The ongoing spread of a new coronavirus — which shut down major business hubs in China — serves as "a very good lesson" for companies and economies on the importance of diversifying their supply chains, said Singapore's trade minister on Wednesday.
Many countries around the world depend on China to buy their products, as well as to supply them materials and parts to make goods for exports. But that status quo is now under threat, especially after much of China was shut down as authorities work to contain the virus outbreak.
"Today, China is not just producing low-end, low-value products, they are also in the supply chains of many of the high-end products. And that means that the impact on the supply chains will be significant across the entire globe," Chan Chun Sing, Singapore's minister for trade and industry, told CNBC's "Squawk Box Asia."
"I think this is a very good lesson for everyone to really look at the supply chain resilience," he said.
Singapore, a tiny Southeast Asian country, is one of the most trade-dependent economies in the world, with China as its largest trading partner. It was among the economies that were hit hard last year when the U.S.-China trade war escalated and the global economy was slowing down.
The latest coronavirus epidemic — which has killed hundreds, mostly in China — could add even more pressure on the Singaporean economy. But the magnitude of the impact would depend on how long the outbreak lasts, Chan said. The country has recorded 24 infected cases so far, one of the highest numbers outside of China.
"To be frank, everybody will be impacted by this, it's a matter of degree. The key is who will recover faster and how people respond to the crisis will be even more important than what the crisis is," he said.
The minister added that Singapore has for many years prioritized economic diversification. He explained that the government has urged firms not to rely on particular products or markets for business, while making sure that the economy as a whole is not overly exposed to any one sector.
Doing that will allow the Singaporean economy to withstand knocks from unforeseen circumstances such as the ongoing virus outbreak, he said.