nearly one third of the companies in the study are facing components, supplies or material shortages, with 15% of them reporting to have already run out of components, supplies or material.
◎ 80% of the companies believe the problems will last between one to three months.
◎ 100% of respondents are experiencing some impact on their operation due to disruptions in the supply chain.
◎ Some Multinationals have had to postpone their product release affecting tens of thousands of employees globally.
◎ With 18% of the shortage of components, supplies or material being attributed to US, EU, and APEC countries (other than mainland China), the job losses in those countries as a result of disruption in the supply chain will be substantial.
Download the report here: Special Report on the Impact of COVID-19 on Supply China