More and more overseas companies are taking moves to shrink or even suspend their operations in the Chinese mainland as the region’s economic activities and spending stall in the face of a deadly SARS-like virus. But some of them still remain relatively optimistic and committed to long-term opportunities in the market.
The new coronavirus had killed 170 and infected more than 7,700 people as of Wednesday midnight. It has led Chinese authorities to cancel events and restrict transportation during the Spring Festival holidays, normally one of the most vibrant periods in the year for consumption and travel.
As the disease developed, global companies that have business in China also gradually responded to the unexpected disease by pressing the “pause” button on their operations in the country.
On Thursday, Swedish furniture giant Ikea, which has 30 physical stores in China, announced to suspend business at all of those stores.
On the same day, Air Canada announced it would cancel all international flights between Canadian cities and Shanghai, Beijing between Thursday and February 29.
US carmaker Tesla, which has just started to deliver made-in-China Model 3s to domestic customers, was ordered by local authorities to temporaraily shut down its new factory in Shanghai, which would delay the production ramp-up of the localized Model 3s, one person close to Tesla confirmed to the Global Times. He didn’t give further details such as the exact time of the shutdown or when business would resume.
Those companies have joined some others that took action earlier to halt business in the virus-hit country. Those companies include Starbucks, which temporarily closed more than half of its stores in China, Walt Disney, which closed the Disneyland theme park in Shanghai, and Apple, which shuttered three retail stores in China for the time being.
It is still unclear as to how much impact the business shutdowns will exert on those overseas companies or on the Chinese economy, as many foreign companies are still watching how the disease develops in the coming days and will likely adjust their operations in China accordingly, but some feedback has been relatively optimistic.
Starbucks CEO Kevin Johnson said that the company would remain optimistic and committed to the long-term opportunity in China, according to media reports.
Alan Zhou, president of the Hangzhou Association of Taiwan Compatriots Investment Enterprises, also told the Global Times that some Taiwan-based exporters operating in East China’s Zhejiang Province have postponed production abiding by government regulations. This would force them to delay delivery to foreign clients by several days.
“They have to explain the situation to foreign customers and as far as I know, most clients understand the situation. There have been no great losses like liquidated damages or things like that,” he said.
Cong Yi, a professor at the Tianjin University of Finance and Economics, said that the shutdowns have been “reasonable and correct” business adjustments to lower costs at a time when domestic consumption is diving.
“But overseas companies will by no means lose confidence in China or make extreme moves just because of the virus,” he said. “I have confidence that it will only be a matter of time until the disease is put under control, but it is hard to predict the time when that will happen.”
Chinese respiratory expert Zhong Nanshan also said that there will not be large-scale infections along with Spring Festival return trips, according to media reports.
Cong nevertheless predicted that the unexpected coronavirus was likely to wipe one or two percentage points from China’s GDP in the first half of this year, but he also said domestic consumption might “explode” after the disease is brought under control in the country.
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