Wuhan is the biggest transport hub in inland China, home to the factories of countless multinational and local businesses. It is also the country’s biggest ghost town. The lockdown triggered by the coronavirus means most plants are closed. The same applies across more than a dozen other Chinese cities. Supply chains, both domestic and global, are at risk.
Autos and technology, two of the most vulnerable sectors, suffered badly when Chinese equities markets sold off on Monday. An 8 per cent drop in the local blue chip CSI 300 index could have been worse. Local markets have been shut for more than a week for New Year holidays and a government-imposed break. An injection of $171bn in liquidity from the People’s Bank of China will no doubt have helped.
Some stocks will suffer far more lasting damage. Shares of Chinese automaker Dongfeng have dropped over a fifth since the outbreak started. Most of its production is based in Wuhan. Global automakers such as Peugeot, Renault, Honda and Nissan are at risk too. The latter bases roughly half its Chinese production in the city. Domestic supply chains face prolonged disruption until factories can reopen. Component shortages appear inevitable.