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Coronavirus a "very real threat" to the economy

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Tuesday 11 February 2020

Coronavirus a "very real threat" to the economy


A Deputy who spent the majority of his working career in Asia has warned of the "very real" threat that the coronavirus poses to the global economy and supply chain.

Deputy Carl Meerveld, who set up and ran Asian operations for several international investment fund research companies earlier in his working career, has expressed concerns about the macro-economic impact the now widespread disease could have.

"Everywhere there is growing concern about the medical impact of the coronavirus," he said. "What people are as of yet unaware of is the macro-economic impact, which is growing worse by the day.

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Pictured: Deputy Carl Meerveld lived in Hong Kong for 20 years. 

"With our just in time supply chain, whether it be finished goods to the consumer or components to a factory, very few people carry stock. It is typical that one container arrives as the previous container is emptied. 

"The issue with that is that any interruption in the supply chain whatsoever can have a dramatic impact in a very short timeframe. That can be seen right now in that face masks are rarer than hens' teeth if you want to buy them."

Authorities in China have ordered factories and other employers to remain closed after the annual one month New Year holiday, while some cities are only allowing one adult to leave the house every two days in efforts to stop the virus spreading. 

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Pictured: A lot of Apple factories are in China, along with many others. 

Many of those Chinese factories are manufacturers for major international companies like Apple, whose operations remain closed until further notice. 

And several leading car makers such as Nissan, Peugeot and Citroen are in shutdown. 

"If you look at modern society, how many things are made in China or have components that are made in China?," said Deputy Meerveld. "Even if you can get workers to a factory, how are you going to get your goods shipped out when the complete supply chain is affected?"

"The shutdown of our factory to the world is going to have a considerable impact and every week it goes on, that impact goes up."

"There is a premium on protective clothing and face masks, which are now in short supply and are selling for several hundred percent more than the normal going rate."

Deputy Meerveld said many companies which source goods or parts from China put in a large order before the turn of the year to see them through the scheduled downtime. 

"However, the Chinese New Year has come and gone, and there has already been a two week extension [to the return to work date]. 

"[Some companies] may have enough in stock to keep them going until the end of February or the end of March, but there would be very real issues beyond that."

"The impact of this is inconceivable and it may expose the vulnerabilities in our global economic model, which is built on efficiency, and increase the carry cost of stock in the future." 

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