China is Back in Business

Last week saw the first day since the initial COVID-19 outbreak that China reported zero new cases. It appears China’s hard-line quarantine efforts have paid off, with the economy on track to achieve a swift recovery to economic growth.

Promising Developments

  • Wuhan have lifted their travel restrictions and officially shut down the last of their temporary hospitals.
  • China’s government is taking active measures to assist small, medium and large Chinese businesses return to normal operation. According to Trivium’s National Business Activity index, China is currently operating at 73.6% of typical business output, up from 6% on March 19.
  • According to Bloomberg, China can be viewed as a ‘safe haven’ for its continued stabilisation amidst rising global uncertainty.
  • Roolife Group’s staff on the ground in in Guangzhou and Qingdao can verify that the majority of retail outlets, bars and restaurants are now open, although all patrons are screened for temperature and heath prior to entry.
  • WalkTheChat has forecasted that with Chinese consumers showing renewed optimism, even China’s hardest hit sectors are likely to bounce-back. China’s luxury and haircare industries are speculated to achieve some of the fastest growth.
  • Chinese internet stocks have consistently outperformed US stocks throughout the outbreak. Notably, China’s eCommerce has flourished. JD.com for example, is poised for strong growth in Q1 2020.
  • Alibaba has reported that 72% of their 130,000 POS systems are now back online. They also announced the launch of their own online university, in a bid to nurture SMEs across China and the Belt and Road to become eCommerce active.
  • Many major Chinese businesses have reopened their doors, including Dongfeng Honda and Apple. Meanwhile, others are taking advantage of new opportunities that have arisen out of COVID-19’s outbreak. Both LVMH and The Food Revolution Group have pivoted their usual business models to manufacture hand sanitizer.
  • China’s national blockchain network is now live across 100 cities.
  • As China’s major tourist destinations reopen, there is also light at the end of the horizon for Australia’s tourism industry. A recent survey conducted by Dragon Tail Interactive found that half of the 89% of Chinese travellers who have cancelled or delayed their plans still intend to travel once the crisis is over. Notably, younger post 1990s respondents appeared to be the most optimistic about a speedy recovery.
  • Cross-border payments have become slightly more manageable this week, with Alipay announcing a partnership with Transferwise, as well as an inclusion in Apple’s next iOS updates.
  • Little Red Book has rolled out new enterprise accounts for travel Partners (i.e. CTrip).

 

Australian Economy Going Into Freeze

As China’s economy reignites, Australia is entering lock-down mode;

  • Prime Minister Scott Morrison has banned all non-essential travel across the country.
  • Similarly to that which was seen in China in late January, Coles and Woolworths have faced challenges and experienced a level of disarray as they struggle to keep up with online demand. Similarly, Amazon has suspended Prime Pantry to handle its backlog of orders.
  • Responding to the rise in remote work domestically, Telstra is removing the data quota cap for all home broadband plans. This comes as NBN providers have been given a 40% capacity boost to handle Australia’s increased load of internet demand.
  • A growing number of international retailers are closing their stores to contain the outbreak, and are shifting their operations online.

Naturally, many Australian businesses are now looking to China to offset the uncertainty being faced domestically. Given its’ low-cost nature, Cross-Border eCommerce presents a particularly attractive entry point for many businesses. In 2019, 71% of China’s internet-active population made an online transaction, while eCommerce penetration reached as high as 36.6% of total retail sales. It seems there has never been a better time to plan, develop or update your China launch strategy.

 

China: A Market Changed

As Ogilvy pointed out: the post-COVID19 China is already proving to be a very different place. Businesses must be prepared to adapt to a changing landscape.

Noteworthy Digital Shifts:

  • Mini-Programs are now a bare-minimum pay-to-play requirement for businesses, with daily active users in February surpassing 450 million. This follows Tencent’s announcement of a 6.1% YOY jump in WeChat’s monthly active users, now at 1.17 billion (Q4, 2019).
  • Livestreaming is now a major part of netizens’ purchase journeys, with the number of Taobao livestreams in February having jumped 110% YOY.
  • Mobile gaming is currently at a record high, and brands are increasingly incorporating games as into their engagement and sales strategies.
  • Remote collaboration and learning are now commonplace. Even Pinduoduo has launched its’ own platform, Knock.
  • 5G has well and truly landed in China. Since the start of 2020, Beijing has built 9,000 5G towers and doubled their userbase. Chinese consumers are also showing to be more willing than the rest of the world to pay a premium for 5G.
  • China’s logistics networks will emerge stronger than ever. Alibaba Group, JD.com and Meituan Dianping have undergone a significant stress test throughout the crisis. They have worked alongside government regulators to streamline approvals processes and launch new delivery services incorporating fleets of drones and autonomous vehicles.
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