JUDY WOODRUFF: Most of the attention on the
outbreak of this new coronavirus is appropriately
focused on public health concerns in China
and around the world.
Here in this country, 66 percent of U.S. adults
say that the virus poses a real threat to
public health. That's according to the latest
"PBS NewsHour"/NPR/Marist poll.
As quarantines and travel restrictions multiply,
many companies that rely on China are also
hurting from this outbreak.
William Brangham is back tonight with a look
at the early economic fallout.
WILLIAM BRANGHAM: You have heard about major
airlines suspending flights into and out of
China, but you may not know that many large
companies have shut down stores and offices
in the country. Others are halting work at
factories within China, which can deal a serious
blow to the global supply chain of parts and
merchandise.
Today, Hyundai Motor Company announced it
will suspend vehicle production at most of
its South Korean factories in three days because
it can't get needed parts from China. It's
the first carmaker outside China to make this
announcement.
David Lynch covers global economics for The
Washington Post. And he joins me now.
Welcome.
DAVID LYNCH, The Washington Post: Thank you.
WILLIAM BRANGHAM: Sticking with this Hyundai
announcement, they're basically saying, we
can't keep making cars if we can't get these
parts coming out of China.
Is it your sense that this is a harbinger
of what's to come?
DAVID LYNCH: Well, that's the worry, that
this is the canary in the coal mine, because
Hyundai is not alone in the auto industry
or in the global industries across the board
in depending upon Chinese factories for key
parts.
The auto industry in the U.S. depends on Chinese
suppliers for something like 15 percent of
its components. Consumer electronics is even
more dependent, up to 50 percent of what's
needed for consumer game consoles, smartphones,
laptops, computers and the like.
So, if Chinese goes off line for any appreciable
length of time, that's a big problem.
WILLIAM BRANGHAM: One of your most recent
pieces in The Post really touched on -- and
I think, for people who don't appreciate the
role that China does play in the global economy
and the supply chain, can you just explain
a little bit more about its centrality?
DAVID LYNCH: Sure.
And this is one of the big changes since 2003,
which was the last time, during the SARS epidemic,
that we saw this kind of runaway medical scare.
China is now four times as large as it was
then, in economic terms.
WILLIAM BRANGHAM: Four times in 17 years?
DAVID LYNCH: Correct, $14 trillion economy.
And it's also become the center of global
production networks in any number of key industries,
as we have said, electronics, autos, medical
equipment, industrial machinery, pharmaceuticals.
Eighty percent of the raw materials used by
American drug companies to make generic drugs
come from China.
So, again, if there is any sort of lengthy
interruption there -- and we don't -- we should
say, we don't know how long this problem will
last.
WILLIAM BRANGHAM: Right.
DAVID LYNCH: If things come back online in
a week or two, this will be a hiccup. It will
be a bump in the road. It will be forgotten
pretty quickly.
But the concern is, as this virus continues
to spread, and the Chinese authorities continue
to struggle to contain it, how long is this
going to last?
WILLIAM BRANGHAM: And I guess we're not epidemiologists.
That's really the mystery, and that's the
thing that they're trying to get to the bottom
of.
The other thing that you and others have reported
that I didn't quite appreciate is how much
of a domestic market -- I mean, China, yes,
exports to the world, but they themselves
have a booming domestic market that we sell
to.
DAVID LYNCH: Absolutely.
And this is another big change. We have gotten
used to thinking of China as a low-cost factory
export platform for the world. But it's now
-- the Chinese domestic market is the largest
market for movies, for autos, for all sorts
of consumer products like this. And American
companies are there to sell into this.
Apple, for instance, sold $44 billion worth
of product in China to Chinese consumers last
year. All the stores in that country are now
closed.
WILLIAM BRANGHAM: We understand that some
of the quarantines for certain regions might
be coming off, with the idea being that those
factories could theoretically open again.
But you were telling us before the end of
the Chinese lunar new year, enormous number
of people coming back into the cities, but
it's not clear if they are going to be going
back to work and if it is going to be safe
for them to do so.
DAVID LYNCH: Correct.
At the moment, the theory is that most of
the factories will come back online on February
10. But in Hubei province, which is where
Wuhan is, the center of the epidemic, it's
February 13. And that's the current planning.
As you say, typically, the Chinese lunar new
year, this is the big annual holiday. So,
everybody floods out of the cities, goes home
to their ancestral villages, coming back at
a time when domestic transport has been interrupted,
because they're trying in the home market
to use the same sort of isolation that's being
applied globally to cut off that transmission.
It may make it much harder than is normally
the case for workers to get back to their
jobs.
WILLIAM BRANGHAM: Responding to the economic
fears about this virus, the Trump administration
has been downplaying it, saying, we don't
think it is going to be a big impact here.
And the stock market thus far seems to have
not viewed this with too much alarm. Does
that reaction surprise you or make you sanguine?
DAVID LYNCH: It surprises me a bit, just because
I think the downside risks here are obvious.
The White House, Larry Kudlow, the national
economic director, said last week that he
didn't anticipate any material impact on the
U.S. economy. That was early days.
I think, today, he's said that they do anticipate
an impact on the recently signed U.S.-China
trade deal. China is supposed to be making
enormous new purchases of American products,
farm goods, energy, manufactured goods.
These were ambitious targets, $200 billion
extra over two years, an ambitious target
before this crisis. Kudlow said today it's
going to take longer than expected to get
those export orders because of the illness.
WILLIAM BRANGHAM: All right, David Lynch of
The Washington Post, thank you.
DAVID LYNCH: Thank you.
