By: Zhuo Zhao
In a country with a population of over one billion people, disease travels fast. On December 31, 2019, the first symptoms of Coronavirus, what is now known as a modern-day epidemic, was reported in Wuhan, China.[1] Since December, the disease has spread like wildfire all around the world, infecting over twenty-thousand people and killing over four hundred in just one month.[2] Wuhan, where the outbreak began, is under lockdown, and strict restrictions are placed on the movement of goods and workers.[3] Additional cities all across China have taken precautionary measures against the spread of the virus.[4] The outside world is fearful of the virus spreading from China.[5]
Since the outbreak, seventy-three airlines have cancelled flights to China for fears of spreading the epidemic.[6] But the outbreak affected more than travel. In addition, factories have shut down, schools and universities are closed, and numerous big-name brands have closed their shops.[7] Manufacturers abroad are reluctant to purchase goods from China, which means outsourcing materials and shifting their supply chain away from China.[8]
Economists have said that “we should be expecting a rapid deceleration in growth in the first quarter of 2020, and gradual stabilization for the rest of the year.”[9] Due to China’s closing of its borders to visitors, tourism has struggled,estimating lost revenue for the past month to be at $1.5 billion.[10] The lengthy shutdown first started over the Lunar New Year holiday, a time when people travel all over the country to celebrate with their families.[11] Specifically during the Lunar New Year period, it is challenging to “gauge how many people are working or producing things.”[12] However, “China’s market fell eight percent on the first day of trading after the holiday.”[13]
Because
of the uncertainty over the duration of the outbreak and the quarantine
measures, companies are struggling with supply and demand.[14] Companies
that “buy and sell goods in the Chinese market are considering the legal
defense of force majeure.”[15] Chinese manufacturing companies’ declaration
of force majeure may give it the opportunity to avoid liability from
nonperformance of its contracts during the outbreak of the Coronavirus.[16] However, in order to qualify, a company must
show that it is “effectively impossible” to fulfill the requirements of the
contract.[17]
Economists are “flying blind” because the data from
around the country is “scant, patchy[,] and unreliable at best.”[18] While companies have closed, it appears that
under force majeure, the Coronavirus has not impacted the companies enough for
them to declare that it is “effectively impossible” to perform their contract. China’s economy has already been impacted, but
if the spread of the disease is not controlled and companies declare force
majeure, then the entire production cycle across most industries in China could
be obstructed.[19]
[1] See Lon Tweeten, Emily Barone & Elijah Wolfson, A Timeline of How the Wuhan Coronavirus Has Spread—And How the World Has Reacted, Time (Jan. 30, 2020),https://time.com/5774366/how-coronavirus-spread-china/.
[2] See Victoria Albert, China Announces 65 New Deaths from Novel Coronavirus, CBS News (Feb. 4, 2020, 7:00 PM), https://www.cbsnews.com/live-updates/coronavirus-usa-confirmed-cases-news-death-toll-latest-2020-02-04/.
[3] See Andrew Walker, Coronavirus: The Economic Cost is Rising in China and Beyond, BBC News (Feb. 6, 2020), https://www.bbc.com/news/business-51386575.
[5] See Coronavirus Quarantine Precautions Around the World, The Guardian (Feb. 4, 2020), https://www.theguardian.com/world/2020/feb/04/coronavirus-quarantine-precautions-around-the-world (describing how all arrivals from China are being screened at airports, temperature scanners are being used, and hand sanitizer has been given out in shops and on transport systems).
[6] See Thomas Pallini, At Least 73 Airlines have Cancelled Flights to China Amid Coronavirus Fears—Here’s the Full List, Business Insider (Feb. 6, 2020, 3:14 PM), https://www.businessinsider.com/airlines-canceling-changing-flights-to-china-amid-coronavirus-fears-2020-1.
[7] See Keith Johnson & James Palmer, Knock-On Effects of China’s Coronavirus May be Worse Than Thought, Foreign Policy (Feb. 3, 2020), https://foreignpolicy.com/2020/02/03/knock-on-effects-china-coronavirus-weak-economy-markets/.
[8] Walker, supra note 3.
[9] Johnson & Palmer, supra note 7.
[10] Id.
[11] See Peter S. Goodman, SARS Stung the Global Economy. The Coronavirus is a Bigger Menace, N.Y. Times (Feb. 3, 2020), https://www.nytimes.com/2020/02/03/business/economy/SARS-coronavirus-economic-impact-china.html (discussing that the implications of the Coronavirus on China’s economy are far worse than from the SARS outbreak that happened in 2003).
[12] See Coronavirus: China Shares in Biggest Fall in Four Years, BBC News (Feb. 3, 2020), https://www.bbc.com/news/business-51352535.
[13] See Walker, supra note 3.
[14] See Johnson & Palmer, supra note 7.
[15] Jan Wolfe, Explainer: Companies Consider Force Majeure as Coronavirus Spreads, Reuters, Feb. 10, 2020, https://www.reuters.com/article/us-china-health-legal-explainer/explainer-companies-consider-force-majeure-as-coronavirus-spreads-idUSKBN205059 (defining force majeure as “unexpected external circumstances that prevent a party to a contract from meeting their obligations”).
[16] See id.
[17] Id. (stating that even if a company needs to act exert more time and money to fulfill their end of the contract, they must).
[18] See BBC News supra note 12.
[19] See id. (stating that analysts believe the impact of the virus could harm the growth of China’s economy if it lasts for a prolonged period).
