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No Customers, Closed Stores: Chinese Entrepreneurs Brace For The Worst Amid Coronavirus Outbreak

Zhou Yuxiang was not in the mood for festivities during China’s Lunar New Year holiday this year. The 30-year-old CEO of Shanghai-based software startup Black Lake Technologies had to figure out how to manage his company amid the country’s deadly coronavirus outbreak. Working from home to comply with local quarantine rules has lowered productivity, while expenses remained high as he still needs to pay rent even when no one is using the office.

What’s more, Zhou says, clients are slower to take on new contracts as factories remain shut and production is delayed, hurting his otherwise fast growth.

“This epidemic caused production suspension for a considerable number of factory clients,” he says, who counts 300 factory owners as customers of his cloud-based management software. “Unpredictability on when factories could resume production has increased uncertainty for our first quarter growth.”

As the deadly virus, temporarily called 2019-nCoV, shows no sign of slowing, China’s vast business scene is taking a hit. While some companies, including Zhou’s, hope to recoup any losses before the year’s end, others are suffering a much more devastating blow.

This is because the epidemic’s economic damage is far and wide. It is believed to be more contagious than the 2003 Severe Acute Respiratory Syndrome (SARS) epidemic, causing the Chinese government to impose nationwide mall closures, movie cancellations and factory shutdowns to prevent the disease’s further spread. As manufacturing and business activities cease, first quarter GDP growth will plummet to 3.8%—which equals to $62 billion in lost growth—and drag full-year GDP growth below 6% to 5.4%, according to UBS economist Wang Tao.

Sectors that are hardest hit include catering, entertainment, hospitality, retail and transportation. These businesses tend to have heavy inventory or a lot of expenses, but they can’t generate any meaningful revenue when people stay indoors.

Jia Guolong, founder of popular restaurant chain Xi Bei, told local media this week that his company only had enough cash for the next three months. He still needs to pay rent and salary to more than 20,000 employees, even when his restaurants are largely empty. To preserve cash, Hong Kong’s flag carrier, Cathay Pacific has asked its 27,000 employees to take three weeks of unpaid leave, warning that the condition is as grave as the 2009 global financial crisis. And fast-food operator Yum China is expecting negative impact on 2020 full-year sales and profit, after temporarily shutting down 30% of its stores in China.

While these larger businesses may eventually have the resources to weather through, smaller startups could experience a life-and-death moment. Zhang Yi, founder of Guangzhou-based consultancy iiMedia Research, says he won’t be surprised if a wave of bankruptcies occur. And Wang Ran, founder of Beijing-based investment firm CEC Capital, urged startups to do whatever they can to survive.

“Downsize if you need to, relocate if you need to and lay off people if you need to,” Wang wrote in a recent blog post. “Only those who lived through this can see spring, and have a future.”

Beijing has put out rescue measures. The country’s central bank, the People’s Bank of China, announced on February 2 that it would pump $174 billion worth of liquidity into the markets to help cushion the impact. Local governments have called for rent deductions and more flexible salary arrangements, with the Shanghai municipal government promising tax and insurance refunds to employers who don’t engage in layoffs.

But analysts say business survival may ultimately depend on whether the virus can be contained. Since originating in the central Chinese city of Wuhan in December, it has spread across the country, infecting more than 28,000 people and killing over 500. There are now coronavirus cases around the world, including Japan, Thailand, Germany, the United States and the United Arab Emirates. The World Health Organization declared the outbreak a global health emergency and dozens of nations, including Italy, Singapore and the U.S., have placed travel restrictions from China.

“The longer this drags on, the bigger the damage,” iiMedia Research’s Zhang says. “If it lasts for another month, then it would be unbearable for any business.”

Startups are doing what they can to minimize damage. Black Lake’s Zhou is offering discounted services, especially to clients who are based in the most affected areas. Zhou Wenyu (not related to Zhou Yuxiang), founder of Shaoxing-based software startup Youshupai, is slowing down marketing activities and transferring its first quarter sales goal to the second quarter. And Joanne Tang, founder of travel and marketing agency Infinite Luxury, says she is diversifying to other Asian markets while reminding overseas-based clients not to reduce efforts in China.

“For sure, we are in a challenging time,” Tang says. “We have to monitor how it goes, but we won’t be standing still and just wait until this is over.”

I am a Beijing-based writer covering China’s technology sector. I contribute to Forbes, and previously I freelanced for SCMP and Nikkei. Prior to Beijing, I spent six months as an intern at TIME magazine’s Hong Kong office. I am a graduate of the Medill School of Journalism, Northwestern University. Email: ywywyuewang@gmail.com Twitter: @yueyueyuewang

Source: No Customers, Closed Stores: Chinese Entrepreneurs Brace For The Worst Amid Coronavirus Outbreak

CNBC’s Eunice Yoon reports on how the coronavirus outbreak is expected to take a serious toll on China’s economy. Expect supply disruptions as China takes measures to contain an ongoing coronavirus outbreak, says REYL Singapore’s Daryl Liew. “The sharp action taken by the Chinese government to basically delay workers going back to work is definitely going to cause some supply disruptions,” Liew, who is chief investment officer at REYL Singapore, told CNBC’s “Street Signs” on Thursday. With the virus infecting at least 7,700 and killing 170 in China, authorities have taken measures to curb the disease’s spread. At least three provinces have declared that businesses, other than some essential industries, are barred from resuming work before Feb. 10. In Hubei province, where the majority of cases have been found, resumption of local business has been delayed till at least Feb. 14. A “big question mark” remains over how long the disruptions could last, Liew said, as it depends on whether the situation can be contained. That comes as manufacturing numbers were showing “some normalization,” he added. “It’s a bit of a lagging indicator but the December ISM numbers have all been broadly positive, especially for Asian economies … which suggest essentially that global trade is normalizing. It’s not bouncing back significantly but it is rebounding,” Liew said, adding that that has translated to better manufacturing numbers. “The current virus … and the extended shutdown in China will definitely put a crimp to that,” Liew said. Potential impact on US businesses The outbreak has sent tremors across markets in Asia and beyond in recent days, as investor concerns about the potential economic impact grow. “We’re concerned that there could start to be … some overall impact on the Chinese economy which could lend itself, from a sentiment perspective, to greater concerns … for the global economy,” Shannon Saccocia, chief investment officer at Boston Private, told CNBC on Thursday. That could spillover into the performance of U.S. businesses at a time when the “strain of lower production” is being felt stateside, Saccocia said. “If we start to see that upended by the fact that factories aren’t opening and … we’re not able to get the components that we need from the Chinese economy, you know, that could … certainly slow any sort of manufacturing reacceleration that we were hoping for in the first two quarters of 2020,” she said. The Chinese city of Wuhan, the capital of Hubei province, is the epicenter of the outbreak, and authorities have placed multiple cities in the province under partial or complete lockdown. Wuhan and the surrounding region of Hefei and Jiangsu are major manufacturing hubs that work with American firms. But they have also been shut down due to the virus outbreak. “As an investor, you need to understand … where the supply chain starts and ends and factor in to your expectations … for those companies,” Saccocia said, though she acknowledged that it’s “a little early” to “paint the picture that half of the year is going to be meaningfully lower from a growth standpoint due to this virus.” For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://www.cnbc.com/pro/?__source=yo… » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC #CNBC #CNBC TV

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WHO Warns of Global Shortage of Protective Equipment Due to Coronavirus as Death Toll Hits 638

The World Health Organization (WHO) has warned that the world is facing “severe disruption” in the market for personal protective equipment due to the coronavirus outbreak.

“Demand is up to 100 times higher than normal and prices are up to 20 times higher,” WHO Director-General Tedros Adhanom Ghebreyesus said at a Friday press conference.

General Ghebreyesus says there are depleted stockpiles of equipment like masks and respirators and a 4-6 month backlog of orders for necessary supplies.

“We need to make sure we get it [supplies] to the people who need it most in the places that need it most,” General Ghebreyesus said.

The State Department announced that they are offering $100 million to help China and other countries dealing with the virus.

Meanwhile, a Chinese doctor who tried to warn others about the coronavirus outbreak and was subsequently punished by police died of the virus Thursday in Wuhan.

The Wuhan Central Hospital reported Dr. Li Wenliang’s death on social media, saying that he was “unfortunately infected during the fight against the pneumonia epidemic of the new coronavirus infection,” the Associated Press reported.

After initial reports of Li’s death, WHO offered its condolences. “We’re very sorry to hear of the loss of any frontline worker who has attempted to care for patients,” said Dr. Mike Ryan, executive director of WHO’s Health Emergencies Programme.

The coronavirus—known as 2019-nCoV—has infected 31,530 patients globally, according to Johns Hopkins University’s virus tracker.

The virus has also killed one person in the Philippines, and another in Hong Kong.

In Japan, officials said Friday that 41 new cases of the virus had been found on a cruise ship that’s been quarantined in Yokohama harbor, bringing the total number of infections onboard to 61. The ship was quarantined after the company learned that a passenger from Hong Kong who had been diagnosed with the coronavirus sailed on the ship, the Diamond Princess, last month.

Japan and Singapore have reported the most patients outside of China, with 45 and 28 respectively.

The number of cases in Japan rose significantly after 10 more people tested positive on a quarantined cruise ship that docked in Yokohama Wednesday,local media reported. The ship was quarantined after the cruise company learned that a passenger from Hong Kong who has been diagnosed with the coronavirus was on board last month.

So far, 99% of confirmed cases are in China and 80% of the cases in China are in Hubei Province, the WHO stated on Wednesday. Excluding China, there are more than 190 cases across 24 countries. At least 31 of those cases involve people with no travel history to China, but all of those cases involve people considered in close contact of a confirmed case or of someone from Wuhan, the epicenter of the outbreak.

On Friday morning, 27 passengers aboard a Royal Caribbean cruise ship were screened for possible coronavirus sickness when the ship was docked in Bayonne, New Jersey. No cases were confirmed from the screening

On Wednesday, authorities in Hong Kong announced that all arrivals from mainland China would be quarantined for 14 days starting Saturday, acknowledging that there is risk of an outbreak in the city. However, Chief Executive Carrie Lam once again stopped short of closing the border, despite demands from many Hong Kong residents, including thousands of medical workers who went on strike in an attempt to force the action.

Chinese state media said Thursday that the second hospital in Wuhan, the epicenter of the outbreak, officially opened on Thursday. A rush-built hospital with 1,000 beds was completed earlier in the week. Both hospitals were constructed in a matter of days to treat coronavirus patients, an attempt by authorities to contain the deadly outbreak.

Medical experts are suggesting that the illness could be passed from mother-to-fetus as two newborn babies tested positive for the illness, according to Chinese state media.

World Health Organization coordinates global response

The WHO has announced plans to raise at least $675 million for a strategic plan to respond to the outbreak and a forum to convene global researchers to fast-track solutions.

Part of that money — $60 million — is to fund WHO’s operations, while the remainder is for “countries that are especially at risk,” said WHO Director-General Tedros at a press conference on Wednesday.

Tedros had reiterated that the agency’s “greatest concern” is the potential for the respiratory illness to spread to countries with weak health systems.

“Our message to the international community is: invest today or pay more later,” Tedros said. “$675 million U.S. dollars is a lot of money, but it’s much less than the bill we will face if we do not invest in preparedness now during the window of opportunity that we have.”

Tedros thanked the Bill and Melinda Gates Foundation for already pledging up to $100 million and Japan for contributing $10 million.

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The WHO is monitoring all public health measures taken by all member states, and will “try and bring some cohesion and order to that process in the coming days,” Ryan said.

Tedros also downplayed criticism from John Mackenzie, a member of WHO’s coronavirus emergency committee, who said that China’s initial response to the outbreak was “reprehensible” and that they did not report cases quickly enough. Tedros said he would expect more cases to spread from China to the rest of the world if China was hiding cases, but noted that the WHO would still have a retrospective review in the future.

American response

The State Department announced on Friday that they are sending medical supplies, including masks, gowns and respirators to China to assist with the virus.

The United States is also prepared to spend up to $100 million in funds to help China and other countries impacted by the spread.

A second wave of American evacuations from Wuhan took place Wednesday as a plane with 178 passengers landed at Travis Air Force Base in California, the U.S. Centers for Disease Prevention and Control confirmed. Those on board are now subject to a 14-day federal quarantine and will stay at the air force base temporarily.

Those entering the U.S. within 12 days of having been in Hubei or the rest of mainland China will be directed to one of 11 U.S. airports for an additional health assessment, according to the CDC. They include Los Angeles International Airport, San Francisco International Airport, John F. Kennedy International Airport, Hartsfield-Jackson Atlanta International Airport, Honolulu International Airport, Chicago’s O’Hare International Airport, Seattle-Tacoma International Airport, Washington Dulles International Airport, Newark Liberty International Airport, Dallas/Fort Worth International Airport and Detroit Metropolitan Airport.

Americans traveling back to the U.S. from Hubei province 14 days before returning to the country will be subject to up to 14 days of a mandatory quarantine, Secretary of Health and Human Services Alex Azar told reporters at a White House press briefing. Any American citizens who were in mainland China 14 days before returning to the U.S. will have to undergo a “self-imposed” quarantine for 14 days.

International cases and response

At least 191 patients have tested positive for the illness across 24 countries, according to the WHO.

A 44-year-old man died in the Philippines on Saturday, the country’s Department of Health confirmed, marking the first person to succumb to the virus outside of China. The man, a resident of Wuhan, China, had arrived in the Philippines on Jan. 21 with a 38-year-old woman, who was also infected.

A 39-year-old man in Hong Kong died on Tuesday, making him the second death outside of mainland China. The patient reportedly had an underlying illness.

There are 24 confirmed cases of the coronavirus in Hong Kong, which was hard-hit by the 2002-2003 outbreak of severe acute respiratory syndrome (SARS). More than one-third of the nearly 800 deaths from SARS worldwide were in Hong Kong, and the semi-autonomous Chinese territory had more than 1,700 of the 8,000 confirmed cases of the virus.

Hong Kong’s neighbor, the gambling hub of Macau, confirmed its 10th case of the virus Tuesday. Macau announced the same day that it would be shutting its casinos for two weeks. (The city’s casinos are overwhelmingly reliant on mainland Chinese tourists.)

Russia, Sweden, Spain, the Philippines, Italy, India and the U.K. confirmed their first cases of coronavirus last week.

There are also at least 25 confirmed cases in Japan, 30 in Singapore, 25 in Thailand, 25 in Hong Kong and 24 in South Korea, according to Johns Hopkins University’s virus tracker. Governments and health officials in Nepal, Canada,Cambodia, Vietnam, Malaysia,Sri Lanka, UAE, France, the U.K., Italy, Russia, Sweden, Spain and Germany have also reported patients testing positive for the virus.

Several countries have tightened their borders to restrict the flow of mainland Chinese visitors.

In Hong Kong, the government has closed all but two entry points, leaving a cross-border bridge and a port in a northwestern part of the territory open. (Visitors can still fly to Hong Kong, though flights between mainland China and Hong Kong have been cut by half.) All travelers coming from China will be quarantined for 14 days starting Feb 8.

Singapore has said it is banning visitors with recent travel history to mainland China and has also banned the entry and transfer of travelers holding passports issued by China’s Hubei Province.

Russian Prime Minister Mikhail Mishustin said Thursday that Russia would be closing its land border with China from Friday at least until March 1, the Associated Press reported.

Multiple countries are also warning against unnecessary travel to China, and many have already started evacuating their citizens from Wuhan.

Evacuees from Spain, Japan, the U.S. and Europe are among those who have been flown out of Wuhan on government planes.

China travel restricted

Chinese officials have shut down travel in and out of Wuhan — home to 11 million people — and enacted similar, strict transportation restrictions in a number of other cities. Wuhan has suspended immigration administration services, local authorities said Monday, according to Chinese state media.

People in China have started going back to work after an extended Lunar New Year holiday ended, according to the South China Morning Post.

China’s Hubei Province has also suspended services to apply for passports and exit-entry permits.

Apple said Saturday it would close stores, corporate offices and contact centers in China “out of an abundance of caution,” the New York Times reported.

Royal Caribbean also announced restrictions, including the cancellation of eight cruises out of China due to the outbreak, according to the AP. The cruise line announced Monday that it would also prohibit any guest or crew member, regardless of nationality, to board a ship if they traveled through mainland China or Hong Kong less than 15 days prior.

Japanese officials said that Japan would ban foreign nationals who have been to Hubei province within two weeks before their arrival. Those carrying Chinese passports issued in Hubei are also banned from entering the country, although special exceptions may be made, government officials said, according to Japan Times.

Australia said it would ban travelers who have visited or transited through mainland China from Saturday onwards for the next two weeks. The restrictions will not apply to Australian citizens, permanent residents and members of their immediate family, although these groups will be asked to isolate themselves for two weeks from when they departed China, Australian Prime Minister Scott Morrison said on Saturday, according to the Sydney Morning Herald.

Additionally, Singapore has banned all travelers arriving from mainland China who had been there in the past 14 days from entry and transit by Sunday morning. The U.S. Federal Aviation Administration says that Vietnam has suspended almost all flights from and to mainland China, Hong Kong and Macau until May 1, according to the New York Times.

As the deadly virus spreads, a growing number of airlines including British Airways, Air France, Delta and Lufthansa are suspending all flights to China. Many have cut down the number of flights, and some have stopped flying to major cities.

China organized at least three flights to bring home more than 300 Hubei residents from abroad and plans to dispatch nine flights to bring home about 2,000 Chinese tourists in the Philippines., according to Chinese state media.

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CDC confirms second human-to-human transmission in the U.S.

On Monday, the U.S. Centers for Disease Control and Prevention confirmed the second case of the disease transmitting from person-to-person within the U.S. The first American patient diagnosed with the new coronavirus was also discharged from hospital.

A patient in California, who had not recently traveled to China, tested positive for the virus. The patient is married to a person who had previously traveled to China and tested positive for the respiratory illness, according to the California Department of Public Health.

On Monday, hospital officials at the Providence Regional Medical Center in Everett, Washington, said the 35-year-old man who was the first to test positive for the new coronavirus in the U.S. has left the facility, the Associated Press reported. The unidentified man is recovering and looking forward to life returning to normal, he told the AP.

The CDC has now confirmed at least 12 cases of the coronavirus infection in the U.S. across Wisconsin, Arizona, Massachusetts, California, Washington state and Illinois. On Wednesday, Wisconsin’s Department of Health Services reported an additional confirmed case of the virus in an adult “with a history of travel to Beijing.”

“The individual is isolated at home, and is doing well,” the agency said.

Dr. Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases, maintained that the risk to the American public continued to be low, but that the CDC expects to find additional cases in the U.S.

The U.S. Food and Drug Administration issued an emergency use authorization for the first 2019 new coronavirus diagnostic Tuesday, before which the test had been limited to being used at CDC’s laboratories. The authorization now allows the test to be used at any CDC-qualified lab in the U.S.

The CDC said as of Wednesday morning that 293 individuals across 36 states were considered to be “persons under investigation.” Of those, more than 200 had so far tested negative for the disease. The status of another 76 cases is currently pending.

By Hillary Leung , Sanya Mansoor , Amy Gunia , Jasmine Aguilera , Tara Law and Josiah Bates

Source: WHO Warns of Global Shortage of Protective Equipment Due to Coronavirus as Death Toll Hits 638

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