Outbreak sees Shanghai show commitment to opening-up, transparency
Engineers discuss maintenance plans at Honeywell Shanghai Avionics. The company resumed operations on Feb 10. (PHOTO PROVIDED TO CHINA DAILY)
Efforts by the Shanghai government in helping mitigate the effects of business disruption caused by the novel coronavirus outbreak are being lauded by foreign companies in China.
Shanghai is home to the regional headquarters of 710 multinational companies, the highest in China, according to the Shanghai Municipal Commission of Commerce.
Over the past few weeks, companies in the city have been affected as many employees worked from home to minimize their chances of getting infected, while many businesses closed to prevent the spread of the virus.
Having foreseen the challenges that the epidemic would create, the Shanghai municipal government on Feb 8 announced a 28-point circular containing measures to help companies maintain growth and weather the current storm.
The measures include loan interest rate cuts of at least 0.25 percentage points off the benchmark prime rate for the duration of the outbreak, as well as extended repayment periods, rent reductions and deferment of tax payments to ameliorate potential capital shortages.
“We welcome and appreciate the support from governments of all levels during this difficult time,” said John Wang, senior vice-president of Dutch lighting specialist Signify and president of its China operations.
Wang, whose company resumed operations on Feb 10, noted that such policies stand to benefit both large corporations as well as small and medium-sized enterprises, “including many of our dealers and suppliers”.
Paul Lindblad, president of Wacker Chemicals in China, also weighed in on the matter, saying that the government has been providing a torrent of financial and legal support to even small and micro enterprises, which constitute part of the company’s downstream customers.
“These measures are conducive to appeasing capital shortages and maintaining overall market stability,” said Lindblad.
Arnaud Ribadeau Dumas, China president of French lens maker Essilor, noted that the adjustment of social security insurance has also been welcomed, saying that it “directly benefits our financial situation”.
“Even for large companies like us, the cash situation is very much challenged by the tremendous reduction in revenue,” said Francois Tardif, president of French car parts company Faurecia China.
Tardif also said that government measures to extend social security payments to employees are “of great support” at this moment in time.
Industrial conglomerate Honeywell, whose 18 of 21 plants across the nation have restarted manufacturing operations, said that government support is crucial to bolstering business confidence.
“Our epidemic prevention work has been recognized by Sha Hailin, deputy director of the Standing Committee of Shanghai Municipal People’s Congress, who visited our Shanghai campus,” said Scott Zhang, president of Honeywell China.
Gao Guolei, managing partner of Zhanghe Capital, said certain policies have “far-reaching influences” and are poised to bring profound changes to the nation’s science and technological advancement.
He explained that one of the policies aims to provide special funding for foreign enterprises engaged in coronavirus-related research and development, diagnosis and treatment. This will help to encourage technology transfer for multinational companies.
“Companies like (US biotechnology firm) Gilead, whose portfolio of medicines is being tested for the effectiveness in treating novel coronavirus pneumonia patients, stand to enjoy the benefits,” he said.
“This is likely to usher in a benign cycle for introducing new technologies and further improving the business environment.”
Although foreign companies admit the virus is affecting their China operations, they are convinced that long-term growth would not be compromised, while they remain committed to the world’s second-largest economy.
“It is still too early to precisely assess the business impact. But with the experiences we have had with similar situations in the past, such as SARS and H1N1, we are confident that the market will bounce back,” said Fabrice Megarbane, president and CEO of French cosmetics company L’Oreal China.
Wang of Signify said: “Where possible, we will source products and components at alternative suppliers outside the impacted area but still within China. We also have a global supply base that will help us to mitigate the effects of the current situation.
“We have confidence in the positive medium- and long-term economic trends in China and will maintain our commitment to the China market.”
Dumas of Essilor said his optimism about the Chinese market stems from the nation’s improving healthcare infrastructure, responsiveness in dealing with the outbreak and decisiveness in issuing policies to support growth.
He has also managed to glean positives from current crisis, saying that the situation has trained the company to be more agile and adaptable.
“For example, we believe now is actually a good opportunity to accelerate digital and online platforms and enhance internal competence, such as in learning and training,” he said.
Jiang Hao, global partner of consultancy Roland Berger, pointed out that while the new policies have been impressive, so too has the speed at which they were introduced.
“The implementation of these policies was prompt and preemptive, and this reflects a mature and systematic governance model that the local authorities have always had,” Jiang said.
This injection of confidence instead of merely financial incentives could also prove to be more appealing to mature MNCs in Shanghai, said Xu Bin, a professor at the China Europe International Business School.
“The string of policies should be seen as a natural extension of the constant pledges by the Shanghai government to continue its opening-up endeavors, stay transparent and be responsive to enterprises’ needs,” he explained.
Xu said that many of the new policies are in line with the broader goal of welcoming more foreign capital, introducing bigger incentives, and streamlining services.
“The epidemic is no doubt a stress test for the government. But a good handling of the crisis will convince foreign businesses that there is no better place than China to do business in and thrive,” he said.
Vote of confidence
Scott Zhang,
president of Honeywell China
We appreciate the Shanghai government’s 28 measures to stabilize businesses and are heartened to know that foreign-funded companies will enjoy the same benefits as local businesses. We believe in the power of “Made in China” and the resilience of China’s economy. We believe that as we stand in solidarity, we will end this epidemic soon and embrace a bright future.
Fabrice Megarbane,
president and CEO of L’Oreal China
The government has taken effective and appropriate measures to best contain the epidemic and protect people’s health and safety. More than that, it’s also putting in place a series of new policies to ease companies’ burdens, help them resume normal operations and overcome any difficulty. We believe that with the collective efforts of the whole society, we can definitely win the battle against the epidemic and create another year of success.
John Wang,
senior vice-president and China president of Signify
We welcome and appreciate the support from Shanghai and other local authorities during this difficult time. We believe the policies will benefit not only large enterprises, but also small and medium-sized enterprises including many of our dealers and suppliers. We have confidence in the positive medium- and long-term economic trends in China and will maintain our commitment to the China market.
Francois Tardif,
president of Faurecia China
We expect a rapid recovery from the short-term impact — quarterly or half yearly — caused by the suspension of production. The Chinese authorities have indeed taken effective measures to support companies resuming production with policies aimed at stabilizing consumption for traditional commodities like automobiles, and this is positive for us.
