Two recent industry surveys indicate that China’s many diverse markets remain resilient as the recent pandemic recedes. Some prominent industry experts, however, remain skeptical.
U.S. firms in China say business is gradually returning to normal, but lower revenues and delayed payments are leading to changes in both short-term and long-term strategies.
That is according to the results of a third Flash Survey released by the American Chamber of Commerce in China (“AmCham China”) that evaluates the impact of the COVID-19 outbreak on its member companies.
With close to 150 companies responding to the survey, these results provide a detailed insight into the ongoing impact on American companies in China, as well as detailing suggested policy responses for both the U.S. and Chinese governments.
The impact on business operations continues to be widespread. 77% of surveyed members say they are experiencing global travel disruptions, while 44% cite business challenges stemming from policies preventing foreign staff from returning to China.
Additionally, the percentage of companies encountering cash flow challenges and delayed payments has doubled from the last survey, taken in April.
On the positive side, 42% of respondents say they have resumed normal operations, but the longer-term outlook for others remains gloomy. 76% of respondents predict revenue declines if business cannot return to normal before the end of August, and the share of those reporting a daily loss of between half and one million RMB (the renminbi) has nearly doubled in a month, from 6% to 11%.
“To combat these ongoing challenges, many of our members are increasing investments in IT, with a focus on improving workforce productivity and their relationship with customers,” says AmCham China Chairman Greg Gilligan.
But he adds that they need additional help, and the survey results also point to specific areas where both governments could assist during these trying times.
“Nearly a quarter of respondents hope the U.S. government will restore visa services – a 7 percentage point increase from April – while tax alleviation remains the top area in which foreign companies are seeking support from the Chinese government, with others asking that senior expat executives can be allowed to return to China,” says Gilligan.
He further notes that 67% of respondents say they expect the pandemic to stall their industry’s 2020 market growth, however, and still say it is too soon to determine the impact. Meanwhile, approximately 30% of respondents with over 1,000 employees say they will maintain previously planned investments.
DHL conducted a similar survey of U.S. small-to-medium sized companies in May, including its own shippers.
Results here indicate that Asia remains a top business target despite the fact that COVID-19 originated in China. Researchers found that almost one-third (32%) of respondents said Asia is the top priority region for their business this year.
In last year’s survey, 21% selected Asia as their top priority region. According to researchers, the YOY increase in confidence in Asia is likely due to progress in potential relief with China tariffs.
But many trusted industry analysts with particular expertise in China, still urge caution. Rosemary Coates, President of Blue Silk Consulting, for example, feels that relations between the U.S. and China remain fragile.
“We are in a world of hurt,” she says. “The global pandemic and resultant projected deep recession will last for months, if not years. Once the global economies open up again, recovery will be slow, with low demand for products and services across industries and across global economies. Recovery is likely to be slow and painful. The new normal will likely be China and the U.S. as spiteful adversaries.”
About the Author
Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]