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Quest Means Business

Coronavirus Cases Confirmed in 25-Plus Countries and Territories; Coronavirus Disrupts Global Auto Supply Chain; U.S. Markets Swing on Coronavirus Updates. Aired 3-4p ET

Aired February 10, 2020 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[15:00:13]

RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: This is what the world is talking about. The novel coronavirus, unknown to scientists until

two months ago.

Now, in a matter of weeks, it's killed hundreds, sickened thousands and sparked chaos in the global economy.

Tonight, a special edition of QUEST MEANS BUSINESS. We are counting the cost of coronavirus.

I'm Richard Quest in New York. We mean business.

And a very good evening to you. All this hour, we are taking stock of the global impact of coronavirus.

We'll been looking at it from all aspects. First on China, the country. It is trying to get back to work after the New Year as tens of millions of

people are still on lockdown. And the longer the outbreak lasts, the greater the economic damage will be to the world's second largest economy.

And then the individual industries that are affected. Travel in particular. The impact on the travel industry. Canceled flights and cruise ships stuck

in dock. Travelers from Beijing are being turned away around the world.

And as for industry, well, you've got the effects on the global supply chains. The ripples have spread as far as North America and Europe.

Put it all together and the Chinese government is pulling out the stops to contain the virus. After all, the damage could be immense.

At a hospital in Beijing, President Xi urged his countrymen to have confidence.

(BEGIN VIDEO CLIP)

XI JINPING, PRESIDENT OF CHINA (through translator): We will fight with great confidence. We will fight for people. We must build confidence. We

will absolutely win.

(END VIDEO CLIP)

QUEST: So now let's just begin with the virus itself. Health authorities have confirmed cases around the globe. Thousands of them.

More people have now died from the virus than from SARS in 2003, if you look at the map and you look at the numbers, but the percentage of people

affected with coronavirus who have died is of course, much lower.

The head of the World Health Organization warns we're now seeing maybe the tip of the iceberg. He's especially concerned about the transmission of the

virus from people who have not visited China.

Joining me to put the medical and the health side first is Yanzhong Huang, the Senior Fellow for Global Health at the Council on Foreign Relations. Do

we know -- let's be -- let's get to the nitty-gritty. Do we know if the virus has crested and if not, what's the best guess of when it will?

YANZHONG HUANG, SENIOR FELLOW FOR GLOBAL HEALTH, COUNCIL ON FOREIGN RELATIONS: The initial estimate that we have arriving at the inflection

point has not achieved, in fact, now the best hope is that we need to have two more weeks maybe we're going to reach the inflection point. That is for

other parts of China excluding Wuhan.

If including Wuhan, probably, we have to wait for one more month to see the possible inflection point that is the drop of the cases.

QUEST: Is it your view that the health authorities have this under control, and that the quarantine measures in place will be sufficient to

eradicate in the fullness of time?

HUANG: I think it's still too early to say. For one thing, we still have a lot to learn about the virus. This virus seems to be very smart and

actually there's cases that already turned negative, now also turned positive again.

And today, there's a report published by Zhong Nanshan and his team suggesting that the incubation period could be up to 24 days.

QUEST: To be clear, this isn't SARS in terms -- or MERS -- in terms of the deadliness of this, even on a percentage basis. Most people who get the

coronavirus have some unpleasant symptoms, but most people recover, correct?

HUANG: That's correct. But this one, I think it's different from SARS, it is different from MERS in terms of devastating power and in terms of the

state response. They are incomparable to this current outbreak.

QUEST: What worries you most now about coronavirus? The way it's being handled and the information we are receiving?

[15:05:10]

HUANG: Well, the worst scenario is that the containment measures won't be very effective by next month. We have seen continued spread of the virus,

not just in China, but also in the world that developed into a pandemic. I think that will be a true disaster.

QUEST: Sir, we'll talk to you again as we follow this through. I appreciate your time.

HUANG: Thank you.

QUEST: In China, people have started returning to work after the virus enforced an extended holiday break. It's still far from business as usual.

The advice is that companies check workers' temperatures at the office or set up quarantine areas for employees returning from infected zones.

And several companies including Tencent, Microsoft and Alibaba say staff will work from home until further notice.

Toyota and GM are keeping their factories closed. David Culver is our correspondent, and he has been doing splendid work in Beijing following

this.

David Culver, you heard there the Council on Foreign Relations expert. The fear is that this could still get out of control, and yet the Chinese are

doing the very best they can to present it is well under control. What's the truth there?

DAVID CULVER, CNN CORRESPONDENT: They are going to some extreme efforts at that, Richard. I think the question remains, how effective are these

containment efforts going to be going forward? And that's something that everyday folks here are asking to as their lives, in some cases, have

really come to a stop, especially when you look at the lockdown zones.

More than 60 million people, 15 plus cities and this is not only restrictions from leaving those zones, but restrictions within, so going

from one place to another.

In some cases, people are told they can't have but one person leave their house every three days. That's the extremes that some places are going to

in hopes of containing this virus, yet to be seen how effective it will be going forward.

Meantime, President Xi, you mentioned him. He was out and about today for the first time in a while. The question had been raised, where was he?

And he certainly made an appearance, wanted to be on the front lines, so to speak, albeit here in Beijing, had a mask on like most of us as we step

outside, and not only was he trying to reassure folks from the medical place and trying to say in that sense that they are trying to move forward

in this battle against this epidemic.

But he was also trying to reassure people, Richard, from an economic standpoint, and he said that they're trying to stabilize the economy,

trying to prevent massive layoffs.

Meantime, it is back to business but far from normal.

(BEGIN VIDEOTAPE)

CULVER (voice over): You're looking at the post Lunar New Year holiday rush on the streets of Beijing. Most years, you'd see millions of migrant

workers going back into China's capital.

But this year, a much slower pace and thin crowds. The normally bustling shopping districts, desolate on the outside at least, and think you'd find

more life indoors?

Health checkpoints like this one screen people at every entrance of the shopping mall, sanitized only to enter a sterile and near empty space.

CULVER (on camera): On any other given Sunday, especially in winter, malls like this one would be packed with people. Instead, we're pretty much the

only ones here.

CULVER (voice over): Popular Beijing restaurants like this one known for their Sichuan cuisine have had no need to change out the white tablecloth

for weeks.

Many are scared to even talk face-to-face to others, let alone share a meal with them. But there's still a need to make money and there's still a

demand for fresh produce.

Instead of wasting their supplies, the restaurant staff has set up tables outside their storefront creating a makeshift farmers markets of sorts.

(BEGIN VIDEO CLIP)

ZHANG RUI, BEIJING RESIDENT (through translator): They can't operate because of the epidemic so they need to sell out the stocks.

(END VIDEO CLIP)

CULVER (voice over): It's convenient for customers like Zhang Rui. He's been working remotely in IT for about a week. His company, like many here

in Beijing encouraging their employees to work from home.

But he's noticed a slumping company productivity.

(BEGIN VIDEO CLIP)

RUI (through translator): It's not as efficient as working in the office because it's not very convenient if colleagues are not physically together.

(END VIDEO CLIP)

CULVER (voice over): Zhang is still among the fortunate ones. The outbreak left many without jobs to clock into.

Huang Keyun video chatted with us from Anhui in Central China. She, like many migrant workers had expected to travel back to Beijing to return to

her job as a nanny.

(BEGIN VIDEO CLIP)

HUANG KEYUN, MIGRANT WORKER (through translator): My boss told me that he would leave for America. I asked him when he would come back, but he said

he might not return.

(END VIDEO CLIP)

CULVER (voice over): Now jobless, she is living off the two months of extra pay her former employer provided her, but that's draining with each

passing day.

(BEGIN VIDEO CLIP)

KEYUN (through translator): I just stay at home. I don't go out. And the government asked us not to go out as well. I just stay at home with my

family.

(END VIDEO CLIP)

CULVER (voice over): And even if she wanted to return to Beijing immediately, she would be expected to self-quarantine for two weeks. That's

two more weeks without pay.

Many migrant workers facing similar financial struggles as the government's efforts to stop the spread of the virus intensify. For now at least, there

is no containing the growing economic uncertainty.

(END VIDEOTAPE)

[15:10:13]

QUEST: Let's talk about that growing economic uncertainty, David. China was doing -- it wasn't doing particularly well under the tariffs the U.S.

trade war, the economy was slowing, debts are rising. How worried from your gauging of it, from your assessment, how worried are the policymakers about

further serious damage to the economy?

CULVER: I think they are extremely worried here, Richard, and they're not going to let on to that too much in public. However, you do see some

stances coming out of it, particularly with even President Xi.

The fact that he not only was making comments today with regards to the medical side of things, but also trying to reassure people from the

economic standpoint. That really hit home. I mean, he really felt the need to push support for the doctors, but also tell companies, hey, if you need

help to get back production, the country will step in to help you resume production.

I mean that in the same breath of fighting a virus speaks volumes.

QUEST: David Culver, who is in Beijing, thank you, sir. It's late there, and early morning, so I appreciate it.

Now, the coronavirus has struck on the world's busiest travel markets during its busiest travel season, the Lunar New Year, but it's more than

that. It's the rest of the world, too, and the Director General of IATA, and the CEO of Qatar Airways will be with me.

Airlines cutting flights to China and there's no end in sight.

Then later factories around the world feeling the strain. The global supply chain is starting to unravel.

(COMMERCIAL BREAK)

QUEST: Now to our special QUEST MEANS BUSINESS as we continue counting the cost of the coronavirus.

The global economy is already suffering from slowing global growth. We talked about that a moment ago.

There's also the trade war with the U.S. and the prolonged protests in Hong Kong taking their toll.

Now the outbreak is threatening one of the world's busiest travel markets and the ripple effects that go well beyond China's border.

Okay, let's start with the aviation and the cruise industries that are currently bearing the brunt.

We will deal with cruise industries and ships in a moment. Let's start first of all with airlines.

[15:15:06]

QUEST: Now airlines around the world are suspending or cutting flights to and from China en masse.

The Lunar New Year is a peak travel season in China we know that. Now, compare the air traffic from China's busiest airports, this was over the

space on the eastern side of China last year 2019 Lunar New Year, look how busy it is.

Now look what it was like in 2020 and many of these services will have since been dropped.

The IATA Director General, Alexandre de Juniac says the airline industry is prepared to deal with the outbreak. Speaking earlier, he told me

maintaining some service in China can actually help fight the outbreak, too.

(BEGIN VIDEO CLIP)

ALEXANDRE DE JUNIAC, IATA DIRECTOR GENERAL: What we have to say is, it is useful when there is an outbreak everywhere that the service is maintained

at a reasonable level because the airlines bring medical material, equipment, people, so doctors, nurses. So it's an important point not to

cancel the entire service. Otherwise it's a problem. It increases the problem.

QUEST: As the sort of representative of the world's airlines, are you happy with the flow of information that there has been from China to the

airlines? From the WHO to the airlines?

I mean, we've had plenty of health crises by now. We should know how to do it properly. Are you content that that's what's happened here?

DE JUNIAC: I have to say that we have accumulated experience and the sector -- the airline sector -- including you know, the airlines, the

airports, the border control, administrations, Customs, cargo handlers are pretty well prepared and equipped.

You see that there are masks. There are thermal imaging cameras, temperature control systems. So the sector has gained experience from the

previous outbreaks, the SARS, the MERS, the H1N1, the various outbreaks we have had to face in the past.

And we are following very closely the WHO guidelines. We cooperate with the WHO. We have a medical group within IATA. We are composed with the 10

doctors or medical advisers of airlines, plus, we have an observer seat at the WHO Emergency Committee.

So, frankly, it's not too badly done. Of course, there could be areas of improvement. Everybody can do better, but the sector is not too badly

prepared.

QUEST: But what's interesting, of course, is that not only can there be transmission on the aircraft, the airlines are transporting people from

China, and that in itself is a potential risk for contamination.

So you are in many ways stuck right in the middle, aren't you? Because besides the virus contamination in Wuhan and Central China, it is the

transmission elsewhere from people traveling on airlines.

DE JUNIAC: Yes, on that point, you must be aware of two things. First of all, the risk of contamination in traveling by plane is not higher than any

other confined area, probably lower because first of all, we have trained crews inside. We have trained our cleaning crew. We have trained our

handling crew. We have trained our maintenance crew, you know to fight against this type of virus.

And secondly, the air is filtered inside the cabin, so there is -- the risk to catch the virus through breathing is probably lower in an aircraft than

in any other confined area.

The point is the proximity. You have more risk in touching someone who is sick than breathing the same air.

(END VIDEOTAPE)

QUEST: Alexandre de Juniac of IATA.

North America carriers, all of them have suspended his flights to China. Across Europe, they've all suspended, too. The Middle East as well.

It's perhaps only the Asian airlines like AirAsia, Nippon Cathay Pacific that are still resuming some form of reduced service, but Qantas and Air

New Zealand have canceled.

Now Qatar Airways as you can see from here is one of the airlines that has canceled flights to China.

The Chief Executive of Qatar, Akbar Al Baker, joins me now on the phone from Doha. Mr. Al Baker, thank you for speaking to us.

I can understand why you reduced or cut services. How much more difficult decision was that to take?

[15:20:20]

AKBAR AL BAKER, CHIEF EXECUTIVE, QATAR AIRLINES: Frankly speaking, it was a difficult decision because China is an important market, but we have not

suspended flights due to the virus.

The reason we have suspended flights is due to significant operational challenges caused by entry restrictions imposed by several countries,

limiting our ability really to maintain scheduled operations elsewhere.

As a result, the airline had no alternative but unfortunately suspend its flights to Mainland China since the third of February.

QUEST: Right, so this is the position that the crews and the pilots who would be flying to China would not then be able to take other routes

elsewhere because they'd be restricted from entering other countries.

AL BAKER: Exactly. There is a lot of countries that have restricted any crew that has been to China in the last 14 days, cannot operate. And due to

the fact that we are operating nearly 31 frequencies a week to China. It is a significant impact on Qatar Airways operations by restricting this large

numbers of crew for such a long period of time.

QUEST: Are you satisfied with the way the industry has handled this? The information you got from China, the ability -- as an industry, as your own

airline as well, of course, as an industry to deal with these matters?

AL BAKER: Frankly speaking, I should get my hands off China of how transparent they have been and how quickly they have reacted in sealing

these large cities with people, trying to restrict the spread of the virus.

Richard, you need to keep in mind that this virus is not transmitted in the air. This is only transmitted due to droplets coming from coughing or

sneezing by an infected person.

And if you keep your hands properly sanitized, you are really restricting from contracting this sickness. At the same time, keep in mind that modern

fleet of airplanes are protected with high efficiency particulate air filtration system, really eliminates 99.97 percent of airborne particles

from circulating in the cabin.

So, frankly speaking, air travel is still very safe, even in circumstances like that.

QUEST: And what are you doing to assist because I know cargo flights continue or at least, many cargo flights will be at a reduced level, but

they are continuing to bring in necessary supplies to China?

AL BAKER: Qatar Airways is the only airline that has announced that we will carry free of charge all donated medical equipment to China by

anywhere in the world in our wide network.

We are going to operate nearly 40 cargo frequencies in order to deliver medical supplies and Qatar Airways itself is donating over a million masks

and over a million bottles of hand sanitizers as a donation to the people of China, and we will continue to do so as long as we are receiving

requests in this matter.

QUEST: Akbar Al Baker, thank you for joining us tonight. I appreciate it. It's late in Doha. We much appreciate your time. Thank you.

Now, whilst the airlines are catching flights, the cruise industry has been the public face of the crisis so far.

Ships have been quarantined or denied entry at ports running thousands of passengers.

It is in many ways what are seeing on our screens, the effects of this.

Asia is the third biggest cruise market capacity. You can see all the ships in this part of the world, and it grew by 277 percent over the last five

years.

Half of the ships in Asia, you see this very clearly indeed are based in and around China.

Now so far, cruise stocks have tumbled sharply, not surprising, but happened nonetheless. All the three majors. Some of them, like Royal

Caribbean down six percent. They've been denying passengers access who've been to China, and there's been extra screenings before boarding. Some

cancellations and refunds for trips as well.

Brian Salerno is in Washington, the Senior Vice President of Maritime Policy at CLIA, which is the Cruise Lines International Association and

Vice Admiral in the Coast Guard.

Good to see you sir. Thank you -- retired. Good to see you, sir. So the face we've seen are these ships with thousands of people on board, and is

the situation getting better or worse?

[15:25:08]

BRIAN SALERNO, SENIOR VICE PRESIDENT OF MARITIME POLICY, CLIA: Well Richard, let me explain the situation. Our industry places the safety and

health of its passengers as a top priority. That's -- we're in the hospitality industry. We're also in the travel industry.

So we wouldn't have a very viable business if we did not put people first.

Immediately after the World Health Organization established that this is a global crisis, the cruise industry put enhanced screening procedures in

place to restrict or limit the likelihood of a virus being introduced on board a cruise ship.

QUEST: Can I just stop you there. For those ships that already have had one or more cases, we now get the situation where passengers are

quarantined until they've been eliminated. Are you -- that's the way it's working at the moment, correct?

SALERNO: Wait, there's one ship where we have confirmed cases of coronavirus and that is the ship in Japan. There have been a few others

where there were concerns that somebody might be affected. But all of those have turned out to be negative. So it's just that one ship.

We have 272 ships in our members' fleets, so that's one out of 272. That's not to minimize the significance of what people are experiencing on that

ship. We have a tremendous amount of empathy for the inconvenience that they are enduring.

But we're also quite proud of the fact that the industry is doing everything it possibly can to see to their comfort, for their health, and

to make sure that they are given the care that they need.

QUEST: There is one industry that's well equipped for this. I mean many outbreaks of novel viruses and different viruses on ships have certainly

allowed your members to hone their procedures.

But you're still not allowing anyone who's been in China over the last 14 days to board ships, which probably makes sense.

SALERNO: That's correct. We have essentially three criteria in our screening and travel history is one of them. So if a person arrives on a

ship, and they've been in China within the last 14 days, which is the incubation period for this virus, they would be denied entry.

QUEST: What to do next? Because, certainly getting things back to normal so that people will have confidence to go on board, I mean, choosing ships,

I could just as easily say, theaters, or any place where you're going to be at close proximity, but ships particularly where you're close proximity for

some time.

SALERNO: Yes, that is why, you know, we have put these additional measures in place to make sure that we limit to the absolute maximum extent possible

the introduction of this illness onboard any of our ships.

And again, it appears to be working. We've only had again the one ship where there's a confirmed case.

One thing I'll add as well, cruise ships are very unique from a vacation standpoint. It's probably the only vacation you can take where you have a

hospital traveling with you and you have trained medical professionals traveling with you.

QUEST: And an operating theatre on many of them. And finally, I was interested that in this cruise ship case, they're going to give everybody a

-- and in those other cases where cruises have been interrupted, they're giving everybody a complete refund and a free cruise and picking up all the

charges, which seems to be rather generous considering it's not the cruise lines fault that they got -- that there's been this outbreak.

SALERNO: Right, and you know, I can't get into the financial agreements between cruise lines and their passengers. As a trade association, that's

inappropriate for us.

But I think if you checked with the individual lines, you will see there, they're doing everything they can to do right by their passengers.

QUEST: Good to see you, sir. Thank you. I appreciate your taking time joining us from Washington.

SALERNO: Thank you, Richard. I appreciate it.

QUEST: Thank you.

SALERNO: My pleasure.

QUEST: As we continue tonight, it is the cost of the coronavirus and they are adding up. We are going to take a look at the international impact

including those important supply chains.

It's next on QUEST MEANS BUSINESS. Our special edition tonight, the coronavirus outbreak.

(COMMERCIAL BREAK)

[15:30:00]

QUEST: Welcome back to the special edition of QUEST MEANS BUSINESS tonight. China's recovering from the deadliest day of the coronavirus

outbreak so far. Ninety seven people died from the virus on Sunday, that takes the total globally to above 900, and the cases are continuing to

rise. Communities and companies are feeling the effects across the world.

(BEGIN VIDEOTAPE)

QUEST (voice-over): What began as a mystery virus in Wuhan, China, back in December has now spread to more than two dozen countries and territories,

infecting thousands of people and delivering a shock to financial markets across the world. As researchers are scrambling to control the coronavirus

outbreak, the World Health Organization has sounded the alarm by declaring a public health emergency of international concern.

TEDROS ADHANOM GHEBREYESUS, DIRECTOR-GENERAL, WORLD HEALTH ORGANIZATION: Our greatest concern is the potential for the virus to spread to countries

with weaker health systems and which are ill-prepared to deal with it.

QUEST: Already, the virus is rattling industries. Airlines are suspending flights to China, retailers are shutting stores in the country, oil prices

are falling sharply at the prospect of a lower economic demand. And investors are grappling with uncertainty, seeking out safety. Chinese

markets have posted major losses. It's all bad news for a country that was already slowing down economically and is in a tough position.

China's still dealing with the effects of the trade war with the United States, with political unrest in Hong Kong, and rising debt and

unemployment. Last year, it suffered its slowest growth in nearly three decades. It's estimated to lose billions of dollars from the effects of the

coronavirus. China's economy suffered during the outbreak of SARS 17 years ago.

Its annual growth rate slipped more than 2 percent in a single quarter back in 2003. This time around, the hit to China's GDP could be even worse due

to the growth of certain sectors like travel, and the way in which the country is much more integrated into the global trading economy.

[15:35:00]

All of this means, coronavirus and China will have knock-on effects for the rest of the world.

(END VIDEOTAPE)

QUEST: Now, the impact of the virus has extended well beyond China's borders. The World Health Organization is warning about cases in France

and the U.K. involving people who have never even traveled to China. In the U.S., nearly 400 people have been tested. Now, Goldman Sachs says it

expects the outbreak to slash U.S. growth by nearly half a percent this quarter. Mo JI is the senior vice president and chief economist for Greater

China at AllianceBernstein.

Now, she joins me from London. Mo JI, this -- well, what is your expectation for how this will affect both China's growth and global growth?

MO JI, CHIEF ECONOMIST, GREATER CHINA, ALLIANCEBERNSTEIN: I think, you know, the impact on the global economy and also the Chinese economy, you

know, it's much bigger than market originally saw it because the recognition of the contagion and also the death rate of this virus. Markets

and everybody, experts, policy makers, has to be very humble, respect the virus' own cycle.

It's not as market expected, it's very short, it can end. And also end over or -- end the --

QUEST: Right --

JI: Estimation of the potential impact is much disruptive.

QUEST: So, this idea that Goldman Sachs comes up with a half a percent of GDP in the U.S. Does that sound about right to you? And more importantly,

perhaps, how much do you think it will affect Chinese economic growth? What would you say is likely to be the downside there?

JI: The downside here, because economic structure back in 2003 and now are so different. Service and consumption accounted for 50 percent of the GDP,

meaning the current heat on the GDP is -- should be much bigger. So, this is why we see markets vary in that fourth quarter GDP for China for 2020

from little percent to 5.5 percent. And our estimation, it should be at least 1 percent a deduction of the current GDP.

QUEST: Right, so that would -- and bearing in mind the last numbers we saw were the lowest for some many years, this could have the -- this will have

a serious impact on China's economic growth this year?

JI: Absolutely. We at AllianceBernstein, we have been calling for precedent downward pressure, precedent policy easing for 2019. But for

2020, we have been calling for more downward pressure, more policy --

QUEST: Right --

JI: Easing expected. Along with this coronavirus, Chinese government has to ease much more.

QUEST: So, let's talk about that. So ease rates, the policy rates, which are already low, and then also what? I mean, what are the stimulus

measures? They've already cut some of the tariffs? Would you like to see them cut more tariffs? What else should they do?

JI: Actually, they have a lot of things to do. I think looking around globally, China has the room, has the tool, and also to be a nation to do

the policy-easing. That is why I say Chinese stimulus is the biggest data for global assets. Now, here, in terms of monetary policy, they can do a

lot.

QUEST: Right.

JI: Triple our cuts, long prime original cuts. They can lower their interest rates, and also for the fiscal side, they can do much more,

special local government bond issuance to help stimulate the economy by investing in infrastructure projects.

QUEST: So the billion-dollar question, bearing in mind, where this happened, right in the heart of the manufacturing center of China, do you

think the government will react sooner rather than later on the economic front?

JI: They have to react much sooner. This is as just today, President Xi has been calling for a much faster resumption of the manufacturing --

QUEST: Right.

JI: Because now we see global supply chain has been hit much bigger than expected. And also President Xi and China's leaders, they do not want the

manufacturing moving overseas.

QUEST: Right.

JI: So, this is why you will see a much faster resumption of activities, especially in manufacturing sector.

QUEST: Mo JI, good to have you, needed that interpretation on the economic front. Thank you so much, ma'am, for joining us tonight. So, from the

economics, let's get down to the nitty-gritty of actual supply chains, the business side of it. Wuhan was at -- or is at the manufacturing center, the

crossroads. Transportation, industrial production, it all goes through Wuhan or thereabouts.

[15:40:00]

And now the ripples have reached factories around the world. We will look at that in a moment. QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Nissan is warning its factories in Japan are facing supply shortages because of the virus outbreak. The global impact on supply chains

is now growing. DHL warns industries like autos, pharma, high-tech manufacturing will be particularly affected. Now the first ripples in Wuhan

were when factories delayed reopening after the Chinese new year.

There were new concerns about the health of returning workers. You then got a second ripple effect. Transportation disruption, think about it. Seven of

the top-ten business -- and busiest ports in China. You can see them here in yellow. They are all along the east, southeastern seaboard. Ships are

now being held outside the ports or at the dock side.

And there are similar issues of course, affecting air cargo, and that's where the ripples truly go global. The third ripple is just in time,

manufacturing, 17 percent, 17 percent of unfinished goods, consumer goods, they're intermediate goods going around the rest of the world, whether it

would be to the United States or across to Europe.

Now, when one critical part isn't available from Wuhan to be shipped around or flown around, then of course, the other companies can't ship the

finished products. And so, the reality is in South Korea, Hyundai has suspended production because of part shortages. Nissan is facing supply

shortages in Japan. Fiat may have to shut European facilities.

Kaori Enjoji reports Wuhan -- as you just look at its positioning, this is what's so significant. It's particularly important for the global auto

supply chain, and the virus crisis is proving disruptive.

(BEGIN VIDEOTAPE)

KAORI ENJOJI, REPORTER (voice-over): Before Wuhan became ground zero for the coronavirus, some called it the Detroit of China as it churned out

billions of parts for the auto industry. It takes roughly 30,000 parts to make one single car. Every day, a factory is closed in Wuhan means risks

are mounting for one of the most important industries in the world. China accounts for about a third of global auto production.

And supply chain strains are already showing inside and outside China. First Sanya Motor, then Hyundai, next Kia. These South Korean automakers

have temporarily suspended production because they couldn't find harnesses from China to wire their cars.

[15:45:00]

Giants like Toyota, GM and Ford all say, they simply don't know what lies ahead.

KOJI ENDO, HEAD OF EQUITY RESEARCH, SBI SECURITIES: At long last, the opening of this facilities can be -- can be witnessed within the next two

months. Then probably, eventually, you know, the actual negative impact could be minimal.

ENJOJI: Japanese auto giants, Toyota and Honda said they will not restart the plants they have idle in China until at least the week of February

17th. China and the global economy slowed after the SARS outbreak in 2003. This time, though, could be far worse, because China's economy is eight

times larger than it was then, and it exports six times more.

On top of that, China now makes higher value-added products that are harder and costlier to replace. If supply is down, so, too, is demand. Automakers

say it's too early to tell if consumers will be in the mood to spend even after production resumes.

JESPER KROLL, SENIOR ADVISER, WISDOMTREE: It is a demand shock affecting the most important global growth driver over the last couple of years,

which is the people's Republic of China.

ENJOJI (on camera): It couldn't have come at a worse time, on the heels of the slowest global economic growth since the 2008 financial crisis. With

China's rising middle class, literally locked in, hopes that businesses had for a small rebound this year are fading fast. For CNN, I'm Kaori Enjoji in

Tokyo.

(END VIDEOTAPE)

QUEST: Wherever you look, it's taking a toll, a brutal toll on tech, as many products are manufactured in China. Companies are now warning

customers to expect shortages. Foxconn saying iPhone and AirPod production will have delays after its factory was closed. Facebook stopped taking new

orders for its oculist quest via headset -- no relation. Tesla is warning Model 3 deliveries could be postponed.

And Lenovo laptops and Huawei phones, expect delays as they rely on components from Hubei. Hadas Gold is live in London as well on these ripple

effects. I guess, Hadas, one shouldn't be surprised at all at these ripple effects. But they are startling nonetheless.

HADAS GOLD, CNN BUSINESS REPORTER: It is startling also when you just look at the numbers, and it really puts into perspective how important China is

to so many of these firms. And that's why some analysts have said companies like Apple need to find their new China just because of the reliance, and

just to see how this one virus can really have such a crippling effect.

I'll give you a number for example, about 381 out of 775 manufacturing and supply locations for Apple are based in China. Now, while only two are in

the epicenter, we have seen how the shutdown of transportation, how the worries of letting people work from home are all affecting -- are all

affecting the production. We've already seen some numbers from analysts. Apple hasn't given numbers out yet, but Wedbush example says for every

week, Foxconn is going to be shut down, that's one million fewer iPhones this year.

We probably won't see the impact on these number really until the holiday season --

QUEST: Right --

GOLD: But this is going to continue on too, and I've seen other analysts, they say that they expect a 12 percent drop in overall smartphone

production this year.

QUEST: OK, let's look at the other side of this coin. The economic evidence also shows though, does it not? That there's a bounce back. The

demand that is lost in the slowdown or in the crisis picks up afterwards. Now, it doesn't go one for one, so really I guess what one is looking at is

what's likely to be the net-net effect?

GOLD: Right, what's the net effect on demand, and also on supply and how much inventory are they not going to have sort of backed up to be able to

sell? And that is why the concern I'm seeing from analysts is already towards this 2020 holiday sales. The concern that as we continue, we don't

quite know if all the factories are up and running because Foxconn -- we're getting some sort of cagy responses for them, for example when it comes the

Apple products.

How much is this going to be affected? How much slowdown are we going to have? But we won't really see those numbers until --

QUEST: Right --

GOLD: Towards the end of the year. But it's also going to affect, I have to say new products as well because while they're working on these current

products, they're also developing these newer phones, and it's not clear whether that's -- whether this slowdown is going to affect these new

models.

QUEST: Good to see you, thank you, Hadas Gold in London. Now, investors have been following the coronavirus very closely. The market can't make up

its mind on what the ultimate impact will be. The chaos that it has caused, but there are opportunities. Those companies that have been beaten down,

they could be the ones to buy if there's going to be a rebound. Clare Sebastian after the break.

(COMMERCIAL BREAK)

[15:50:00]

QUEST: It has been an exciting year since the beginning with record highs, left, right, and center. You can see January went all the way up, then came

all the way down into losses, and then back up again. And now look where we are, 2930. Now, even with Wall Street at record highs, the virus has become

the major focus for investors. The Dow took notice in mid January. As well there after a second person died in China.

But then it rose sharply towards the end of the month, that's because the Chinese government stepped up responses. And now, we've got this fall

against -- the U.S. cases are announced. Putting it towards February -- I mean, this just shows the difficult nature of it is set to rise over here,

and central bank stepped in and a number of new cases slowed.

The issue of course, and the question bearing in mind, we've had this gain is once the coronavirus has settled down and is on the wane, does this go

back up or hold its own? Clare Sebastian is with me to break this down. What do you think happens?

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, I think, Richard, we don't know yet how this is all going to play out. I think the issue with

earnings, the issue with how this affects global economic growth, all of that hinges on how long this lasts. And we're seeing this week from how

these companies are coming back online, the patchy response we're seeing across China.

The disruptions that are happening in supply chains around the world that even when things start to get better, it can take a little time, disruption

can last longer than that.

QUEST: So -- but if we look at those companies like the cruise lines -- I showed you some of them --

SEBASTIAN: Right --

QUEST: You know, are down, Royal Caribbean are down 6 percent. Well, this is not going to last forever even in a -- I mean, is this a buying

opportunity?

SEBASTIAN: I mean, I think some people would look at it that way, others will see a potential for cascading economic impact that could mean that

things don't get back to where they started. Don't forget this is happening at a time when Chinese economic growth is at a 29-year low, when that is

spilling over into global economic growth. The Federal Reserve is now saying that coronavirus is another downside risk at a time, when last year,

they were saying the downside risks were receding.

So, I think there's a note of caution there, but certainly, some people will be coming in. And this market does have, Richard, the buy the dip

mentality because of the support that we have seen from the central banks.

QUEST: Yes, but also because the elevated prices --

SEBASTIAN: Right --

QUEST: That we've seen, we show -- we saw that, you know, there, we're seeing now --

SEBASTIAN: Right --

QUEST: I mean, that Apple, per se --

SEBASTIAN: Yes --

QUEST: But that ramping up that we've seen. Any opportunity to get these stocks on a downward dip, if you fundamentally believe that the U.S.

economy is strong, and that there will be an election and that Donald Trump wins or loses, I don't really know, but then this is grits to your milk.

[15:55:00]

SEBASTIAN: Well, Apple is not -- I mean, it's not so much a bet on China like some of the other stocks out there, this is consumable a bet on how

strong the U.S. economy is because obviously a lot of their customers are in the U.S., and they just posted, you know, really strong earnings, iPhone

sales are rebounding. So, any chance to get in there, I think a lot of people are going to take it. But if you compare that, for example to some

others --

QUEST: Wynn resorts.

SEBASTIAN: Wynn resorts.

QUEST: Now, it gets from 152 down to 127.

SEBASTIAN: Right --

QUEST: There's an argument that says why would you not take a risk?

SEBASTIAN: Right, 70 percent of their revenue is from China. They had to close their casino in Macao because of this -- they say they're losing $2.5

million a day around that. But obviously when it starts up again, that effect should recede. The intangible here, Richard, is the effect on

sentiment. Will people still want to go to Macao? Will people still travel to Hong Kong? Will the flying public come back or will there be a lagging

effect there?

QUEST: I can see the temptations. Take this Yum China which is --

SEBASTIAN: Yes --

QUEST: A restaurant chain, down from 48 to 42. Now, it's not a huge fall, considering. But if you're bullish overall --

SEBASTIAN: Yes --

QUEST: Then this is your moment.

SEBASTIAN: Potentially, I mean, you don't get much more exposed than Yum China. They are the biggest restaurant operator --

QUEST: All right --

SEBASTIAN: In China. But they have been expanding there, Richard, they had a two pizza-huts a day last year in China.

QUEST: Good to see you, thank you, we'll have a profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment, we spent a lot of time talking about the economic effects and the business effects. But in all of this, let us

not forget the human effect. The tens of thousands of people who have been infected, who are now living in quarantine, the millions of people who

can't leave their homes or cities, those on ships, planes, you name it.

Because the coronavirus has hit hard. And that is before we even begin to consider the effects on the Chinese government, and the issues of

censorship, the issues of trust and what might happen to President Xi as a result of all of this. Put it all together, it is easy to say that it is

not as deadly as SARS, but coronavirus has the potential to be every bit as significant in as many different ways.

And as our correspondent reminded us, could still explode into an international health crisis. And that's QUEST MEANS BUSINESS for tonight, I

am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is profitable. Leave you with the bell from the New York Stock

Exchange and thank you for watching our special edition.

(BELL RINGING)

END

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