“Foreign customers will definitely wait and see how the epidemic situation develops and may place new orders in other regions, instead of China,” said Tom Wang, who runs a footwear factory in the city of Dongguan in Guangdong province.

The rapidly spreading virus, which has killed at least 304 people and infected more than 14,000 in mainland China, has prompted authorities to close factories, shopping malls and tourist attractions, as well as put severe curbs on transport. Several governments have extended the Lunar New Year holiday, ordering firms not to reopen until at least February 10.

“The number of workers resuming work [at factories] in Dongguan will definitely be affected in the coming couple of months, as well as at logistics operations and supply chain firms,” Wang said.

“In the first quarter, a drop in orders is certain, and most of [Dongguan’s] factories are labour-intensive. We are very afraid of possible contagion in our factory, so we dare not take any big orders in the first quarter.”

He said he was not confident about the outlook for export orders in the second quarter, either.

“China had just joined the [World Trade Organisation in December 2001], so there were a lot of foreign orders, resulting in a boom in the manufacturing sector,” he said. “Now, supply chains have begun to shift in the past couple of years because of the trade war. The epidemic situation will definitely give more factories the incentive to [shift].”

Liu Kaiming, head of the Institute of Contemporary Observation, which studies working conditions in hundreds of factories across China, warned that the uncertainty created by the coronavirus outbreak could be a “death blow” for many manufacturing firms.

“If the epidemic can be controlled by the end of February, the impact on the manufacturing industry will be manageable,” he said.

“If in early March they still see that the [virus] situation has not been brought under control, they are likely to turn to other countries to place orders.”

Liu said that if the situation had not calmed by March, then “China’s supply chains and status as the ‘world’s factory’ could fall off a cliff”.

Jason Liang, sales manager for a Guangdong-based exporter of LED lighting products, said his company had already moved some of its production overseas and predicted others would soon follow.

“LEDs are seasonal products, and most of our export orders have been completed and shipped,” he said.

“In particular, we’re so lucky we invested in a Thailand-based factory last year, which started production in January. I think this virus outbreak will spur more production capacity to be relocated abroad.”

Ftech, a major supplier for Honda’s car production facilities in China, is planning to move its brake pedal production to the Philippines from Wuhan, the epicentre of the virus outbreak, according to Japanese newspaper Nikkei. If the coronavirus continues to spread, other companies are likely to follow Ftech’s move, the report said.

The Guangdong government must act to help smaller manufacturing firms, said Peng Peng, vice-president of the Guangdong System Reform Research Society, a think tank.

“The international reaction [to the coronavirus outbreak] is more psychological,” he said. “Foreign clients cannot distinguish between Chinese goods manufactured in Wuhan from those manufactured elsewhere in China, so all Chinese goods exports may be delayed or cut back in the short term.”

Many small service firms and restaurants may not last more than two months under the current conditions, Peng said.

More than 20,000 employees of Xibei, one of China’s biggest restaurant chains, had been unable to work because of the virus outbreak, company chairman Jia Guolong was quoted as saying by Chinaventure, a leading investment research and consulting firm. Xibei had 400 stores with more than 20,000 employees in more than 60 cities across the country and at present almost all dine-in restaurants had been shut, he said.

The outbreak has cut Xibei’s revenues by about 90 per cent compared to the same period of last year.

“We pay 156 million yuan (US$22.3 million) per month for employees’ salaries. Our cash flow can only keep this up for three months,” Jia said, adding if the situation continued until April “we will have no choice but to lay off employees”.

For now, was is little small and medium-sized enterprises could do, said Wang, the owner of the footwear factory.

“We can only keep out Hubei natives and check workers’ body temperatures on a daily basis, and let the workers live outside the factory.

“However, the rent, workers’ social security and other government fees, as well as operating costs, remain unchanged and are a stranglehold on SMEs like ours,” he said.