27/05/2020 Finance and investment | MINISTERY OF ECONOMY
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A recent report
from the United Nations Conference on Trade and Development (UNCTAD) reviews the
interrelated impacts of the ongoing coronavirus crisis (COVID-19) on global
trade, especially its negative and direct effects on supply chains due to global
transport ,traffic restrictions and the suspension of commercial activities. It
highlights the risks of reduced global trade movement caused by a decline in
exports by the manufacturing sector in China, especially as Chinese production
was affected by the preventive measures taken by the government to combat the
spread of the virus.
The Ministry of
Economy, in its review of the latest UNCTAD report, presented a summary of the
key points highlighted in the report, the first of which is the economic
repercussions of the coronavirus pandemic, talking exclusively about the direct
impacts on foreign trade and shipping globally. In addition, it listed the top
20 countries in the world whose economies have been adversely affected by the
decline in Chinese exports during the two consecutive months, January and
February 2020. Furthermore, it addresses the pandemic’s impact on global value
chains and the decrease in trade volume in countries affected by the decline of
Chinese production and Chinese exports (supplies) with an estimated USD 50
billion drop in the volume of the exports across global value chains. The
report explains in details that manufacturing
industries and services sectors in China
fell sharply in February 2020.
China has
become of great importance to the global economy in the past two decades, according
to its position as the main supplier of intermediate goods to manufacturers
abroad, as global trade depends on the manufacturing of 20 per cent of their intermediate
goods in China. The importance of the Chinese economy and its overlap with
global economies have been indicated through the presentation of some graphic
indicators such as: Director of Industrial Procurement, Shipping Indicators,
GLI Index to measure the integration of every country and industry with the
Chinese economy.
There is no
doubt that the decline in the Chinese supply of intermediate goods will affect
the production and export capacities of other countries whose industries depend
on Chinese suppliers as input, this was refereed clearly by stating for example that some European car manufacturers will face
a shortage of some basic components that are needed for their products while Japanese
companies will have also a difficulty to get the needed parts to assemble digital cameras, the same challenges
as well with other countries in various industrial sectors .
For many companies, their dependence on short supply orders when are needed (Just in time inventory) will lead consequently to a shortfall in their production capacities , at the end impacting their overall exports negatively . More specifically, the UNCTAD report indicates that the most affected economies will be the European Union (machinery, cars, and chemicals), the United States (machinery, cars, and precision tools), Japan (machinery and cars), the Republic of South Korea (machinery and communications equipment), Taiwan (communication equipment and office machines) and Vietnam (communication equipment).
Trade Policy & International Organization Department
Ministry of economy
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