Coronavirus: Western corporate giants cut back operations in China

AFP via Getty Images
AFP via Getty Images

Western corporate titans today moved to shut down their operations in China amid growing fears over the impact of coronavirus.

The outbreak has so far claimed 132 lives and left multinationals scrambling to limit the exposure of their employees to the illness.

British Airways suspended all direct flights to and from mainland China until March “with immediate effect”. United Airlines and Cathay Pacific Airways cancelled flights.

Starbucks shuttered half of its 4,300 outlets in China to protect staff in its largest market outside the US. The firm told Wall Street analysts it had planned to hike annual profit targets but ditched the upgrade due to the virus. Fast food chains McDonald’s and KFC have also shut some stores.

Japanese car maker Toyota has suspended its operations in China, where it has plants in northern city Tianjin and the southern province of Guangdong, until February 9. There were fears over the impact on rival Tesla, which sold eight million cars in the roughly 40 cities with many cases of the outbreak.

A string of companies told staff in China to work from home, including social media giant Facebook, accountant PwC and lenders Credit Suisse and Morgan Stanley. HSBC has suspended business travel to its Hong Kong hub until February 11 while Standard Chartered has issued face masks and hygiene guidance.

Apple boss Tim Cook said it was “closely monitoring” the outbreak, which has made forecasting for the next quarter difficult. The tech giant has limited employees’ travel and cut store hours in China, while its suppliers’ factories remain closed longer than expected. Cook said: “The situation is emerging and we’re still gathering data.”

British pharma giants AstraZeneca and GlaxoSmithKline said they were assessing if they could support authorities in the fight against the disease.

There is expected to be a hit to hoteliers, tourist-focused companies and retailers both in China and the UK, where spending from Chinese tourists is a key income for London.

Kate Nicholls, chief executive of trade body UK Hospitality, said: “The impact of the coronavirus outbreak on hospitality businesses globally is growing… Last year, almost 400,000 Chinese visitors came to the UK and the £700 million they spent gave a real boost to hotels, pubs, restaurants and visitor attractions.”

Hong Kong’s stock market tumbled as investors caught up after a shutdown for the New Year holidays. The Hang Seng fell 3% as the financial hub became the first Chinese market to reopen after the break. China’s Shanghai Exchange is shut until next week.

Analysts at Jefferies said the extended break “will mean the banking and financial markets are closed at a time when companies and financial intermediaries will require significant working capital to deal with the supply disruptions”.

UK investors appeared nervous as the virus continues to hit sentiment, with the FTSE 100 barely rising. Other markets including indices across Europe rose ahead of tonight’s US interest rates decision.