The outbreak of COVID-2019 shakes the Chinese economy badly. Declared as a global health emergency, this coronavirus is wreaking havoc worldwide and may cause global economies to suffer as well. The human and economic toll could rise rapidly into a global crisis.
What is Coronavirus?
Coronaviruses are a large family of viruses that are zoonotic, meaning they are transmitted between humans and animals. They can cause diseases from the common cold to dangerous respiratory diseases which may even result in death.
COVID-2019, also unofficially recognised as the “Wuhan virus”, is the new member of the coronavirus family. It originated in Wuhan China in late 2019 and is currently spreading quickly across China, while also affecting other countries.
The most common 2019 coronavirus symptoms include fever, cough, shortness of breath and breathing difficulties. This coronavirus infection can also have elevated symptoms like pneumonia, severe acute respiratory syndrome, kidney failure, and even death. Prevention is the most valuable effort one can make to keep the infection from spreading.
Unfortunately, there is currently no novel coronavirus vaccine developed. Therefore, it is all about prevention. Recommended methods include regular hand washing, covering one’s mouth and nose when coughing and sneezing, as well as thoroughly cooking meat and eggs. Avoid close contact with any individual showing symptoms of respiratory illness such as coughing and sneezing.
The most trustworthy coronavirus updates can be found on the World Health Organization’s website.
Which countries are affected by the latest coronavirus?
A large number of countries on almost all continents are affected by COVID-2019, and they are (by Feb. 28th, 2020): Afghanistan, Algeria, Australia, Austria, Bahrain, Belarus, Belgium, Brazil, Cambodia, Canada, China, Croatia, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, India, Israel, Italy, Iran, Iraq, Japan, Kuwait, Lebanon, Lithuania, Malaysia, Nepal, New Zealand, Nigeria, North Macedonia, Norway, Oman, Pakistan, Philippines, Romania, Russia, Saudi Arabia, Spain, South Korea, Singapore, Sri Lanka, Spain, Sweden, Switzerland, Thailand, The Netherlands, United Arab Emirates, United Kingdom, United States, Vietnam, San Marino. As time goes by, the list keeps growing.
Which industries are hit by the latest coronavirus outbreak?
Being the 2nd largest economy in the world, China accounts for 19.3% of the world’s GDP. The spread of the virus in China has brought disturbance to the global markets, especially with a large proportion of the Chinese population being stuck at home, and a great number of Chinese businesses being unable to return to normal work. So, what are the industries around the world taking the biggest hit?
Tourism
With the growing health fear, China officially banned group trips and package bookings in late January 2020. This month, the US and Singapore have announced a temporary entry ban against foreigners who have visited China in the last 14 days, and countries like Mongolia, North Korea, and Russia have partially or closed borders with China. Naturally, the global tourism industry is immediately feeling the pain.
Numerous international airlines, such as United American, Delta, British Airways, KLM, Air Canada, and Lufthansa, have discontinued flights to and from China at least until late March, and they are forced to extend return policies regulating the refund of customers who have booked flights during this period.
Correspondingly, businesses in bookings, hotels, traveller transportation, retails, and destination management are all negatively affected.
Manufacturing
The supply chain nowadays depends on global commodity flows. China provides massive amounts of materials and products for global supply chains among various sectors such as cars, electronics and machinery, and retail products. A significant delay in delivery from Chinese suppliers can be directly translated into incapability of fulfilling the demand and the financial loss for global manufacturers. Especially since China makes higher-value-added products that are harder and costlier to replace nowadays.
International giants such as General Motors, Toyota, and Ford have expressed their uncertainty. Apple announced last week that it doesn’t expect to meet its second-quarter financial guidance because of the stalled production in China. Even though Samsung has moved a great deal of production to Vietnam, it is still likely to face delays.
Logistics
Due to China’s nationwide containment efforts to prevent the coronavirus from spreading to an even larger scale, and China making up a large part of the global logistics network, logistical challenges have increased significantly. Despite a growing percentage of businesses gradually returning to production, and logistics within Chinese cities and provinces based on individual delivery personnel efforts still working fine, the national and international scale of transportation simply can’t keep up with the demand at the moment.
Even though some parts and products can make it to the Chinese borders, with a notable number of international cargo businesses shutting down operations to and from China, things just get stuck. And it is not just about goods at Chinese borders: those that are managed to be shipped outside China are now lying in many destination countries seaports, airports, and border crossings due to enhanced screening for COVID-2019. There are many uncertainties about when the logistics will return to normal. At least one thing is for sure, the delay is inevitable for now.
Retail
Consumers laying low at home, workers unable to return for work, supplies being interrupted, and logistics being partially paralyzed - putting this all together with the observations above, it is safe to say that the retail industry is experiencing an immediate and harsh “coronavirus winter”.
Did you know Chinese upscale customers have a higher overall appreciation for global luxury brands? According to Bain, 35% of the global luxury market was made up of Chinese consumers in 2019, and they are also credited for 90% of the industry growth in sales. With restricted shop opening hours in mainland China, and the ban of Chinese group tourism abroad resulting in a significant drop in luxury store visits even outside of China, the sales of 2020 first quarter for luxury brands is going to be a disaster.
How can you safeguard your business and build your competitive advantage?
Rather than losing hope, we should think about the measures to improve the condition of our business. To achieve that, a proper plan needs to be set up for the prevention of national and global economic loss.
The basics
It makes sense to start by understanding the potential risks this novel coronavirus poses to your business and developing a plan in collaboration with all stakeholders. If you have employees working in China or who are about to travel to China, remote work and travel cancellation are going to be your best friends in lowering your personnel’s health risk and your financial risk. Out of precaution, check your business insurance and legal documents, specifically in terms of covering virus outbreak as part of force majeure.
Production
This is where Plan B will do you a favour when your suppliers from China cannot deliver. If you haven’t had other options in place already, this is a good time to come up with and implement an alternative strategy. Useful measures can be:
stockpile necessary long-lasting supplies
choose alternative suppliers for components and services
negotiate temporary production with local suppliers or build your workshops
build a pool of temporary workers and freelancers to smooth operation out when time is hard.
Digital transformation
Since the start of the nationwide containment in China due to the coronavirus epidemic, we have witnessed a significant increase in Chinese online activities, including online shopping, entertainment, schooling, working, socializing, and even the courts are moved online. This is all thanks to smart devices and digital solutions supporting various aspects of life from home.
According to analytics provider AppAnnie, average weekly downloads of apps during the first two weeks of February increased by 40%, in comparison with average downloads during 2019. The most popular categories of downloaded apps among Chinese users are gaming, education, entertainment, photo and video, as well as business.
Did you know that JD used to be just a mortgage shop selling CDs, VCDs, and recorders before the previous SARS outbreak? The 2003 epidemic forced the JD team to digitize their sales channels in an era where online shopping was not a norm. And the result was tremendous. JD.com is now one of the two massive B2C online retailers in China by transaction volume and revenue.
If your business is not at its full potential on the Internet yet, there couldn’t be a better time to take it to the next level than now.
Public relations
As the novel coronavirus keeps spreading, resources in medical supplies, human workforce and financial support to fight against the outbreak are in shortage. Numerous businesses, organizations and even individuals have helped out through direct donations and charities. Here are just some examples (according to Business Today):
Alibaba’s founder Jack Ma donated $14.4 million
The Bill and Melinda Gates Foundation committed a $10 million aid
Baidu, Tencent, and ByteDance provided $115 million
Billionaire Ken Griffin’s Citadel contributed $7.5 million
The list goes on. This is a great opportunity to show that your business is working for a good cause, as the whole world is constantly paying attention to the updates of COVID-2019, the efforts in fighting it back, and those who have contributed.
If you run just a small business and are incapable of donating millions of dollars, a good solution would be the purchasing and shipping of medical supplies on a smaller scale, such as surgical masks and protective clothing from your own country. If this is still difficult for you to implement, a social media shout-out sending wishes to China would nevertheless make a positive impact. Below are two common terms used during the current events surrounding the coronavirus outbreak:
加油中国 (Go China)
加油武汉 (Go Wuhan)
Communication:
Running extensive sales campaigns, particularly targeting Chinese consumers, may not be the best idea during the outbreak. However, “not purchasing” does not mean “not paying attention”. Your stay-at-home customers constantly search for new content and forms of entertainment to kill their time.
Increasing your communication with your clients, including sharing brand stories, company culture, product features, and localized messages will draw your business a lot closer to them, which will likely do you good - especially after the storm is weathered.
Final thoughts: if none of the measures proposed above seem realistic to your company at this point, there is at least one takeaway: WHAT DOESN’T KILL YOU MAKES YOU STRONGER. Try to survive this novel coronavirus crisis, and you are already ahead of many of your competitors.
Hohot Consulting facilitates business collaborations between Europe and China. With a professional team and an extensive partner network across various industries, we offer outstanding consulting services across all business areas to ensure your success in the Chinese market. Learn more here.