Life continues to return to normal across the vast majority of China, with more businesses back to full operations, domestic travel increasing, fewer temperatures being checked and positive consumer sentiment in the air to coincide with the warmer spring climate.
The longer-term impact on certain industries has yet to be fully realised, but increased manufacturing and the rapid opening up of the domestic market indicates that China is already getting back to business. With much of the world reliant to some degree on China goods and services, the ‘world’s factory’ is well-positioned to help bring some stability to a weakened and fragile global economy by increasing production output and keeping supply chains open.
The recent announcement that schools will start to re-open is another sign that normality is getting closer in China at least.
An anti-COVID 19 feature has become one of the new product claims for the latest air purifiers. For example, the household appliance manufacturer has launched a model priced at RMB 12,000, claiming that it can kill coronavirus with the efficiency of 99.9%. One of their competitors Mijia launched their Air Purifier F1 whose key selling feature is the combination of three effects of removing formaldehyde, removing bacteria and removing smog became the biggest selling point.
Business and Trade
By 26th March, about 80% of businesses restarted their operations in the catering industry with the top 3000 companies seeing a 30% increase in revenues compared to February.
The index of logistics & purchasing in March was 103.7, an increase of 12.5 compared to February. The index is above 100 in six out of fourteen categories, indicating a positive recovery trend.
Cargo rates have risen by over 10% in March 2020 as some airlines convert passenger planes to cargo to stay afloat. Delta Airlines have converted some wide-body passenger planes to cargo-carrying aircraft, and after ceasing US to China operations in late January, they currently are running 3 return flights per week between Shanghai and Detroit for emergency and medical supplies. A similar strategy is being implemented by Cathay Pacific., Korean Air and American Airlines, along with others.
Alibaba has launched Chunlei Plan, a project that should help the country’s small and medium businesses recover quicker. The plan includes assistance in expanding domestic and international distribution, establishment of digital agricultural bases, offering loans etc.
Travel and Transport
Over 43 million people travelled domestically during the Qingming Festival (Tomb Sweeping) representing a decrease of 61.4% YOY. During the three-day holiday, tourism revenues reached RMB 8.26 billion, a decrease of 80.7% YOY. Due to the relatively small number of people travelling, it is not surprising that the domestic tourism satisfaction index, indicating happiness with the experience, reached 88.8 – the highest level in history since the measurements started taking place (average is 82.2).
Public transport services in Wuhan have resumed, with the number of buses available to the citizens reaching 70% of the pre-crisis level. Taxi companies restarted their operations on 8th April.
In past week, over 90% of hotels resume business in China. Shanghai, Hangzhou, Chengdu and Guangzhou top the list with the most guests while Suzhou hotel industry saw 50% increase of booking comparing to March. Hotel brand Marriott’s group also reported that during Qingming holiday, its hotel in Sheshan, in the suburbs of Shanghai, reached 100% occupancy.
90% of Chinese consumers are planning domestic trips as their preferred choice once the coronavirus pandemic is over, with 41% of them stating they plan to drive and 29% opting for high speed trains (vs 14% planning to fly).
The usage of shared bicycles is returning to normal, with the total number of rides reaching 16.22 million in March (63% of the rides in March 2019).
Day to Day Life
Hospitals in China are slowly returning to normal, with those in Shanghai gradually resuming outpatient, inpatient and surgical services. The number of outpatients, discharges, and surgeries returned to 70%, 65%, and 48% of respective pre-epidemic levels, while the outpatient volume in community health centres rose to 76% of the pre-crisis period.
To get citizens to maintain social distance, the government has encouraged digital funeral services. China currently has around 60 digital funeral service companies, one of which, Yunjisi, stated they received more than 130 million prayers during Qingming Festival.
86% of consumers in mainland China plan to prioritize home cooking even after the pandemic is over according to Nielsen.
Universities in Jiangsu province are set to reopen by mid-April. The government currently encourages universities to reopen on different dates, in order to avoid crowding and potential increase in infections.
Provinces of Hebei, Guangdong and Shanghai announced that schools will reopen gradually from 27th April. Students in the final year of high school and middle school, as well as college and secondary vocational school students, will begin resuming lessons first, while students in primary school and those in other grades in middle and high schools should be prepared to return after 6th May.
Alibaba’s eCommerce platform Taobao supported Hubei farmers by launching “Gather around Hubei” (Ju Hubei), an online shopping activity to support Hube-based business. This was a success, with 200,000 produce orders being placed within one hour.
Hotpot chain Haidilao have announced they would be raising their prices by 6% in order to recoup their losses from 2020 Q1. China Securities currently estimates Haidilao lost RMB 580 million in 2020 Q1.
Luxury corporation LVMH is facing a global revenue loss of RMB10 billion (US$1.4bn) in 2020 Q1 due to closed manufacturing facilities and stores of Armani, Hermes and Chanel, with sales in China declining by 40% in the same period. The consulting company Boston Consulting Group (BCG) expects the losses to reach RMB700 billion in 2020, with a significant shift to online shopping which is forecast to grow by 50%.
Online video content platform Bilibili announced revenues in 2019 of RMB6.78 billion (+64% YOY). Formerly known as a platform specializing in anime, comics and gaming (ACG), Bilibili re-stablished itself as a YouTube of China, attracting a large number of influencers interested in creating longer form video content.
Luo Yonghao, the CEO-turned-influencer of smartphone company Smartisan, had his first live streaming session on 1st April during which he sold a wide range of items, including projectors, vacuum cleaners, shrimp and toothbrushes. The session was a success, with 8.41 million items being ordered and the number of viewers reaching almost 49 million.
Sources: Gree, Mijia, Douyin, China Tourism Academy, Nielsen, China Hospitality Association, China Federation of Logistics & Purchasing, Taobao, Yicai, China Securities, Yunjisi, Delta Airlines, China’s Ministry of Education, BCG, Bilibili, Fortune, Wired
Thanks to our PHD China Insights team for their contributions.
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