China virus outbreak fans fear, uncertainty

China’s worst health crisis in years has sparked fear and uncertainty for businesses from North America to Asia that depend on trade in the affected region.

Experts say it’s too soon to know how disruptive the crisis will prove. But it’s already having an impact.

McDonald’s has shuttered restaurants in five Chinese cities, including the inland port city of Wuhan, where the crisis is centered. Shanghai Disneyland has temporarily closed as a precaution. Restrictions on travel and fears of flying to the region are threatening to depress demand for oil and jet fuel just as China’s Lunar New Year is beginning.

In a sign of China’s vast economic reach, even niche companies in America have begun feeling squeezed. In Houston, Rockstar Wigs worries that production delays in China will hold up shipments. Omaha, Nebraska-based Home Instead Health Care has stopped sending caregivers to the homes of elderly clients in Wuhan.

So far, there are 830 confirmed cases of the virus and 26 deaths. Wuhan and 12 other Chinese cities are on lockdown, isolating a combined population of more than 36 million.

“Personally, I now cannot go to Wuhan to negotiate new orders, meet with new vendors, take foreign companies for supplier visits, and visit trade shows,” said Stanley Chao, a consultant in Rancho Palos Verdes, California, who helps foreign companies do business in China. “I may lose three to five trips to China, which is my bread and butter. In turn, my team in China cannot work, and I may have to temporarily lay them off for a while.“

The growing fears over the virus rattled financial markets Friday. The Standard & Poor’s 500 stock index endured its worst day since early October and snapped a two-week winning streak. The S&P index fell 0.9 percent after having been down as much as 1.3 percent earlier. Shares in airlines and other companies in the travel and tourism industries, which stand to be among the hardest-hit sectors if the crisis worsens, fell sharply.

So far at least, the virus appears to be less lethal than the SARS outbreak of 2003, which killed hundreds, though it is too soon to say for sure. And Beijing has apparently been more forthcoming about the health risks this time, leaving less room for panicinducing rumors to take hold.

“The authorities are sharing more information,” said Kent Kedl, partner at the consultancy Control Risks responsible for Greater China. “They’re getting out in front of it.”

Moreover, because the outbreak coincides with the Lunar New Year holiday, many businesses are closed as tens of millions of migrant workers return from big cities to their hometowns in the countryside.

Still, Wuhan is a central hub for China. Isolating the region could devastate Chinese production in automobiles, aviation, hightech mechanical and electrical manufacturing, said Ahmed Rahman, an economist at Lehigh University.

“Its central role in facilitating exchange between the Chinese hinterlands and the rest of the planet cannot be overstated,” Rahman said. “Arguably, out of all the regions of China, closing off Wuhan may be the most disruptive to the global economy.“

Tourism could be hurt, too, because of the region’s many flights to Bangkok and Tokyo.

Many businesses are scrambling to contain the potential damage.

McDonald’s said it has closed all of its restaurants in five cities in Hubei province — Wuhan, Ezhou, Huanggang, Qianjiang and Xiantao — until further notice. Its operations are running in other cities in Hubei where public transportation is available.

A CTNext business startup pitch event in 2018 in Stamford.

words and pledged to reinvigorate the state’s image as a place to start a business, touting his own personal history in building a company that ran cable TV networks on college campuses.

A year later, Lamont has yet to promulgate any sweeping entrepreneurship initiatives to rival those of his predecessor Gov. Dan Malloy, whose administration paired in 2016 a new CTNext initiative with the existing Connecticut Innovations venture fund to galvanize efforts to identify and groom startups that could becoming hiring machines.

One small change could have a broad reach, however, after Lamont and the General Assembly slashed the threshold at which “angel” investors could take a tax credit for the money they put into early-stage startups.

Nearly 80 companies qualify for those angel tax credits, including the Monroe security startup Zorus.

“We over $1 million now raised,” said CEO Greg Gage. “It’s significant.”

CTNext’s membership spiked 17 percent in the 2019 fiscal year that spanned both Lamont’s and Malloy’s tenure, with twice the rate of increase for the number of companies CTNext is actively mentoring.

Concurrently with CTNext in 2016, the Malloy administration created an Innovation Places grant program to better promote links between state agencies, business incubators, universities, startup investors and others in communities deemed attractive to entrepreneurs, with Stamford, New Haven, Hartford and New London receiving grants.

“From a community infrastructure perspective, when CTNext started there weren’t a lot of co-working spaces, there weren’t the (innovation) districts — but there was a lot of seeding to build the foundation,” said Glendowlyn Thames, executive director of CTNext. “We’re seeing the private market really seeing the opportunity, and seeing the entrepreneurs and the resources that they need to help them grow.”

Thames said CTNext and Connecticut Innovations are now distributing grants for entrepreneurs to develop concepts for products or services more fully, in order to put their best foot forward in soliciting funds from the private sector.

“Most people to do not have access to a wealthy network or ‘social capital’ network of friends and family that can provide them that $5,000 or $10,000 of early capital to really help them do a proof of concept,” she said. “A lot of our grant funding is really focused on helping companies get ideas to a certain level on that commercialization path, so they are able to ‘de-risk’ their investment to a certain extent to make it more attractive for (investors).”

Speaking in mid-January at Hartford economic forum sponsored by the Connecticut Business & Industry Association and the the MetroHartford Alliance business group, Hartford Mayor Luke Bronin noted his city’s efforts on that front the past several years, including the InsurTech Hartford effort to support startups in partnership with the Upward Hartford business incubator that launched in 2017.

“I believe that one of the biggest reasons the state of Connecticut has struggled to grow over the last 10 years and more is that we missed that shift back to urban centers,” Bronin said. “It’s strong urban centers around this country that are driving growth, and Connecticut missed out because we placed our bets on suburban office parks and on bedroom communities. ... You look in Stamford and New Haven and Hartford — there’s a moment of opportunity right now to position our cities to be the places that people are coming to when they get priced out of Boston and ... New York.”

Hearst Connecticut Media file photo