Proactive measures needed to mitigate business challenges from coronavirus
The recent outbreak of the 2019 novel coronavirus (COVID-19) has spread uncertainty and fear across the world. At the time of writing, over 43,000 cases have been confirmed, nearly 99 per cent in mainland China, and over 1,000 individuals have died from the virus.
Global investors are anxiously monitoring the situation as industries struggle to return to normal after the extended Chinese New Year holidays. Domestic and foreign businesses alike face serious logistical challenges as supply chains—already damaged by the prolonged US-China trade war—have faced new disruptions, with some Chinese companies going as far as declaring force majeure. Prices for commodities like oil and steel have plummeted, and consumer inflation has soared to an eight-year high.
The current viral outbreak is often compared to the Severe Acute Respiratory Syndrome (SARS) outbreak in 2002–2003, but the economic effects will likely be very different. China’s weight in terms of global GDP has vastly increased. The country now serves as a fulcrum of global trade and a crucial part of complex supply chains.
The bottom line is that the true economic impact of the virus will remain unknown until long after the epidemic has subsided. In the meantime, alongside its unprecedented health and safety measures to contain the virus, the Chinese Government has pursued a series of measures to bolster the economy during this period of uncertainty and stagnation.
On 8thFebruary, the Shanghai government released 28 measures available to local and foreign companies alike that are aimed at buoying the local economy. These policies will incentivise enterprises to help combat the virus; provide relief from tax and fee burdens; and financially support business that have been the most impacted. Additional support has also been extended to companies that produce essential medical supplies, as well as those that are most acutely affected by the virus.
With fewer resources with which to endure this period, small and medium enterprises (SMEs) in China have found themselves in an especially challenging position. The grim prospects of SMEs were captured in an equally dark joke that recently went viral on Chinese social media, which jests that employees can enjoy an indefinite Chinese New Year holiday since their company will have shut down anyway.
Given the extent of the challenges, the European Union Chamber of Commerce in China recognises the additional measures aimed at SMEs. These include such policies as two-month minimum rental waivers from state property owners and lower lending rates for SMEs impacted by the virus.
Other bright spots have emerged in the fight against the virus. While increased connectivity in China has sped up the spread of the illness compared to the SARS epidemic, the capacity of China’s health authorities and medical professionals is now considerably more robust. China also has far better communication with expert bodies like the World Health Organisation. International cooperation has already yielded results; many foreign enterprises, among them dozens of European Chamber member companies, have donated funds, medical supplies, and other services to help fight COVID-19.
However, European companies in China hope that the government considers not only reactive steps, but also proactive ones. Now is an opportune moment to advance various reforms and tighten related standards. Since the outbreak of COVID-19, the European Chamber has been working closely with the Chinese authorities to find medical suppliers from abroad. Opening up China’s healthcare-related sectors to full participation from foreign enterprises could further bolster the country’s medical resilience in the future. There remain considerable barriers for European pharmaceuticals, medical devices and healthcare service providers that should be reconsidered in this new light of COVID-19.
There is also a need for tightened coordination between government agencies across China. The central government has pushed for enterprises to reopen, while some local governments still require approval to resume business operations, and suggest self-quarantine for anyone who has travelled recently, even to areas that are not clearly identified as “key affected regions”. Although Shanghai enterprises were meant to reopen on 10thFebruary, many office buildings still lack heating, as building management may fear the virus spreads via central air conditioning systems among tenants. This lack of coherence in government policy has an impact not just on operations, but also on business sentiment.
However, China has a strong track record of dealing with major crises. If it continues to take all necessary precautions to safeguard health and safety, and retard the spread of the virus through transparency and cooperation with its global partners, China could yet come back even stronger from this difficult situation.
Mr Carlo Diego D’ Andrea is the Vice President of the European Union Chamber of Commerce in China and Chairman of the Shanghai Chapter