The coronavirus outbreak and the prolonged trade dispute between China and the United States have resulted in a decline in the global demand for Chinese-made goods, which is having a drastic impact on the economy of the country. This slump has had a significant effect on the industry as a whole, with producers and suppliers struggling to cope with the ever-changing circumstances.

Manufacturing in China has been a major driver of the country’s economic growth over the past decades. The productionzone as a whole churned out more than $2 trillion worth of goods for both the domestic market and export customers in 2019, accounting for almost double the gross domestic product of the last year.

However, the current situation has stalled growth and is expected to continue to do so in the short-term. The coronavirus outbreak in Wuhan, which was the epicentre of the disease, led to a nationwide lockdown in Chinese provinces, interrupting domestic production and curbing international demand for the country’s products. The lockdown further hit the export market as companies from major consumer nations cancelled or delayed their orders.

The decline in export is not only due to the coronavirus outbreak but is also a result of the prolonged trade dispute with the United States, since the US is one of China’s key export destinations and a significant source of the economy’s revenue. The spat began when the US imposed tariffs worth hundreds of billions of dollars on Chinese products and services, which led to a significant drop in imports.

The relationship between the two countries has only further deteriorated during the course of the pandemic. In May 2020, the US further tightened restrictions by tightening visa rules for Chinese citizens with ties to the Chinese military and implemented major sanctions on Huawei, one of China’s leading tech companies. Such increased tensions have only deepened the impact of the trade war on the Chinese economy.

The current state of affairs has been particularly damaging for smaller manufacturing companies in the country that are dependent on foreign trade. “Most of our clients are from the US and Europe, so we’ve been affected quite a bit,” said one manufacturer in the eastern Chinese city of Yiwu. “We’re trying to diversify our client base and markets by looking for customers from countries like Mexico, Brazil, Indonesia and other parts of Asia.”

The current decline in global demand for Chinese-made goods is expected to have a long-term effect on the country’s economy. To offset the losses, the government has come forward with aid packages for the manufacturing sector to provide support to companies that are struggling and help them to cope with the impact of the pandemic. The relief packages are also aimed at stimulating domestic consumption through tax cuts and subsidies, a move that could help kick-start economic growth.

In the wake of the crisis, Chinese policy makers have also been focusing on overhauling the country’s industrial and economic structure in order to make it more resilient to global disruption. In June 2020, Chinese premier Li Keqiang outlined plans to rebuild the country’s economic fundamentals by focusing on emerging sectors such as e-commerce, digital health and artificial intelligence.

Though the outlook for the Chinese manufacturing sector remains uncertain at the moment, recent government interventions are likely to result in a much-needed boost to the economy. Nevertheless, it may be some time before China’s export manufacturing sector is back to its pre-pandemic level of growth.