Tech Mahindra

Business still not as usual, in Covid-19-hit China

Last Wednesday, the central Chinese city of Wuhan, where the pandemic called SARS-CoV-2 by the WHO, coronavirus or Covid-19 began, opened its doors again! This, after spending 76 days, sealed off from the world. Remember, Covid-19 first broke out in the city of Wuhan, China, in December 2019!

Businesses are struggling to get back to business as usual, while there are instances of the development of robotics in Guangdong area. China set up a prefabricated hospital to deal with Covid-19. Two new coronavirus hospitals were also built in Wuhan. People are said to be maintaining social distancing. For example, in the image here, they are shown queing up at the popular joint, Subway.


Cautious about second wave?
Chen Yang, a scholar, said that China business activities have gradually resumed to normal as new local cases have been reduced dramatically. People have gradually started going back to work across all industries. However, the China government is still cautious about the possible outbreak of the second wave. That’s why, they keep urging the public to be mindful for personal hygiene and social distancing.

A lady informed that the China economy is recovering. Business and manufacturing are on the move. However, people are still very cautious. Another echoed the same lines. An insurance agent, Spring Lee, said that the situation is getting better. People are resuming work and doing outdoor activities.

Business unusual?
Sabrina Xi, an e-commerce sales agent, said that domestic business is definitely restructuring. However, a lot of offline business may close down. Even the import and export business have still not recovered because of the pandemic. Lee added that with the economic downturn, the government needs to do something to rebound.

Businesses in relationship with protective supplies against Covid-19 are doing good, said Chan Shih, a manager. Yet, not all factories are back to normal.

Yang noted that manufacturers/exporters/logistic service providers are facing difficulties in terms of cancellation of orders, bankruptcies of buyers, as well as the uncertain market forecast, etc.

He advised that those who have the resources to switch to the domestic market would have a better chance to survive. Otherwise, the closure of some businesses is inevitable. Therefore, people now understand that they have to put in more resources for developing the domestic market.

Alternatives, besides China
Nevertheless, there is a global backlash against China. Bloomberg reported that Japan has earmarked $2.2 billion of its economic stimulus package to help manufacturers shift production out of China. The extra budget, compiled to try to offset the devastating effects of the pandemic, includes 220 billion yen ($2 billion) for companies shifting production back to Japan and 23.5 billion yen.

So, what is the opinion regarding whether companies will look for alternatives, besides China? According to Yang, it all depends on the industry served. For instance, it is difficult for those who are in the electronics industry to move out, due to the supply chain issues.

However, companies in the garment industry have shifted to the other Asean countries, such as Vietnam, Cambodia, Laos and Myanmar, etc. due to a lower labor and other operating costs, as compared to China.

The size of the domestic market is one of the major factors that would hinder companies’ decision in looking for alternative manufacturing base, other than China, he added. Going forward, China will become the largest market for consumer spending in the world within the next few years.

Xi agreed, adding that it is quite the opposite. This now gives China more opportunities to show the world its robustness. Chan added that due to the Sino-American trade disputes, companies will look to source from places such as Vietnam, Indonesia and the other Asian countries, besides China. Indeed, the production capabilities are picking up in these countries!

Focus on cloud, smartphones!
In China, the most popular options for cloud and hybrid cloud-based solutions are Microsoft Office365, Alibaba’s DingTalk, and Tencent’s WeChat Work. Other solutions such as Slack, Microsoft Teams and Flow (now renamed PowerAutomation), exist as well.

Smartphone makers are also hoping for strong recovery. Apple and Xiaomi have showed some recovery in March 2020. Lenovo is helping with supercomputers, genome sequencing, and the race to decode coronavirus.

Workplaces have become virtual-friendly or digitalized. An opportunity exists for companies to shift corporate work processes online. They are digitalizing, and possibly automating their back-office operations in China.

China might also suffer from ‘global social distancing’ in the post-Covid-19 world. ‘Brand China’ may have lost some of its sheen.

With inputs from Aanchal Ghatak.

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