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Survive to Thrive Project | Market Insights | Is China Open For Business?


The increasingly severe impact of COVID-19 has been felt throughout the world, with countries, communities and businesses facing significant social and economic implications in the months and years to come. The effects of this crisis on China – the country, people and economy – is in the spotlight due to it being the first country affected by the pandemic, and the prevailing sentiment is that China is through the worst and is returning to normal.

But is China really back open for business for exporters?


WHAT ARE WE HEARING?

New Zealand Trade and Enterprise

NZTE advise that due to the still rapidly evolving nature of the situation, it is crucial that exporters to China utilise the full range of advice open to them as they make decisions moving forward.  Proactive communication with export trading partners is key to getting clarity on how they are affected, and the consequential impacts to your business. This communication needs to extend the full length of your supply chain into China: suppliers, logistics providers, distributors, partners, customers and e-commerce platforms.

NZTE have also established a China-specific advisory service that is available to any exporters who are encountering issues in China. https://covid19.nzte.govt.nz/page/greater-china

World Economic Forum

“China has done an incredible job at slowing the spread of the virus,” David Aikman, Chief Representative Officer, World Economic Forum, China. “I’m impressed to see the delicate balancing act the Chinese government is doing between getting the economy growing again and protecting public health”.


WHAT IS ACTUALLY HAPPENING NOW?

China is relaxing its travel restrictions. As western flights shut down, Chinese flight routes are opening again; domestic capacity in China has already doubled from its February lows.

Provinces in China have been gradually announcing dates for when schools will reopen through March and April.

Public transport has resumed and citizens can now move about their daily tasks or go to work if they are healthy. People can now shop at grocery stores and most retail stores –  but need to have their health code verified (by the smartphone app), their temperatures checked, and register their names.

Businesses in China have slowly been reopening since mid-February and, as of the end of March, reportedly over 80% of original economic activity had restarted (Source: Wu Haishan, a vice president at WeBank, a digital bank owned by Tencent).

Other data has indicated a slightly lower percentage. Analysis by Trivium China’s National Business Activity Index indicates that the Chinese economy is operating at 73.6% of normal output at at the 25/03/20.

This differential between stated and empirical data positions is becoming a recurring trend in trying to understanding China’s initial recovery from the COVID-19 crisis.


The Impact

The Economist Intelligence Unit (EIU) has lowered China’s real GDP growth forecast for in 2020 to 2.1%. Chinese imports declined 4% in value to USD 299.5 billion. For the January-February period some indicators year-on-year drops are the largest on record:

  • Industrial production down 13.5%
  • Retail sales declined 20.5%
  • Fixed asset investment declined 24.5%

So is China Really Back Open?

From an E-commerce perspective, Damon Paling [Beachhead expert from NZTE] view was this in a recent interview:

  • Exporting to China is still extremely challenging due to constraints on cargo space, air freight and ocean freight. It may take some time for the situation to return to normal. 
  • You may be able to continue to fulfill online sales orders, but last mile delivery is significantly slower than normal.
  • There are now different rules and regulations for how products must be delivered to households. Despite this, some trade has continued, and domestic E-commerce should be an important channel going forward.
  • While there will certainly be a short term disruption to Chinese economy for the next 3-6 months, there will be a Chinese rebound. 
  • NZ is well perceived by China, and could play a key role in getting their economy back to full capacity.

China has certainly had great success in ‘flattening the curve’ considering their population size, and that they didn’t have the luxury that the rest of the world had in planning their response based on what was learned from other countries experiences. It seems that they have been effective in both protecting their citizens, and insulating the damage to their economy as much as possible.

China is an extremely driven, resilient and innovative economy, which has dealt with large macro threats, and quickly recovered, many times before. The Chinese government is taking actions to increase domestic consumption, and help ease some pressure off businesses through incentives such as low-cost loans, accelerating the issuance of special bonds, and discounts on electricity rates for manufacturers. This indicates a highly likely increase in domestic demand, and a corresponding increase in demand of New Zealand exports to China.

The question is not if China is back open, but when and what sectors. ‘When’ appears to be now or relatively soon, if the logistical minefield can be navigated.  NZTE listed these examples of sectors that could potentially rebound more quickly during a China market recovery: 

  • Infrastructure (assuming government stimulus) 
  • Logistics (watch for digital capability) 
  • Gaming
  • Digital media 
  • Software 
  • Online entertainment 
  • Online education.

Link to sources

NZTE – Greater China export advice https://covid19.nzte.govt.nz/page/greater-china

NZTE – Damon Paling video blog https://youtu.be/iBYsobkkU48

Starbucks – COVID-19 China lessons learned https://stories.starbucks.com/stories/2020/one-global-companys-bold-steps-to-navigate-covid-19-in-china-and-the-lessons-learned/

Cases/Deaths Stats https://www.worldometers.info/coronavirus/

David Aikman https://www.weforum.org/agenda/2020/03/chinas-response-shows-how-bold-decision-making-can-contain-coronavirus/

Flights into China https://www.economist.com/graphic-detail/2020/03/21/as-western-flights-shut-down-chinese-routes-are-opening-again

China video and GDP stats https://www.bloomberg.com/news/articles/2020-02-17/u-s-factories-in-china-are-open-but-don-t-have-enough-staff

China COVID-19 recent updates https://www.china-briefing.com/news/managing-china-business-during-coronavirus-outbreak-updates-advisory/

China’s economic rebound https://www.npr.org/2020/03/19/818518697/lessons-from-china-on-how-to-restart-an-economy-after-coronavirus-peaks


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