Lessons From China Inc. – Analysis

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By Geopolitical Monitor

By Simrin Mediratta*

The COVID-19 pandemic came with its own set of challenges for each nation, revealing the importance of public healthcare systems. Combined with one of the earliest nationwide lockdowns, it catapulted China into a downward spiral for growth and development alike. The Chinese congress binned its growth expectations for 2020 and would inevitably have to delay its deadline to lift its people out of absolute poverty. The shutdown proved especially challenging for businesses. More than 4,29,000 firms in China closed permanently in the first quarter of 2020 and over 2,40,000 filed for bankruptcy, giving the world a glimpse into the struggles faced by companies weathering the crisis and their future. From employee engagement to rapid digitalization, there are many lessons to be learnt from Chinese businesses as the world reopens.

The new age of business

As companies grappled with the ongoing pandemic to come out stronger, the new normal looked a lot like having the ability to adapt to changes. Many brick-and-mortar retailers were catapulted into the new age of digital business without warning and were forced to increase their digital presence to offset the steep decline in sales. According to a report by Fung Business Intelligence, many retailers and departmental stores resorted to creating official WeChat accounts and turned their employees into virtual shopping assistants to provide exclusive offers and information about new products. Another popular initiative included Mini Programs, where customers could view livestreamed shows by key opinion leaders, place an order, and connect to merchants. While overall retail sales of consumer goods declined in the first two months of the year, the online retail of physical goods actually saw an increase of 3% (y/y).

The catering and restaurant industries were hit hard in all parts of the world, making workers vulnerable to redundancy. To soften the blow of the pandemic, firms adopted a new scheme called ‘employee sharing’ which prevented massive layoffs by loaning idle-capacity workers to short-handed businesses such as food delivery firms, which saw a huge spike in demand. This allowed workers to earn wages for hours spent being idle at their previous jobs and saved firms like Alibaba’s Hema Xiansheng from conducting widespread HR recruitments due to increase in demand.

Alibaba’s e-commerce competitor – JD.com, Amazon, and many other firms also hired furloughed employees, supposedly saving 4 million workers from being left behind. The move reduced the strain on government resources as lesser number of people then required government assistance and unemployment benefits.

Many retailers also opted for contactless delivery options like piloting driverless vehicles and drones to retain customers vary of stepping out of their homes.

Business-driven safety

Apart from adopting the practice of employee sharing, many e-commerce websites have aided merchants by reducing service fees and warehouse rentals, relieving the cash flow burden of merchants suffering losses during the pandemic.

Most businesses, save medicine and healthcare manufacturing, were shut down as china embraced the crisis by sacrificing weeks of economic activity. As the economy started opening post lockdown, firms essentially had two choices: Transform production process and come to office with expensive hygiene controls or return with fewer people.

While no company was allowed to resume business without seeking government permission, by 8 February the government started urging people to get back work and resume production. To ensure safe working standards and solve manufacturing bottlenecks, 29 working groups were formed to facilitate resumption of work. By the end of March, the work resumption rate had reached 100% in four industrial provinces in China – Guangdong, Jiangsu, Shandong, and Zhejiang – the top four provinces in terms of GDP share.

No employee was allowed to come back to work without personal protection masks and required thermal scanning on a daily basis. After returning to work, each employee was asked to share their health status on a government sanctioned app, and firms were required to visibly provide routine cleaning of the office spaces to build confidence in the employees.

Other than that, Alibaba altered its operating procedure by generating health codes which decided who qualified to return to office. Those who had a “clean” health declaration were given a green code, while others were required to continue working from home. Not only that, they dispatched medical health packs to its employees in high risk areas and improved employee morale by hosting virtual karaoke sessions and facilitated videos and notes to workers in the frontlines.

Laird Performance Materials, an intensive electronic manufacturer, went one step ahead by securing 500 quarantine rooms for its employees returning to Shenzhen after the New Year break, and started employing staggered reporting times and lunch times to avoid mass crowding in the factories.

There is a greater push towards automation. From robot cleaners to drone delivery, the pandemic has seen a surge in demand as companies realize the vulnerability of human labor. Companies are also looking to have one machine do more jobs than before, reducing the labor reliance. Machines which scanned faces before, now also take thermal temperatures of employees coming in for work.

Beijing’s new wave

After almost eight weeks of no locally transmitted cases, a resurgence in Beijing has led to new shutdowns and reversal of social distancing leniencies. Renewed lockdown of areas near the Xinfadi market, a coveted wholesale food market and the source of the new outbreak, and school closures have made it clear that the ‘new normal’ isn’t pandemic-proof. While Beijing isn’t keen on imposing another city wide lockdown, tightened control measures are helping keep the spike in check.

China’s curve has been ahead of other countries and as businesses are looking for guidelines on how to bounce back, there are many lessons to be learnt from it. The Chinese private sector has extensively shown that those who have the ability to adapt will survive and tech-savvy players are most likely to thrive. But even though digital presence is important, physical retail is here to stay.

Since regulators across the globe are snowed under various demands, it would be too much to expect them to produce standard operating procedures (SOPs) for the new normal on the fly. Business’s experience will have to serve as a guide for those in other countries. Preventative measures will have to suffice to ensure safety of workers and limit the spread.

*The author is a Research Intern at ORF Delhi

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

 

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