Coronavirus outbreak: Managing and protecting your China business and staff

 

(Kindly supplied by our in-China partners Dezan Shira & Associates, this article will be updated continuously. It was originally published on 27 January 2020 and was last updated on 17 February).

Latest updates

  • The Guardian reports that Xinxian country in Henan Province, which is south of Beijing, is extending the quarantine period for its citizens to 21 days.
  • After Wuhan, Xiaogan city in central Hubei has enforced self-quarantine on its citizens to curtail the spread of the virus. The city has the second highest number of confirmed cases after Wuhan.
  • February 17 – Total confirmed cases of Covid-19 in China are 70,548; there are 2,048 new cases as per the health ministry’s Monday briefing – out of which 1,933 were reported in Hubei Province. The death toll in China has reached 1,770 – with 105 new deaths, out of which 100 were in Hubei.
  • February 16 – China announces a total of 68,500 infections and 1,665 deaths, with a Saturday overnight increase of an additional 2,000 cases. This comes after an overall decrease in infection rates.
  • Enterprises in Hubei Province are now expected to resume work starting February 21. The starting dates for colleges, primary and secondary schools, vocational schools, technical colleges, and kindergartens are also postponed. Wuhan city is a major manufacturing hub in Hubei and has been in lock down since January 23. This article shows the latest map explaining the official position – Updated: China Factory and Offices Reopening Schedules after Lunar New Year.
  • February 14 – Total number of confirmed cases in mainland China reached 63,851 – seeing a rise of 5,090 new cases. The death toll has reached 1,380 with 121 new deaths recorded on Thursday. (Note: The spike in the number of cases is due to the change in the methodology adopted by China for confirming cases, as mentioned previously.)
  • February 13 – Some confusion in China over the numbers of new overnight Covid-19 cases. Hubei’s Health Commission state an overnight rise of 14,440 new cases, while according to the Global Times, the overnight infections increased by 16,568. The latter figure means there are 61,221 confirmed cases in China, the majority of them in Hubei. The rise is far larger than previously recorded, due to a change in how infections are included in daily figures. This means that the jump is not caused by the virus suddenly becoming more infectious.
    In related news, Beijing has dismissed both the Hubei Party Secretary and the Wuhan city mayor, and replaced them with new officials from Shanghai and Jinan.
    The Director of the Hong Kong & Macau Affairs Office in Hong Kong has also been sacked.
  • What do China’s wildlife protection laws say about the pangolin – an endangered species now suspected as a carrier of the coronavirus (Covid-19)? Our latest op-ed from Chris Devonshire-Ellis can be read here.
  • China has rolled out a series of preferential policies related to corporate income tax, value-added tax, and individual income tax to stimulate the production capacity of businesses affected by the coronavirus outbreak as well as to support individuals and firms involved in fighting the epidemic. Read our latest article here.
  • 10 members of one family in Hong Kong were infected while sharing Hot Pot with a mainland Chinese relative who had the virus. People are being urged not to eat from communal shared dishes and to use individual bowls.
  • The incubation period of the coronavirus could be longer than 14 days. South Korea reported their 24th case yesterday who had been in quarantine and had not had contact with any infected patients since January 25 – an 18 day time-frame.
  • Chris Devonshire-Ellisstates that in the aftermath of the coronavirus, the Chinese government need to embark on a mass education campaign concerning the treatment and eating of wild animals. Tougher penalties should be introduced for the capture, trafficking, and consumption of all such animals, while the sanitary conditions of China’s traditional wet markets require a massive investment and overhaul. Products should be stored away from each other and the display of wild animals banned, in addition to the presence of wild birds and rodents entering such markets being prevented. Despite the initial high cost, Chinese sanitation companies and other specialists in this field can become world leaders in this market within a decade as the conditions China currently experiences are also prevalent in other parts of Asia, Africa, and South America.
  • China’s NDRC reports that 22 provinces in China have seen staff return to work, and that 58 percent of coal production and 95 percent of grain production and processing capacity has resumed, both important to maintain as energy and food supply stocks have run lower. Next week should see a further uptick in economic activity as the government expects 160 million people to return from the extended break on Monday, February 18.
  • February 12 – Cases in China reached 44,653 with 2,015 new cases. That represents a decrease of 18.6 percent over Tuesday. New fatalities reached 97 over-night but speaks to a reduction in the fatality rate, now at 10.2 percent. The spread of the coronavirus is slowing.
  • The coronavirus is officially named Covid-19, WHO chief Tedros Adhanom Ghebreyesus informed reporters in Geneva on Tuesday. The name consists of CO for coronavirus, VI for virus and D for disease; and 19 stands for the year 2019.
  • Chinese media reports that two senior officials in Hubei Province – party secretary of the Health Commission of Hubei Province, Zhang Jin and the director of the Hubei Provincial Health Commission, Liu Yingzi – have been fired.
  • The New York Times reports that thousands of people are being quarantined in the city of Tianjin after a cluster of new coronavirus cases were linked to a department store in the Baodi district; about a third of the 102 new coronavirus patients in Tianjin were said to have shopped or worked there.
  • Hong Kong chief executive Carrie Lam asks citizens to stay at home to contain spread of the virus as part of a strategy of “social distancing”. The Guardian reports that more than 100 residents in 35 households were evacuated from a high-rise apartment on Cheung Hong Estate, Tsing Yi, in the early hours of Tuesday, after two residents were confirmed to have contracted coronavirus. Health officials are trying to contact nine more households that need to be moved out from the complex, according to reports from the South China Morning Post.
    • February 11 – China’s coronavirus cases rose to 43,111, with 1,018 deaths. The total number of recovered patients are now 4,098, including 2,222 in Hubei Province.
    • China’s central government announced a slew of new measures supporting the timely supply of consumer medical necessities, prioritizing the import-export of technology, reducing import tariffs consistent with the Phase One US trade deal, and opening up more financial channels of assistance for foreign trading businesses. See our article here.
    • Hong Kong confirmed its 42nd case, Monday night (February 10).
    • Good article from the Guardian science correspondent about the longer term potential of the n-CoV here.
    • Hong Kong reports its 38th case. A real time map of Hong Kong and the impact of the coronavirus can be seen here.
    • A China Briefing map showing all China Provinces and return to work dates is here.
    • China infections outside Hubei Province drop from 890 on February 3 to 444 on February 9, according to the Global Times, citing the National Health Commission.
    • February 10 – China reports 40,171 infections and 908 deaths as of Monday morning.
    • February 9 – There are now 37,554 cases and 813 fatalities; however, the WHO says the infection rate is “stabilizing”.
    • Reports from mainland China that local communities are failing to report potential cases due to the immediate quarantine inconveniences incurred. Whistleblowers face being ostracized.
    • Travelers from China who break Hong Kong quarantine laws face 6 months jail.
    • Fatality patterns suggest N-CoV is more transmissible with colder climatic conditions and is more harmful to patients with long term smoking habits. China is the world’s largest tobacco market with 2.4 trillion cigarettes consumed annually, with middle-aged males being the largest consumer group. This group also has a disproportionate number of N-CoV infections and fatalities. Wuhan also suffers from high air pollution. A January 2020 summary is here and a real-time Wuhan air quality tracker is here. This suggests that the likelihood of acquiring n-CoV increases given specific climatic, local public health, and patient behavior conditions.
    • The Chinese government has issued new regulations to severely punish people who disrupt epidemic control work. This includes employers forcing employees to work before official notices of factory and other employment resumption. Those who violate the rules are subject to speedy arrests and immediate jail sentences.
    • The n-CoV virus is 99 percent similar to that found in Pangolins, a rare and protected species in China related to anteaters, yet one that is sought-after among certain gourmets. Pangolins are not farmed and can only be caught in the wild.
    • February 8 – China infections overnight (Friday) reach 34,546 cases and 722 deaths, including an American. Fatality rate has slowed for second day. Non-China confirmed infections are now 320 in 27 other countries and two deaths.
  • New coronavirus advisory for Russian businesses in China here.
  • Singapore has raised Code Orange for the nCoV outbreak, the second highest. For updates on ASEAN and Asia by country, travel restrictions in place and business advisories please click here.
  • February 7 – Confirmed cases of infection in China now 31,161; death toll is 636 in China, 1 in Hong Kong, and 1 in the Philippines. Total global infections pass 31,441 – with more than 280 cases reported in 28 countries.
  • Chris Devonshire-Ellis on the recent decisions by the UK, US and other governments concerning their attitude to China and introducing slight suspensions and travel bans: “Elected officials rarely engage in Regulatory Impact Assessment in a meaningful way when faced with public health problems. Permitting travel has a cost and benefit. So does restricting it. Epidemiologists and economists can come up with such assessments. Politicians are much keener to be seen as decisive in the face of uncertainty, and cost their economy billions, than be confronted with an angry widow on the hustings. In transition or developing economies, those forgone billions could have saved hundreds of thousands of lives via public health programs & hospital services, for endemic diseases other than coronavirus. On the other hand, epidemics in developing and transition economies can be harder to rein in. There is no transparency in government decision making, just “our officials advise us, and out of an abundance of caution we have decided…..'”
  • Global total now 31,368 cases (China 31,102), 638 deaths (629 China), with 4,833 new cases overnight (Thursday, February 6).
  • We are hearing accounts of travelers in some ASEAN countries being denied entry if they possess any China visa history in their passport. While this may not be official policy, it appears to be implemented at certain border crossings in more remote areas. Intra-Asian travel may best be arranged through main exit-entry points.
  • China’s national health commission said that, as of midnight yesterday (Wednesday), there were 28,018 confirmed cases throughout the country – a rise of 3,694 and the biggest 24-hour rise, and 24,702 suspected cases and 563 deaths.
    WHO has asked for US$675 million from member countries to fight the outbreak.
  • Chris Devonshire-Ellis states “There is a contradiction between the stated coronavirus statistics and the behavior of certain national governments. This means one of two things: there is either an over-reaction concerning the severity of the outbreak, or actual numbers are being under-reported and this news is being suppressed by more than just the Chinese. The WHO needs to up its game and get better involved in its communications with the global public over what is going on.”
  • Hong Kong’s Cathay Pacific is asking 27,000 employees to take up to three weeks of unpaid leave between March and June.
  • All arrivals from mainland China to Hong Kong to be immediately quarantined.
  • China has reported an outbreak of the deadly H5N1 bird flu in Hunan province, which lies on the southern border of Hubei province, the epicenter of the rapidly spreading coronavirus. Local authorities have culled 17,828 poultry after the outbreak. No  human cases of the H5N1 virus have been reported.
  • Useful John Hopkins University real-time coronavirus tracker here.
  • South Korea’s Hyundai Auto becomes first major Asian manufacturer to suspend production, says cannot obtain supply chain parts from China.
  • American Airlines and United Airlines suspend flights to Hong Kong until February 20.
  • As of February 5 – 24,505 cases confirmed, 24,292 being in mainland China; 490 deaths.
  • Unverified Wuhan medic says that coronavirus infection figures are inaccurate as patients who die prior to be tested are not considered as cases. Estimates real cases as being nearer 90,000 in Wuhan alone.
  • Coronavirus mortality rate is currently 2.1 percent, consistent with normal influenza.
  • UK issues advisory for its nationals to leave China on basis “it may become harder to access departure options over the coming weeks”.
  • Our ASEAN Briefing Coronavirus Update notes the first cases of cross-border infections in Asia between Malaysia and Singapore, and Thailand and South Korea. Daily updates concerning the situation in ASEAN and other Asian countries here.
  • Hong Kong has reported its first coronavirus death.
  • Article about the Applicability of Force Majeure as concerns the coronavirus in China affecting contractual obligations and the legal implications and procedures to follow by Vivian Mao of Dezan Shira & Associates here.
  • The coronavirus has now infected 20,629 and caused 427 deaths globally, with 20,483 infections reported in China as of Tuesday morning. This is an 18 percent overnight rise, a lower rate than a week ago when infections were spreading at 29 percent.
  • Hong Kong government closes 10 of 13 border crossings with mainland China; further reduces mainland flights.
  • The People’s Bank of China has stated it will provide support for enterprises affected by the coronavirus by reducing the interest rate on loans, increasing trust loans and medium- and long-term loans. It will also allocate 300 billion yuan (US$43.24 billion) in special refinancing loans for important national banks and some local banks from Hubei province and other key provinces.
  • Answers to frequently asked China HR questions regarding handling the coronavirus and extended holiday issues in China by Dezan Shira & Associates China HR and Arbitration in-house counsel Allan Xu here.
  • According to The Guardian, the highest confirmed cases outside China, Hong Kong, and Macau are – Japan (20 people), Thailand (19), Singapore (18), South Korea (15), Australia (12), and the US, which has confirmed its eleventh case overnight.
  • February 3 – 17,459 confirmed cases globally. The death toll is 362 and 489 patients have recovered.
  • China’s Foreign Ministry has requested ‘urgent’ assistance in the provision of protective medical items, such as masks, goggles and suits.
  • Lunar New Year Holiday extensions update: 24 provinces and cities in China have announced a further extension of the current Lunar New Year holiday. These are – Anhui, Chongqing, Fujian, Guangdong, Guangxi, Guizhou, Hebei, Heilongjiang, Henan, Hunan, Inner Mongolia, Jiangsu, Jiangxi, Jilin, Liaoning, Ningxia, Shaanxi, Shandong, Shanghai, Shanxi, Suzhou, Xi’an, Yunnan, and Zhejiang; all have stated that non-essential businesses need not re-commence their operations until next Monday, February 10.
    Hubei province, where Wuhan is located, has stated that the holiday will last until at least February 14.
    These regions accounted for almost 69 percent of China’s gross domestic product (GDP) in 2019.
    In addition to this, Beijing has said companies should let employees work from home until February 9 (with the exception of those working for public utilities and companies providing daily essentials) while Tianjin has urged schools and companies to not resume operations until further notice (again with the exception of those working for public utilities, daily necessities or those involved in the prevention and control of the outbreak).
  • The new hospital in Wuhan to treat coronavirus patients is set to open; a 1,000-bed hospital, it was built in a span of just 8 days. A second hospital, at a capacity of 1,500 beds is also under construction in the city.
  • Official data released Monday show China’s industrial profits declined 3.3 percent, year on year, to RMB 6.2 trillion (US$898 billion) in 2019. It was the first full-year decline since 2015 when profits fell 2.3 percent and can be attributed to the US-China trade war.
    China’s factory activity expanded at its slowest pace in five months according to January PMI data from Caixin. However, the data does not reflect the early impact of the public health crises caused by coronavirus outbreak. The Caixin data is considered ‘normal’ at this time of year. However, analysts expect “a big plunge” in February PMI numbers – to a range between 40 and 45 – due to the virus outbreak. China’s non-manufacturing PMI rose from 53.5 in December to 54.1 in January, showing expansion.
  • Chinese singers and actors Jackie Chan, Xiao Zhan, and Tong Liya sing “Believe Love Will Triumph” to call for people to stand together and stay strong during the fight against the coronavirus.
  • Dezan Shira & Associates’ Chris Devonshire-Ellis on infection trends, logistics and supply chain issues, the impact on China business cash flow projections, and the need to keep your China staff motivated. Please see here.
  • WHO declares global emergency on January 30 as 9,320 confirmed cases and death toll hits 213.
  • Italy suspends flights to China.
  • Air France suspends flights to China, sixth infection confirmed in France is a doctor treating patients.
  • Self-disinfecting ward, medicine and food providing robots being trialled in hospitals in Guangdong.
  • China arranging charter flights to bring stranded Chinese travellers overseas back home.
  • Russia stops issuance of electronic visas to all Chinese nationals, to completely close border with China from midnight tonight, January 30, 2020.
  • Handling China HR issues arising from the extended Lunar New Year, and related issues. Advisory from Dezan Shira & Associates here.
  • Emergency meeting of WHO viral experts being held today. WHO says, “The whole world must be on alert to deal with the spread of coronavirus”.
  • Leading virologist in Thailand says vaccine could take a year to develop.
  • Central Commission for Discipline Inspection (CCDI) announces that “anyone found not effectively carrying out President Xi’s instructions in the fight against the virus or misappropriate rescue funds and materials will be punished”.
  • Ikea, the Swedish furniture giant, is temporarily closing all 30 of its stores in China.
  • The Guardian reports that Air Canada is suspending all flights to Beijing and Shanghai from January 30 to February 29. The last flights from the two cities back to Canada will take off on January 30.
  • People’s Daily reports that China will resume production of face masks on February 3 (first working day after the national lunar new year holiday extension), and produce 180 million masks per day by the end of February.
  • Jiangxi ProvinceShandong Province, and Anhui Province are delaying resumption of work for non-essential enterprises to February 9. Hubei Province announced that enterprises in the province will be closed till February 13.
  • The WHO will meet Thursday, January 30, to make a decision on whether the coronavirus constitutes a global health emergency. Infections have now been confirmed in at least 16 other countries.
  • 7,711 confirmed cases reported by the BBC as of January 29, infections spread to every region in mainland China with a confirmed case reported in Tibet. Death toll has reached 170; The Guardian reports that 162 of the deaths are in Hubei province, where the outbreak originated.
  • WHO estimates mortality rate at 2 percent, less than 10 percent attributed to SARS, but warns the coronavirus could spread globally.
  • UAE confirms four cases in Middle East.
  • British evacuees face two weeks quarantine on UK military base upon arrival back to Britain.
  • Suspected cases in Africa yet to be confirmed.
  • China National Health Commission states “Infections will peak in ten days”.
  • Operating Your China Business Remotely– technical advisory from Dezan Shira & Associates.
  • Washington has advised US airlines they are considering the suspension of all US-China flights.
  • Australian researchers have recreated the novel coronavirus in a laboratory, hastening the development of a vaccine.
  • British Airways has suspended all flights to mainland China. Several countries begin evacuation of their citizens from China. Australia to quarantine evacuees on Christmas Island.
  • Chongqing municipality announced Tuesday night that non-essential enterprises in the administrative area will remain closed till February 9.
  • The number of cases confirmed has risen to 5,974 as of January 29; the death toll reached 132.
  • Guangdong Province issues mandatory order for citizens to wear face-masks in public. Offenders can be arrested and removed from public areas.
  • For our business advisory update about the coronavirus in India from Dezan Shira & Associates local offices, please click here.
  • For our business advisory update about the coronavirus in Vietnam from Dezan Shira & Associates local offices, please click here.
  • For our business advisory update and planning for remote administration in China, please click here.
  • Kazakhstan has suspended visa on arrivals for passengers arriving from China and requires Chinese nationals to have medical certificates certifying fitness prior to entry.
  • Hong Kong has eight confirmed cases. It has announced suspension of all ferries and rail services from mainland China from this Thursday and has cut by 50 percent all inbound China flights.
  • For the latest updates on the coronavirus and ASEAN, please click here.
  • The Philippines has cancelled all visa on arrival facilities from China; other visas issued in China remain valid.
  • Vaccine will not be ready until mid-March, Russia has closed its Far East border with China. Advisory for Russian businesses in China 
  • WHO expresses ‘confidence’ China can contain the spread of the virus. Indications are infections will peak in the next seven days.
  • China reports 4,500 cases with 1,000 in serious condition – a rise of 45 percent. The death toll has risen to 106.
  • The new coronavirus appears to have an incubation period varying from three to seven days and up to two weeks but can spread before symptoms show.
  • Chinese New Year Holidays extended until February 2 to prevent mass movement of citizens. Shanghai, Suzhou, Guangdong Province, Zhejiang Province, Jiangsu Province, and Yunnan Province extended until February 9. Other provinces and cities likely to extend this further; China Briefing will provide updates.
  • Chinese staff may not be able to return to work immediately.
  • Serious interruptions and cancellations of transport reported across China, expect this to continue for the next two weeks.
  • Mongolia has closed its border with China.
  • Hong Kong is temporarily banning Hubei residents from entering.
  • The novel coronavirus that has leapt to prominence in the past few weeks is slowly becoming better understood as doctors and virologists start to identify its characteristics.
  • On January 27, China’s National Health Commission stated that “based on current epidemiological investigations, the incubation period is generally 3-7 days, with the longest no more than 14 days”.
  • While there are some concerning signs – a non-symptomatic incubation period making immediate diagnosis difficult – it should also be remembered that this is the annual flu season in China, and thus far, the virus appears to be survivable among the young and healthy. Most colds or coughs will turn out to be seasonal, ordinary bugs.
  • However, the mortality rate of the coronavirus appears to be far higher than is normal; the method of transmission is mainly through respiratory droplets and China’s health minister Ma Xiaowei has stated that people can spread it before showing symptoms. Until the situation can be brought under control, the virus will affect your business in China.

At Dezan Shira & Associates, we have several hundred staff on the ground, just as many other foreign-invested businesses do. We also worked through the SARS experience back in 2002, giving out advice and bulletins to concerned readers in China and beyond.

This article will be updated as the situation unfolds. For updates on government imposed restrictions in China, please refer to this article: Latest Emergency Measures Announced by PRC Government.

What we know so far

The World Health Organization (WHO) met in Beijing on Monday (January 27) to discuss measures to deal with the spread of the virus. It just stopped short of declaring a public health emergency of international concern, but said it is an emergency for China.

As of January 28, 4,515 cases have been confirmed, with 106 deaths.

China’s State Council has extended the Chinese New Year holidays until February 2 to postpone people from travelling. All schools and colleges are closed until this date; many cities and provinces have announced educational institutions will be closed till mid-February.

Our opinion is that the 2 February return to work may be further extended, as it already has in ShanghaiZhejiangGuangdongSuzhouChongqingJiangsu, and Yunnan until February 9 and possibly later, to prevent people from traveling.

Meanwhile, Hong Kong has banned residents from Hubei from entering, including those who have travelled to Hubei in the last 14 days. On Tuesday, Hong Kong leader, Carrie Lam, announced the high-speed rail service between the city and mainland China would be suspended from Thursday; all cross-border ferry services also suspended.

Mongolia closed its border with China on Monday and shut down all educational institutions. Philippines has stopped issuing visa on arrival to Chinese tourists.

The next two weeks will reveal how serious the problem is. We recommend putting off planned China trips until mid-February at the earliest.

Impact upon businesses in China 

Human resources

The obvious, immediate impact is that some staff will not be able to return to work on the intended date – this coming Friday, January 31. Although this week is still officially a national holiday, it is recommended that senior management in China take a headcount and establish exactly where staff are and are in direct communication with them. The extension of the national holidays to Sunday February 2 should be treated as annual leave and recorded by HR as such.

However, our opinion is that the February 2 return to work may be further extended, possibly until February 9 or even later, as the virus appears to have a two-week incubation period. This means that offices and factories should prepare to be understaffed until that time. It should also be noted that even if staff are able to return to work next Sunday (February 2), transport services can be expected to be severely disrupted, and other services, such as delivery canteens, cleaning, and so on may also be curtailed. For offices, this means staff may be able to work from home. Factories will likely experience down time.

To action: Conduct an immediate headcount to ascertain where staff are and establish direct communications with them. When possible, arrange for staff to work from home.

Chinese labour law concerning staff illness

Should staff become ill, employers must ensure their employees can receive their paid statutory medical leave. If an employee needs to take time off work due to an illness and the employee is eligible for statutory medical leave under the law, the employer must provide the leave in accordance with the national and local law, and the employee’s employment contract. The minimum pay standard varies across China but is typically about 80 percent of the total. However, note that if your employee handbook provides for a company medical leave program more generous than the applicable law, you must follow your own internal rules and regulations.

How exposed are you?

It is important to understand the potential impact an enforced slowdown could have on your business. This will vary from sector to sector; however, being aware if your major customers are also under stress is a prerequisite, and especially if your total sales exposure is to companies in China or dependent upon China-based suppliers. Additionally, if your China customer base is exposed, you are likely to face a sales downturn. In our business opinion, China Q1 sales figures are going to be affected, and it may be difficult for businesses elsewhere to obtain fulfilment on orders originating from China.

To action: Conduct an inventory of planned shipments from China and establish whether or not these could be impacted. Open communications channels with suppliers to discuss delivery problems and be prepared to re-source from alternatives elsewhere. China sales will be hit in numerous sectors, so examine your business plan, budgets, and cashflow to be prepared for a hit.

Receivables

There is simply no need for receivables to be beyond 90 days. Now is the time to examine sales contracts and credit terms already given, and to see what can be done to bring these under better credit control. 60 days is reasonable, 45 days even better. Remember if your customer goes bankrupt while in possession of your goods, it is going to be a devil of a job involving court procedures to get them back. It is far better to manage your receivables before goods shipped become a potential asset in somebody else’s insolvent warehouse.

To action: Examine cashflow and attack your receivables. The coronavirus should not become an excuse to delay payments due to you.

Stock take

It is a good idea when tough times lie ahead to examine the exact status of your stock. Is your stock secure? An empty or undermanned warehouse can be tempting. Do the inventory’s contents really add up according to the balance sheet? Now is a good time to conduct internal audits to ensure your inventory is where it should be.

Cash in hand

It is usually a good idea to maintain at least three to four months’ worth of total operating costs in China. This is especially true when times are tough, as contingency financing is more likely to be called upon at short notice. Your China operations may require a cash injection to help them overcome what may be a difficult Q1. If, on the other hand, you are fortunate to have excess cash in China, now may be a good time to repatriate it.

Preparing to downsize 

Reducing head count is one effective way to cut costs in China should your bottom line come under strain. Fortunately, the overall behaviour of Chinese staff is conducive to this. As we enter the new year with many contracts coming up for renewal, options include non-renewal, as well as offering deliberately low or no salary increases to non-essential staff. This does need to be conducted in line with China’s fairly strict employment laws, but that does not mean a managed staff reduction plan cannot be put into operation. Downsizing a China business by laying off staff is one way to better manage expenses when the going gets tough. Seek assistance with China’s employment laws if you intend to conduct staff layoffs.

Summary 

Now is an ideal time to conduct a health check on your business as it is impacted by China. Businesses in China should be prepared to revisit their 2020 budgets and downgrade their Q1 sales forecasts if dependent upon sales in China.

Global businesses should check on the viability of receiving shipments on time and make contingency plans if in doubt.

Finally, it may not all be bad news. There are always winners and losers during difficult times. Well prepared and managed businesses will survive and ultimately gain market share in the longer term. A Q2 or Q3 bounce back is also entirely feasible – and it makes sense to bear in mind the need to cater for that eventuality as well.

Kindly supplied by Dezan Shira & Associates.

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