China has been hit by a surge in bankruptcies and a slowdown in 2019 is expected to test all nations in Asia. Photo: iStock
The impact of the Covid-19 epidemic could necessitate cost-cutting, including staff reductions. Photo: iStock

The coronavirus outbreak is not just a severe challenge to public health, but also a huge disruption to China’s economy, which has been facing downward pressures for a long time.

Ren Zeping, chief economist of Evergrande Think Tank, said: “The still grim epidemic situation will disrupt China’s weak stabilization of the economy, starting from late 2019. Under pressure of an economic downturn, the annual GDP growth rate is very likely to fall below 6% and less than 5% in the first quarter.”

Ren said the film industry is one of the sectors most affected by the new coronavirus outbreak, as it had nearly halved the number of films anticipated during the traditional Spring Festival. But, from a closer viewpoint, private, small and medium-sized enterprises are believed to have suffered heavy losses.

Film industry almost paralyzed

“It is virtually impossible for me now to check scenes, or organize the shooting team. The worst thing is that I may lose a lot of customers,” Li Da, who runs a small studio in Shenzhen told Asia Times.

Jinyi Cinema in Wuhan has been shut down due to the coronavirus outbreak.

And since filming involves gathering crowds, a large number of film industry employees are out of work because of the epidemic. All film companies and workers have had to stop work in accordance with an official notice.

Li said he had quite a few projects due to be filmed in February and March, but they had been postponed indefinitely. As for when they could go back to work, he said, “the only thing I can do now is wait.”

Factories can’t deliver

Factories are other workplaces where a large number of people gathered.

Longjing, a micro-electronics factory in Pingshan district of Shenzhen, still has not resumed its production due to the epidemic.

Huang Ruiqiang, a senior executive at Longijng, told Asia Times: “According to the relevant regulations, all employees have to be quarantined for 14 days when they come back. Workers from Hubei province are basically unable to come back because of the closure of the city.”

As of now, there are only one-third of the company’s workers back in Shenzhen and they are going through a 14-day period of self-isolation to prevent the epidemic spreading. If factories plan to resume production, they have to record every single worker and apply for necessary approval.

However, employers have to do payrolls even without production. And Longjing is paying all the labor costs during the 14 days despite getting no revenue.

“The new coronavirus crisis has imposed a huge impact on our business,” Huang said. “There should have been 300 or 400 million in revenue during this period, but it has all gone now and we still have to bear responsibilities to protect the rights and interests of employees.

“The biggest pressure now is that enterprises can’t resume production – or deliver goods to clients.”

Quite a few orders were signed last year and needed to be fulfilled. So all the company wanted was to resume production as soon as possible, he said.

Opportunities born in crisis?

While a more mature enterprise like Longjing factory has the ability to cope with the epidemic, for new entrepreneurs, a lot of entities had to shut down before they actually started.

Tang Guohao, a young entrepreneur, works in poultry farming and fresh food e-commerce in Maoming, Guangdong province. After nearly two years of hard work, Tang finally got a break at the end of 2019 – getting a good job in the chicken supply chain.

But just as he was preparing for a large-scale online marketing promotion before the Spring Festival, the epidemic forced him to postpone all his plans.

And with the village “closed”, there is no way to send chickens to the express point in town to be packed and shipped, Tang Guohao told Asia Times. “Sales have basically stopped and there is no income.”

Tang Guohao said it normally it takes 150 days to raise chickens, but the epidemic had greatly prolonged the raising time and added to breeding costs.

He also has to pay for the rent of a store in Maoming, despite the fact “the shop is closed and there is no customer coming to the door – and I am not allowed to go out during the epidemic. I haven’t been to the store for a month, but I still have to pay the rent.”

But, Tang Guohao was optimistic that there may be an ‘opportunity’ in this crisis, given there was no contact with delivery and distribution storage points at the community entrance.

“It may be a good thing for the industry,” Tang Guohao said, “because the epidemic forced many people to buy food online, so it could cultivate habits of our target customers.”

According to a report by China International Capital Corporation, O2O – a non-food distribution platform – experienced a blowout in orders during the Spring Festival. And it was expected that the industry would benefit in the future from more people making orders online during the epidemic.

Tang said he would start to promote his own e-commerce platform in 10 days. The decision he made is based on a prediction by epidemic prevention experts.

But Tang is still a little worried that his own business plan may collapse if the epidemic can’t be brought under control. As a startup entrepreneur, work delay and no returns to shareholders are big risks for him.

This article was first published by Asia Times Chinese

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