Negative impacts should not be taken lightly and should be treated with caution, but we do not need to worry about the long-term development trend of the Chinese economy. We should also see positive changes such as the accelerated transformation of consumer scenarios to online, the innovation of services brought by new technologies, and the acceleration of digital intelligent transformation of manufacturing.
Editor’s note: This article is from WeChat public account Chinese Entrepreneur Magazine (ID: iceo -com-cn). The original title “ Heavy! How the epidemic affects the economy 》
Author ｜ 万 建 民
Edit ｜ He Zhenhong
Image source ｜ Chinese enterprise gallery
In the short term, the offline service industry has been hit hard, SMEs have been the first to suffer, and exports of mechanical and electrical products and labor-intensive products have been affected. These negative impacts should not be underestimated and should be treated with caution. We should see positive changes such as the accelerated transformation of consumption scenarios to online, new service innovations in the service industry, and the acceleration of digital and intelligent transformation of manufacturing.
Today is the first day of formal work after the Spring Festival holiday. The pneumonia epidemic of new coronavirus infection continues to spread. Many local companies are still shutting down production and people. People are concerned about the epidemic while they are paying attention: How will the epidemic affect the Chinese economy? How big are the losses in various industries? What difficulties have companies encountered? How to save yourself? What assistance policies will the government introduce? When will economic vitality be restored?
“Chinese Entrepreneurs” will launch a series of reports on “how the epidemic affects the economy”. We will answer these questions through solid interviews, informative data and unique observations. I also hope that readers and friends will leave a message and reflect the truth of the enterprise to us. Conditions and voices provide us with clues. Today is the first one, so stay tuned.
“A small virus in Wuhan is equivalent to the power of 10 atomic bombs.” Chen Dongsheng, chairman of Taikang Insurance Group, said the impact of the epidemic was beyond imagination. A “butterfly” in Wuhan flapped its wings and caused The shock of the whole world.
In the early morning of January 31, the World Health Organization announced that pneumonia outbreaks of the new coronavirus infection were listed as “public health emergencies of international concern”, but it was not recommended to restrict trade and personnel movements. “Now, global non-cooperation is impossible.Yes, fighting the epidemic also requires global cooperation. “Chen Dongsheng said. But obviously, the spread of the epidemic has temporarily cast a shadow on China’s economic interaction with the world.
Apart from the epidemic itself, people are beginning to worry about the impact of the epidemic on China’s economy. The sudden epidemic caused many cities in Hubei to “close the city.” The Spring Festival holiday was extended throughout the country, and local enterprises delayed construction, and offline consumption in tourism, catering, transportation, and entertainment stalled. Production and operations are suspended, revenue and cash flow are interrupted. Can the most affected SMEs carry it? The service industry bears the brunt, and how much impact will the manufacturing industry suffer? Declared by the World Health Organization as an “public health emergency of international concern”, how much will the global industry chain and import and export trade be affected? The Chinese economy, which is already under great downward pressure, will suffer from this epidemic and enter the downward channel, or even shake it at all?
The answer is written in our battle with the epidemic, and also in the actions of every entrepreneur.
Offline service industry and SMEs bear the brunt
Cancel! cancel! cancel!
This Spring Festival, most restaurant managers are most busy processing refunds for booking customers. After January 20, the epidemic situation turned sharp, and restaurants that had already fully booked had received refunds to cancel their meals. Throughout the Spring Festival, people canceled their meals, separated their homes, and the catering industry was in a slump. Some restaurants even brought out the stocked ingredients for sale.
Not only catering, but also the aviation, tourism, entertainment, and retail services industries, which rely heavily on offline services, have been severely hit, and their income has almost fallen off. In the Spring Festival Golden Week in 2019, the national retail and catering industry achieved sales of 105 billion yuan and tourism industry revenue of 513.9 billion yuan. During the 10 days of the Spring Festival holiday in 2020, consumption was almost halted, and retail and catering industry revenues dropped sharply. Passengers sent by railways, roads, waterways and civil aviation nationwide fell by nearly 73% compared with the same period last year, and tourism-related industries fell into a frozen state. Experts estimate that direct losses in the retail, catering and tourism markets alone exceed 1 trillion yuan.
“Small and medium-sized enterprises will face a huge impact, especially those with poor cash flow and unstable operations will face severe challenges.” Professor Chen Chunhua, Dean of the BiMBA Business School of Peking University Guofa Institute, said that many SMEs Cash flow may only guarantee operation for two or three months. Now some industries are basically stagnant, and there is no income and cash flow, and rent, interest, and personnel costs must be paid. If the company cannot adjust and reduce costs in a timely manner, it is likely to fail. .
Jia Guolong, chairman of Xibei Catering, which has more than 400 Xibei Noodle Villages in more than 60 cities across the country, said in an interview with the media that during the Spring Festival, stores throughout the country were basically closed, and only some takeaway businesses were retained, with more than 20,000 employees Out of business, if the epidemic is not controlled within a short period of time, the company’s cash will not last for 3 months.
Ren Zeping, chief economist of Evergrande Research Institute, further pointed out in a report that the interruption of operations may lead to breach of order contracts and difficult capital turnover.Some small, medium and micro enterprises with small volume and weak anti-risk ability are facing the dilemma of bankruptcy and bankruptcy. Risks may also be transmitted up and down along the supply chain and guarantee chain, causing a local crisis.
Behind the plight of SMEs is the challenge facing employment and people’s livelihood. Offline service industries such as catering, entertainment, and tourism have created a large number of jobs, and these positions have a relatively high proportion of flexible wages and piece rates. If a large number of SMEs lay off employees or even go bankrupt, it will have a serious impact on employment and household income.
Of course, we must also see that, firstly, the impact of the epidemic must be temporary. After the epidemic is over, related industries such as catering, entertainment, and tourism can recover in a short time. Second, the most directly affected are currently the offline service industry. Affected by the epidemic, some offline demand is shifted to online, which will further increase the proportion of online consumption. Although online services are also affected by logistics and distribution, the overall impact is small. According to the National Bureau of Statistics, the total retail sales of consumer goods in the country in 2019 were 4,11649 billion yuan, of which the online retail sales of 1,062.4 billion yuan, accounting for 25.8%.
“The most effective way to support small and medium-sized enterprises is to reduce taxes and reduce burdens to the benefit of the people. At the same time, in the tax and fee collection process,” hands are loosened and loosened, “and water and fish are raised; To play a greater role, promptly introduce policies such as differential interest rate cuts for small and medium-sized enterprises. “For example, Guan Qingyou, president of the Financial Research Institute, also hopes that some large enterprises with conditions can exempt merchants from rents for a certain period of time, like Wanda. “Sometimes small businesses pay the rent for a month or two.”
The ministries and commissions of the State Council have responded quickly and issued supportive policies to hedge against the impact of the epidemic. On February 1, five ministries and commissions of the Central Bank, the Ministry of Finance, the Banking Insurance Regulatory Commission, the Securities Regulatory Commission, and the Foreign Exchange Bureau issued financial support policies, which required relevant companies to overcome the impact of the epidemic disaster by appropriately reducing loan interest rates, increasing credit loans, and medium- and long-term loans; For industries affected by the epidemic, such as wholesale and retail, accommodation and catering, logistics and transportation, and cultural tourism, as well as companies that have development prospects but are temporarily affected by the epidemic, especially small and micro enterprises, they should not blindly draw loans, cut off loans, pressure loan. On February 2nd, the Ministry of Finance issued a notice requesting financial subsidy support for corporate loans that are important for the prevention and control of the epidemic, increasing support for subsidies for entrepreneurial guarantee loans for individuals and businesses affected by the epidemic, and optimizing financing for the affected enterprises. Guarantee service. In the afternoon of February 2, the central bank announced that it will launch a 1.2 trillion yuan open market reverse repurchase operation on the first day of the market opening on February 3 to ensure sufficient liquidity supply. On February 3, the central bank lowered its 7-day period and 14 days. The reverse repurchase rate is 10 basis points. With various supporting policies in place, it is believed that the negative impact of the epidemic situation can be largely eliminated.
“Some policies that lack overall consideration may make SMEs even worse.” Chen Chunhua believes that epidemic prevention and control must be a unified operation, but as far as the production of the enterprise is concerned, it should be left to the enterprise to make its own decisions as much as possible. ,OrderedOperating environment. For example, some places require enterprises to postpone the start of work, and employees who work from home also have to pay twice as much, which increases the burden on the company, which is a lack of overall consideration. In the current situation, the whole society must be considerate of each other and help small and medium-sized enterprises to overcome difficulties. Otherwise, if the company goes bankrupt, employees’ interests will be harmed even more.
The impact on manufacturing depends on time
It is inevitable that the impact of the epidemic will extend from the service industry to the manufacturing industry.
First is the rising cost of manufacturing. Unlike SARS in 2003, the outbreak occurred during the Spring Festival holiday, the country extended the holiday, and the company stopped production and production. Beijing, Shanghai, Jiangsu, Zhejiang, Guangdong and other places have announced that non-essential industries will be suspended until February 9, and Hubei will further Extend the Spring Festival holiday. Delays in workers’ rework, real estate, infrastructure, and industrial production will be severely affected. Labor costs, rent costs, and inventory costs caused by shutdowns will increase. “The shutdown and production will have an impact on various industries. Although the impact of each industry is different, the loss must be a very large amount, and the subsequent impact remains to be seen.” Chen Chunhua said.
Of course, we must also see that due to the late return of migrant workers to the city and difficulties in recruiting workers, a large number of manufacturing companies in previous years also started construction after the Lantern Festival. According to the current situation announced in all places, except for Hubei, most areas can resume construction after the Lantern Festival. The optimistic estimate is that if the epidemic situation cannot be prevented and controlled unexpectedly, the actual impact of prolonged holidays and shutdowns will not be as large as expected.
Second, international markets may be blocked. After the epidemic was classified as an “public health emergency of international concern” by the World Health Organization, people’s concerns about import and export trade have further intensified. Although the World Health Organization “does not recommend restricting trade and personnel movements”, many countries have subsequently issued tourism warnings, closed borders with China, partially canceled flights to and from China, and even restricted entry of non-national citizens who have visited China within 14 days. The physical connection between China and the world economy is inevitably blocked.
The most direct impact on manufacturing is the export of goods. What industries are behind exports? Analyzing the export data of goods trade in 2019, it is not difficult to find that mechanical and electrical products, labor-intensive products, and private enterprises are the three major keywords: in 2019, the country’s export value of goods trade was 17.23 trillion yuan. Among them, the export of mechanical and electrical products was 10.06 trillion yuan, accounting for 58.4%; the export of seven major categories of labor-intensive products such as textiles and apparel was 3.31 trillion yuan, accounting for 19.2%. Among the mechanical and electrical products, exports of electrical and electronic products were 4.63 trillion yuan; machinery and equipment exports were 2.87 trillion yuan. From the perspective of exporters, private enterprises accounted for 51.9% of exports, which has become the largest exporter. The above-mentioned industries may be affected in the short term.
Apart from exports, global supply chains may also be affected. After Wuhan’s “closed city”, the chip industry began to focus on the operation of Yangtze River Storage, Wuhan Xinxin, and Wuhan Hongxin, the three major wafer fabs in Wuhan.Production will seriously affect the supply of the three most in-chip chips in the world. If the outbreak continues, similar concerns will spread to more areas. Measures taken by some countries to close borders, refuse Chinese entry, and cancel flights have also affected some industries that rely on imported equipment and accessories on the industrial chain. Even in the domestic market, because of epidemic prevention and control restrictions on logistics and human flow, many companies’ supply chains will be challenged.
“A large part of China’s economic structure is directly involved in global competition.” Chen Chunhua analyzed that the blockage of global trade will affect many industries and may even change the competitive landscape. “Made in China “It is China’s most competitive brand in the global market. US Secretary of Commerce Rose recently issued a cold-blooded statement that the Chinese epidemic “helps the manufacturing industry to return to the United States”, which illustrates the serious challenges facing the manufacturing industry.
Of course, what’s more noteworthy is that market confidence has been affected and it has affected the economy. “Confidence is an important factor affecting the market. Whether it is the panic of the epidemic in the beginning or the fluctuation of confidence caused by the uncertainty of future development, the impact on the market is very great.” Chen Chunhua said that before the epidemic, every A market subject will adjust its economic behavior according to its own expectations. Whether such expectations are optimistic, rational, or pessimistic will have different effects.
How much the epidemic affects the manufacturing industry depends on when the epidemic can be controlled. It should be seen that the current epidemic prevention and control measures are strong, Vulcan Mountain Hospital is put into use, Hubei has centralized treatment and isolation of “four types of personnel”, and the number of patients cured has exceeded the number of deaths … People’s confidence is gradually recovering. It is optimistic that after the Lantern Festival, all areas will resume work, and the epidemic will be effectively controlled within 10 days to two weeks, but the impact will be limited. Therefore, the top priority at present is to go all out to do a good job in epidemic prevention and control.
The short-term impact is serious, don’t worry about the long-term trend
Analyzing the economic impact of this epidemic, one can easily compare it with the SARS epidemic 17 years ago.
“It cannot be simply compared with the impact of SARS, because the economic structure has undergone tremendous changes, the total amount of scale has been in different orders of magnitude, and the quality of economic development is also different.” Chen Chunhua said.
Simply look at the comparison of several sets of data. In 2003, China’s total GDP was 13.6 trillion yuan, and the total GDP in 2019 has exceeded 99 trillion yuan. In 2003, the service industry accounted for 39% of GDP. In 2019, the service industry accounted for nearly 60%. The huge difference in economic scale determines that the ability to fight risks is completely different. Changes in the economic structure require two perspectives: first, the economic structure is more optimized and the ability to resist risks is stronger; second, the proportion of the service industry in GDP has increased, and it seems that the service industry has been impacted and has a large impact on the economy. We should see the internal structure of the service industry. With the development of Internet technology, online services have accounted for a considerable proportion, and this area is less affected, and even some online