Coronavirus, trade war a ‘double whammy’ for foreign firms in China, EU chamber boss says

• Containment measures for disease dashed hopes that trading conditions might improve, says chairman of southwest branch of EU Chamber of Commerce in China
• Authorities must now provide firms with clear guidelines and support to help them get back in business

The coronavirus epidemic has dashed the hopes of foreign companies operating in China that trading conditions in the region might be about to improve, according to the head of a European Union industry group.

After more than 19 months of uncertainty and difficulties caused by the US-China trade war, the signing of an interim deal to end the conflict on January 15 gave many foreign firms reason to be optimistic. But their hopes were short-lived as the virus outbreak delivered a painful "double whammy", said Paul Sives, chairman of the southwest branch of the European Union Chamber of Commerce in China.

While cities across China are trying to get back to normal after mandatory lockdowns and other restrictions, for many the damage has already been done.

Many in the business community have complained of manufacturing being severely disrupted and that the emergency measures introduced to keep firms operational have resulted in massive cost increases, lengthy delivery delays and, ultimately, the loss of customers.

"Some member companies have already moved certain production lines to factories they have elsewhere in the world, to supply the goods that they cannot supply from China," Sives said.

In its effort to contain the outbreak, which has left more than 81,000 people infected and over 2,700 dead, Beijing implemented a raft of measures, including locking down Wuhan " the city at the centre of contagion " by closing major traffic routes and shutting down non-essential manufacturing and other businesses.

While production is slowly getting back to normal, the conditions attached to that resumption, such as companies being required to provide masks for workers and conduct regular temperature checks on them, are creating their own problems.

In one instance, Sives said that one of the chamber's member companies was told to have a vehicle on standby to take people suspected of being infected to hospital in the event of there being no official vehicles available. It was also told it must provide protective clothing for its workers, despite such items being in short supply even to hospitals that needed them most.

"It would be better if there was a more uniform approach, and the districts applied a standard policy which would make easier for businesses to understand what they are supposed to do," Sives said.

"We all want to support, we want to make sure the virus does not spread, but we want to be sensible about it as well."

Beijing has told companies they must remain vigilant and said that any workers returning from areas affected by the virus must place themselves in isolation for two weeks. Firms have also been told to submit their contingency plans to the relevant authorities for approval.

But Sives said there had been a lack of direction.

"We don't have any clear guidelines to make an emergency plan and there are different requirements among different districts," he said.

China grants banks extra funding to help small businesses

His concerns were echoed in a survey published on Tuesday by the British Chamber of Commerce in China.

The poll of 135 British firms said that a shortage of face masks was the main problem for manufacturing companies trying to restart their lines, while the lack of clarity was also causing concerns.

"Effective communication and transparency from the government are necessary to ensure companies can resume production as efficiently as possible," it said.

Sives said that the cutting of international flights both into and out of China had also been damaging.

Some companies were having to book express carriers up to two weeks in advance to get their products to customers overseas, which was extending delivery times by a factor of two or three, he said.

Also, because of the shutdowns some firms were struggling to source essential raw materials and components from their suppliers within China, Sives said.

That was particularly a problem for smaller companies that unlike their larger competitors "don't have factories outside China, so they can only rely on China".

A quarter of the companies polled by the British chamber said they expected their China revenue to fall by more than 20 per cent this year because of the coronavirus outbreak, while half said they were expecting a drop of more than 10 per cent.

After China's commerce ministry said on February 10 it would help foreign companies to deal with the impact of the epidemic, Sives said that they were still waiting.

When asked when he would like to see the support policies put in place, he replied: "The sooner, the better."

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.