Besides its worrying effects on human life, the novel strain of COVID-19 has the potential to significantly slowdown not only the Chinese economy but also the global economy. China has become the central manufacturing hub of many global business operations. Any disruption of China’s output is expected to have repercussions elsewhere through regional and global value chains. 

Indeed, most recent data from China indicate a substantial decline in output. China
Manufacturing Purchasing Manager’s Index (PMI), a critical production index, fell by about
22 points in February (Figure 1a). This index is highly correlated with exports and such a
decline implies a reduction in exports of about 2 percent on an annualized basis. In other
words, the drop observed in February spread over the year is equivalent to -2 percent of the
supply of intermediate goods. Indicators on shipping also suggest a reduction in Chinese
exports for the month of February (Read more)