How Would China’s Businesses be Affected by the Coronavirus?

release time:2020-02-25

                                                                                                  By Edward Tse

February 2020

These days, the news is dominated by the impact of the Coronavirus and how China is coping with this latest shock. Consumer demand for goods and services is declining in China; sectors such as retail, travel and leisure are the most directly impacted as businesses have closed or are semi-closed throughout the country. The Coronavirus has challenged China, exposing some crucial gaps, but it will also potentially create new opportunities. Attention will be focused on improving China’s entire public agenda, not only one or two vertical areas.

In the aftermath of the crisis, one would expect China’s governance system to become more transparent and there will be more accountability. In order to ensure its public agenda is advanced properly, a lot more effort and resources will need to be put in by the central government as well as local governments at the provincial, city and township levels. State-owned enterprises (SOEs) and non-state-owned enterprises, including both Chinese privately-owned enterprises (POEs) and foreign companies, will be able to better leverage their respective strengths and capabilities. As a case in point, two new specialized hospitals were built in Wuhan – one in 10 days and one in 14 – through the combined efforts of SOEs, POEs and foreign companies. That was quite a feat.

Comprehensive data has always been collected throughout China and surveillance too, was prevalent, and yet China wasn’t able to fully track those who might have contracted the virus. In the aftermath, surveillance and monitoring will become even more important for ensuring their utility for the people.

China's socioeconomic pattern is also changing as consumer behavior shifts and technology continues to develop. Consumption is shifting increasingly from offline to online. New commercial applications of technologies such as 5G, AI and IoT are also developing faster because of the epidemic. We will see innovative business models and changes in the ways that humans interact with each other and with machines in the future.

Source: Baidu

What trends could possibly drive future business opportunities in the aftermath of the Coronavirus?

1. A major nationwide effort would be made towards creation of a safer and more health-conscious living environment.

2. For public health: early detection, prevention, advanced treatment, and diagnostics would receive much more attention and a more comprehensive public health management system would evolve.

3. There would be more Public Private Partnerships (PPP). Collaboration between private and public sectors to create solutions addressing public agenda issues going forward.

4. The development of a more ubiquitous, connected and intelligent society will accelerate, leveraging new disruptive technologies such as IoT, AI, 5G and blockchain.

5. Big data will become even more prevalent with more data sharing across the board for more effective public agenda management.

6. A rise of new modes of interactions will be imminent. Although human-to-human touchpoints will still remain, other forms of interactions, such as human-to-machine and machine-to-machine will grow exponentially.

7. While entrepreneurship and innovation have already been rising in China over the last several decades, they would further accelerate going forward for addressing the pain points that were exposed during the Coronavirus crisis.

The virus has exposed China's many problems and created challenges. In the short run, it has added more uncertainty to businesses operating in and with China from manufacturing, supply chain and consumer demand perspectives. In the medium to longer-run, we can expect a huge potential shift as China re-invents itself, making the improvement of its public agenda management a top priority. Collaborations across governments, SOEs, POEs and foreign companies to foster synergies, while at the same time, new consumer patterns and innovative use of technology and business models will come along. 

About the author

Dr. Edward Tse is founder and CEO of Gao Feng Advisory Company, and a founding Governor of Hong Kong Institution for International Finance. One of the pioneers in China’s management consulting industry, he built and ran the Greater China operations of two leading international management consulting firms for a period of 20 years. He has consulted to hundreds of companies, investors, start-ups, and public-sector organizations (both headquartered in and outside of China) on all critical aspects of business in China and China for the world. He also consulted to the Chinese government on strategies, state-owned enterprise reform and Chinese companies going overseas, as well as to the World Bank and the Asian Development Bank. He is the author of several hundred articles and four books including both award-winning The China Strategy (2010) and China’s Disruptors (2015) (Chinese version of 《创业家精神》).

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