Last week, emails from foreign customers filled the mailbox of the export manager Grace Gao, delaying orders and delaying shipment of goods, or asking for a grace period of up to two months.

Gao’s company, Shandong Pangu Industrial, manufactures tools such as hammers and axes, 60% of which are exported to the European market. As the Covid-19 coronavirus, which departs from China, is currently devastating Europe, economic blockages interrupt orders just as Chinese factories are ready to get back on their feet.

“It’s a complete, dramatic twist”, said Gao. It estimates that April and May sales will shrink by at least 40% annually. “Last month, our clients were chasing us with questions about whether we would fulfill our deliveries. This month they are chasing us asking if we can postpone the deliveries they have ordered”, she adds.

This model poses a serious risk to the world’s second-largest economy to repair the damage of business closures to limit the spread of the virus. Even as politicians, including Chinese Prime Minister Li Keqiang, discuss recovery and introduce support measures, economists continue to lower their growth forecasts.

The earliest expression of the new problem will be seen in official industry figures, which will be released on March 31st when the PMI indexes for the month will be published.

More and more companies are reporting that canceled orders, insecure logistics, and late payment have all become serious problems.

China is already facing its first quarterly contraction in decades and its weakest year since 1976. In the worst-case scenario set by Bloomberg Economics, recessions in the US, the Eurozone and Japan will cut about 2.7 trillion USD from global production.

The cancellation and postponement of major sporting events also affected Chinese factories. A week or two after our return from the Chinese New Year – from mid-February – the manufacturers began to feel that our orders were beginning to decline.

Textile factories along China’s east coast are also affected by the cancellation of orders. About three-quarters of the companies there reported a sharp decline in new orders, 65% reported canceling orders as well.

Due to quarantine in most countries around the world, deliveries are becoming increasingly insecure and payments are slowing down. This is another situation that is particularly upsetting for small businesses that have no reservations.

The government is responding to the emerging crisis by focusing on retaining workers even if their incomes are reduced. The Chinese Ministry of Commerce acknowledges that some export orders have been canceled amid rising external uncertainty and promises to support exporters with tax rebates, insurance, and credit. The government will support warehouse companies and optimize customs clearance, among other actions.