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Larry Edelman

Amid coronavirus outbreak, Mass. businesses face uncertainty

The impact of the 2003 SARS crisis on the United States was small, cutting economic growth by an estimated 0.1 percent. But the world is a different place today.

The coronavirus that has sparked panic across the world since emerging in Central China at the end of December has added an element to businesses that their executives absolutely hate — uncertainty.

The parallel they might draw from — the 2003 SARS crisis — delivered a relatively small blow, cutting economic growth by an estimated 0.1 percent. But the world is a different place today, giving many executives reason to worry that this epidemic could be worse.

China has gone from the sixth-largest economy at the start of this century to second largest. And Massachusetts employers — from high-tech manufacturers to high-end hotels to institutions of higher education — are more tightly linked to China’s than ever before.


That has raised the stakes and left local companies vulnerable as China shuts factories and workplaces, and the United States and other countries restrict travel to and from the country. Employers contacted by The Boston Globe said they had taken steps to protect their employees who travel to or work in China, but few would discuss how Beijing’s efforts to contain the outbreak might disrupt their operations.

“It’s really about uncertainty about the future that is already pretty substantial,” said Michael Goodman, a professor of public policy at the University of Massachusetts Dartmouth and co-editor of MassBenchmarks, a collaboration between the Donahue Institute at UMass and the Federal Reserve Bank of Boston that tracks the state’s economy.

He said the coronavirus has complicated planning for executives still concerned about tariffs, the ripple effects of Brexit, and ongoing tensions in the Middle East.

Economists said that Chinese industrial production and consumer spending will invariably be curbed by the health crisis, though to what degree and for how long isn’t clear. China’s main stock market index plunged 7.7 percent on Monday, the first day of trading after an extended Lunar New Year holiday.


But it’s too soon to calculate the financial impact on local companies or the economy. For now, most economists expect any losses to be modest and short-lived.

“The problem is that too much is unknown" about the illness and how dramatically it will slow China’s economy, said Megan Greene, a senior fellow at Mossavar-Rahmani Center for Business and Government at Harvard’s Kennedy School.

Greene said that US companies that sell products in China likely will be hurt by a drop off in demand, and those that buy parts or rely on Chinese factories may have supply problems.

Riverdale Mills chief executive Jim Knott said he was concerned enough to check in on two factories in China where his company sources fine wire to make finished products such as chicken wire. One factory was operating, but another was shut down by the government for at least 10 days because of the virus.

“It’s definitely going to impact us. These are products we order on a regular basis,” said Knott. “I suspect some delays in the supply chain.”

As a result, the Northbridge manufacturer of welded wire mesh is now looking to buy fine wire from Mexico or another Latin American country.

John Hancock, like many other companies, said it suspended all but essential travel to and from mainland China and imposed reviews and restrictions for other travel in the rest of Asia.

“Those who have recently traveled to mainland China are being asked to work from home for 14 days before returning to an office,” the company said in a statement.


China was the Massachusetts’s second-largest trading partner in 2018, eclipsing Germany, Japan, and the United Kingdom over the previous decade, data from the World Institute for Strategic Economic Research show. Exports to China reached $2.64 billion that year — almost double the amount in 2009 — led by computers and other electronic gear, machinery, and chemicals.

Moreover, China is the biggest source of foreign students for area universities such as Northeastern, Boston University, and Harvard, according to the 2019 Open Doors Report on International Education Exchange. The country is also the top source of tourists for Boston.

The region’s tourism market could be facing a disastrous 2020 the longer recently announced flight bans to China by airlines including American stay in place. According to the Greater Boston Visitors & Convention Bureau, the average Chinese tourist stayed in Boston hotels an average of 10 nights in 2017.

Several hotels declined to comment, but one general manager from a four-star property, who asked not to be identified, said there have been several cancellations over the past two weeks and bookings for the spring are down.

Despite the potential losses, Boston’s hotels may get a small bump from the pandemic. According to Boston Park Plaza marketing director Suzanne Wenz, the hotel is starting to see interest from groups looking to relocate meetings previously booked in China.


Boston Scientific, the Marlborough medical device maker, has asked its nearly 1,000 employees in China to work from home, according to Kate Haranis, a company spokeswoman. “Impact has been minimal so far, but we continue to monitor and prepare as the situation evolves,” she said.

Takeda Pharmaceutical, which is based in Japan and has about 5,000 employees in Massachusetts, has told its 2,303 employees in China, including 63 in Wuhan, that its offices in that country will be closed until at least Feb. 10.

Wayfair, the online home goods retailer that sells many Chinese made products, said its business hasn’t been impacted so far.

General Electric chief executive Larry Culp addressed the China outbreak on the Boston company’s quarterly earnings call with investors last week.

He said the company’s health care division “is really in the smack in the middle of this in Wuhan and elsewhere, servicing our equipment, certainly prioritizing new equipment deliveries, particularly to the Wuhan hospitals.”

After the SARS outbreak ended in mid-2003, business quickly returned to normal. For now, analysts expect the same outcome with the coronavirus crisis.

“Generally these episodes disrupt temporarily, not permanently,” said Jurrien Timmer, director of global macro at Fidelity Investments.

Shirley Leung, Christopher Muther, Jonathan Saltzman, and Janelle Nanos of the Globe staff contributed to this report.

Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.