Market insights: Managing COVID-19 business risks in China

When news of the COVID-19 outbreak in Wuhan, China, made global headlines in December 2019, life as we knew it in China was changing at an alarming pace. There was a lot of confusion and fear as the local authority tried to act swiftly to contain this new strain of coronavirus. 

Lockdown, quarantine, movement control, panic buying, fake news being circulated on social media and confusing data all compounded the issue. As the world watched the contagion implode within China, a strong sense of despair emerged that China was left to fend for itself. 

The Canadian government was one of the few countries that offered much-needed assistance to China by shipping 16 tonnes of personal protective equipment (PPE) such as clothing, face shields, masks, goggles and gloves to help the country battle the virus during the peak of the outbreak in February. The thoughtful gesture by Canada is now being reciprocated by China, which donated tens of thousands of PPE to Canada on March 27.

After many weeks of aggressive battle, the situation in China is improving with many parts of the country implementing controlled back-to-work measures. All major cities are almost, if not already, back to normal capacity. Public facilities such as libraries and parks are gradually reopening, but with strict social distancing being enforced. In Wuhan, businesses are reported to be operating at 60% capacity and many factories are ramping up productions to catch up with backlogs.

Airlines, travel, hospitality, leisure and the entertainment industry are the hardest hit. Most manufacturing sectors are also deeply impacted. The initial hope that the economy would recover rapidly is now hampered by the pandemic that has gone global with many countries facing the same shutdowns China went through. 

China is also at risk of a second wave of contagion as many people, especially college and university students fleeing other parts of the world such as Europe and North America, return to China. During the week of March 23, more than 95% of the new infections detected were people who had recent history of travel or just returned from abroad. As a result, the country has closed its borders with the suspension of all international visas.

On the other hand, online shopping, e-commerce platforms, and logistic and certain IT companies, like web-based solutions providers, have thrived during this period. Canadian companies providing web solutions such as e-learning, virtual conferencing and remote working technology also enjoyed very brisk business. Not surprisingly, pharmaceutical companies and health-care equipment and medical device producers have also been kept extremely busy. 

The Canadian business community displayed an amazing level of solidarity during this challenging period. Chat groups, initiated by local chambers of commerce, enabled many to exchange and validate information. Staff from the Canadian embassy and consulate jumped in from time to time to clarify misinformation, and encouragement and words of support were offered to those negatively impacted by the health crisis.

Canadian businesses in China are gradually picking up in tandem with their local counterparts and domestic industries. Those servicing or supporting clients who are domestically focused are recovering well, but those involved in export from China—directly or indirectly—are facing a lot of uncertainties, with the exception of the medical devices or health-care equipment industries.

Some Canadian businesses involved in trading and distribution are actively scouting for opportunities, sourcing materials and equipment related to the fighting of the deadly virus. Small numbers of unauthorized or unqualified manufacturers that produce sub-standard products have surfaced and Canadian businesses need to be extra vigilant in their due diligence.

At Export Development Canada, we can help them get the financing they need at their banks to cover their payroll and operating costs with our new EDC Business Credit Availability Program (BCAP) Guarantee. There’s also a lot of support being offered by Global Affairs Canada, especially in terms of timely notification of major changes in regulations, important briefings and information sessions on how to protect yourself against the contagion. The local chapters of Canadian Chambers of Commerce and the Canada China Business Council offered a series of webinars, including one which raised awareness about EDC and our products and services.

Chia Wan Liew is Export Development Canada’s chief representative of Greater China based in Hong Kong.