While a few industries see growth opportunity among the crisis, most business are heavily hit. The central government issued a series of policies and measures that cover epidemic control, business resumption, traffic and transportation guarantee, and enterprises support in terms of tax and fees reduction, financial support, necessities supply, and social insurance deferral. Local governments also released corresponding policies in accordance with their actual conditions. “New Infrastructure” investment plans worth up to 50 trillion have been proposed by provinces, of which 5G and related projects have been adopted and encouraged by the central government.

Where is Your Business?

NEGATIVELY Impacted

*sources: IDC 2020

POSITIVELY Impacted

Pharmaceutical and Health Industry

• Short term: protective and testing equipment and medicines

• Medium/long term: upgrading institutions, protection products, and new vaccine developments.

Communication, Internet and New Media

• New infrastructure, including 5G, industrial internet, AI, datacenter, and so forth.

• Short videos and online games, remote office and collaboration systems, new and community ecommerce, e-learning, and online advertising.

Public Utilities and Construction

• Continuous investment in water, electricity, gas, sanitation, and so forth.

• State construction stimulus in 2020 to compensate for the delayed resumption and short-term negative impacts from the containment measures.

2.Actions of Companies

Companies in China nationwide are engaged in continuing protection of people (incl. workforce and customers), stabilizing supply chain, as well as ensuring adequate cash and liquidity on hand. Normal business trips as well as marketing events are either being postponed or cancelled. Crisis management capability for corporations is now becoming something both critical and urgent. In addition to resolving the immediate challenges that the COVID-19 presents, leaders are thinking forward about how to build and strengthen the adaptability of the company in next stages of the pandemic, or even the post-pandemic period. Mentality of predicting the “next-normal” is to be prepared.

A number of leading Chinese companies, Alibaba, Tencent, JD, Xiaomi and Gree, announced investment plans in Wuhan and Hubei, a business move incorporating both government relations consideration and CSR needs.

3.Road for Recovery: Government Policy & Initiatives

Business Stability  

Coordinate logistics and supply channels

• Coordinate local raw material and accessory resources and promote cross-city collaboration as needed.

Promulgate trade emergency measures

• Registration fees exempted for specific drugs and medical devices.

• Manufacturers of essential products will benefit from a one-time tax deduction for equipment purchases.

• Import/export of technology by local companies is to be prioritized and receive special assistance from local departments.

Solve labor difficulties in work resumption

• Arranged charted transport and offered allowances to bring migrant workers to needed cities.

• Offer subsidies for companies hiring more workers.

• Subsidies “point to point” pickup and drop off of migrant workers.

Alleviate pressure on cash flow and operating costs

• Tax declaration extension.

• Exemption of social insurance payments and housing provident funds for corporates.

• Reduce electricity cost.

• Subsidies loans, issue low cost loans, postpone loan repayment, reduce SSC, VAT reduction or exemption, reduce rent for SMEs.

Economy Stimulation

Infrastructure investment plans

• Provincial investment plans added up to 50 trillion.

• Key areas: public health services, emergency supplies, 5G networks, and data centers.

  
  

Fiscal and financial preferential policies

• The PBOC will up its relending and rediscounting quota by RMB 1 trillion.

• Further targeted RMB Deposit Reserve Ratio cuts to help SMEs are also coming.

• Additional local government bond approvals will be “expeditiously allocated”.

Stabilize and boost trade and foreign investment

• Shorten the negative list of sectors restricting foreign investment and expand the list of encouraging.

• Refund all export tax rebates in full and on time, except for those for energy intensive, polluting, and natural resource-related products.

• Encourage financial institutions to increase foreign trade loans by deferring payments.

• Set up 46 new integrated pilot zones for cross-border e-commerce, in addition to the 59 existing ones.

• Extend preferential value-added, excise, and corporate income tax policies to the new pilot zones.

• Host the high-profile 127th China Import and Export Fair (Canton Fair) ONLINE in June.

4. Potential Changes in China's Macro Environment

5. Implications

• With related sectors booming, the economy has taken another step towards modernization.

• China’s management capabilities demonstrated in the business resumption period further verity its manufacturing advantages over other markets.
  

• It will have positive influence on MNCs’ investment willingness and decisions in the future.

Business leaders need to think and act across multiple horizons：

• Predict the “next-normal” of the industry and be prepared in advance.

• Address the immediate and near-term challenges COVID-19 presents to the company’s workforce, customers, business partners, cash flow.

• Be clear about the regulatory and competitive environment in the industry may shift.

• Conduct crisis preparation exercise including crisis manual, site drill and crisis trainings.