- With the outbreak wreaking havoc on economic activities, firms are faced with tough decision whether to reduce staff levels and wages to be able to survive
- President Xi Jinping said this week that local governments must work hard to ‘ensure the general stability of the job market’
As more people return to work across China following extended holidays or work from home arrangements to combat the coronavirus outbreak, some are now worried the resulting economic slowdown will result in job losses.
The coronavirus, which causes the disease now officially known as Covid-19, had led to the death of over 1,300 people in China, while infecting around 60,000. It has wrecked havoc on economic activities across the country, with firms faced with tough decision whether to reduce staff levels and wages to be able to survive.
On Monday, when many companies reopened after a longer than usual Lunar New Year break, LvYue Group, a tourism and resort company backed by industry giant trip.com formally known as ctrip, announced it was cutting the working hours and salaries of staff from executive level and above by 30 per cent.
The company, which employs thousands of staff to run around 1,900 hotels and hostels globally near popular tourist attractions, many of which have all been forced to close due to coronavirus fears, blamed plunging revenues for the decision.
The letter from CEO Zhang Qiang was partly in response to reports last week that the company planned to start massive lay-offs, with LvYue Group later confirming job cuts due to the deteriorating business conditions would be less than 20 per cent.
Zhang did not address the lay-offs in the letter, but said the company would try to stay competitive by "reducing all possible expenses, removing bad business segments, and ending losses and non-quality growth".
Xinchao Media, a large advertising firm, laid off 500 people across 80 cities on Monday, which accounted for around 10 per cent of its total workforce. Chief executive Zhang Jixue said that business decreased 70 per cent in February, with the possibility that the impact of the virus could continue into the second quarter of 2020 weighing on the decision.
Last week, a Beijing-based education firm specialising on coding skills also dismissed all its of staff, while a karaoke company in China's capital city released a plan to lay-off more than 200 employees.
At a high-level meeting on Wednesday, President Xi Jinping said local governments must work hard to "ensure the general stability of the job market", while Premier Li Keqiang made it clear that China must avoid "large-scale job cuts".
The coronavirus outbreak has put millions of people in limbo, particularly those in restaurants, hotels and retail stores, with formal job losses looming if the situation does not start to improve.
Liu Qingfeng, who runs a small marketing firm in Beijing, said he could keep his business running as normal for up to two months, but if the virus continued for three months, he would have to consider significant lay-offs.
A Shenzhen-based seller of imported wine, who asked not to be identified, said she was not considering lay-offs at the moment and planned to wait out the virus.
I want to echo the government's call for not laying off people. But how? What about March? April? I think the virus will be over in May. I am too tiredShenzhen-based seller of imported wine
"I want to echo the government's call for not laying off people. But how? What about March? April? I think the virus will be over in May. I am too tired," she said in a social media post.
Recruitment site Zhaopin said this week that around 10 per cent of firms they surveyed were "on the verge of death", with around 30 per cent planning job cuts and another 30 per cent saying they could not pay their employees on time.
China has not released any updated statistics covering employment, with the unemployment figures for January and February not set to be released until March. In December, the official unemployment rate was 5.2 per cent.
In 2003, which included the severe acute respiratory syndrome (Sars) outbreak, around 8 million people lost their jobs, according to official Chinese data, although real job losses may have been much higher because government data did not cover most migrant workers.
Amid the coronavirus outbreak, China's statistics agency is asking local staff to carefully conduct unemployment surveys. On Wednesday, the National Bureau of Statistics told local statistics staff that the employment situation had shown "complicated changes never seen before".
"There are few people on the street, and in tourism, catering, entertainment and other industries that have chosen to suspend business, while online education, games, takeaway delivery and other industries have rapidly increased demand," the bureau said.
In response to the outbreak, efforts have been made to expand the range of firms who can receive subsidies for "stabilising employment." For small and medium enterprises, as long as they do not lay-off 5.5 per cent of their staff " the target for national unemployment rate in 2019 " they can still apply for subsidies. For smaller firms that employ less than 30 people, the ratio has been increased to 20 per cent.
Local governments have also introduced a slew of policies from reducing rents to encouraging bank to lend money at favourable interest rates, but according to entrepreneur Wu Hai, only few of the incentives will help private, small businesses.
Wu, who runs a karaoke chain that could leave 1,500 people without jobs and result in losses of around 400 million yuan (US$57 million) if it went bankrupt, said in a viral online post that addressing labour costs should have the largest benefit since it accounts for 62 per cent of his expenses.
But many local government have only asked companies to negotiate wages with employees and delay payment of mandatory social security contributions.
"The social security contribution is one of the largest burdens that crush us. The current situation is: the government doesn't allow my company to operate. But you still have to pay all the money you are supposed to do " just a bit later," Wu said.
Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.查看原始文章