The majority of U.S. firms with operations in China expect a virus outbreak to cut revenue this year, and some are accelerating plans to shift their supply chains out of the country, according to a poll by Shanghai’s American Chamber of Commerce.
Nearly a quarter of the firms forecast revenue would fall by at least 16% this year due to the outbreak, while over a fifth said it would decline by 11-15%. Only 13% of respondents said revenue would see very little or no impact from the virus.
The survey covered 127 companies, including 20 with China-sourced revenues of over $500 million and 27 with China revenues of $100-500 million.
Sixteen percent of respondents expected China’s gross domestic product (GDP) would fall by over 2% due to the outbreak.
The death toll from the virus in China has topped 600 with more than 30,000 people infected. Widespread transportation bans and strict public health measures have disrupted economic activity in much of the country, and factory closures are starting to ripple through global supply chains.
A government economist said last week that China’s economic growth may drop to 5% or even lower due to the outbreak, possibly pushing policymakers into introducing more stimulus measures.
Sources told Reuters that Chinese policymakers are preparing measures, including more fiscal spending and interest rate cuts, amid expectations the outbreak will have a devastating impact on first-quarter growth.
In response to the virus, some survey respondents said they were shifting operations out of China and moving more production to other areas, including India.
“Not innovative, but our suppliers are moving operations to Taiwan. This has been considered before, options and planning were being made, but they are pulling the trigger now,” according to one respondent in the survey.
“Our company will directly source from Taiwan and eliminate the China supply chain for more and more products.”