Trade War and COVID-19... "Hope Crushed for Foreign Companies Entering China"

[Asia Economy Beijing=Special Correspondent Park Sun-mi] The hopes of foreign companies operating in China, who thought their China business would improve once the trade war wave subsided, are being dashed by the spread of COVID-19.

According to the South China Morning Post (SCMP) on the 27th, Paul Sibus, head of the China Central and Western Region at the EU Chamber of Commerce in China, pointed out that the spread of COVID-19, along with the trade war, is becoming a "double whammy" for foreign companies operating in China. Foreign companies had hoped that their China business would improve after the trade war, which lasted 19 months, shifted to a better phase on January 15 this year, but their expectations were completely shattered by the subsequent outbreak of COVID-19.

To prevent the spread of COVID-19, China closed interregional transportation routes and temporarily shut down non-essential manufacturing and businesses. Although some regions have begun to normalize economic activities as the COVID-19 situation improves recently, many workers have yet to return to their daily routines, and factories are facing difficulties in resuming operations due to disruptions in logistics and supply chains. Companies are burdened with increased costs from activating emergency response systems for COVID-19, long-term delivery delays, and customer attrition.

Sibus said, "Some European companies, members of the EU Chamber of Commerce, have already relocated their production lines outside of China," noting that the collapse of China's supply chain due to the COVID-19 outbreak is encouraging European companies to leave China. He also criticized the unclear COVID-19 response directives imposed by the Chinese government on companies as a factor making business operations difficult for European firms in China.

Sibus explained, "There are no clear guidelines from the Chinese government for companies to establish emergency plans. Requirements vary by region," adding, "It would have been better if there had been a more unified approach." He further added, "Since the Ministry of Commerce of China announced on the 10th that it would support foreign companies affected by COVID-19, foreign companies have been waiting for government support measures to be implemented quickly."

Meanwhile, the complaints of foreign companies arising amid the COVID-19 outbreak are also reflected in surveys. In a recent survey conducted by the British Chamber of Commerce in China targeting 135 British companies operating in China, companies cited the lack of masks for employees as the most difficult factor in resuming production lines, and agreed that enhanced communication between the Chinese government and companies and increased transparency of government guidelines are necessary to enable companies to resume production as efficiently as possible.

In the British Chamber of Commerce in China survey, one-quarter of the respondent companies expected their sales in China to decrease by more than 20% this year due to the COVID-19 outbreak. About half anticipated an unavoidable sales decline of more than 10%.