Foreign firms optimistic about rebound

Updated: May 6, 2020 By HE WEI in Shanghai China Daily Print
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Employees work on the production line of a Coca-Cola venture in Shanghai. YANG YANJUN/CHINA NEWS SERVICE

Companies cite government measures as crucial for business turnaround

As China flattens the novel coronavirus curve and steadily returns to economic normalcy, foreign enterprises are voicing optimism about the restoration of business and embarking on operational excellence in the world's second-largest economy.

Though the pandemic has strangled growth worldwide, multinational corporations have largely remained committed to China, citing the swift restoration of order and the vast market potential, along with supportive government measures designed to help them weather the storm.

In a study published by two different chambers of commerce of United States businesses last month, more than 70 percent of US companies surveyed said they have no plans to relocate production and supply chain operations or to source from outside of China due to the outbreak, which is crippling global economic activity.

Those companies, most of which have had a presence in China for more than a decade, including nationwide operations, managed to fend off turbulence due to the use of the In China for China strategy for domestic demand, officials said.

"In contrast to some global narratives, our China-based data suggests that the majority of our members will not be packing up and leaving China anytime soon," said Alan Beebe, president of the American Chamber of Commerce in China.

Jan Nicholas, consulting partner at consultancy PwC China, said: "The survey results are a reflection of the resourcefulness and flexibility of the American business community in China in recovering from recent challenges. The views of American executives navigating production recovery in China can give hope and guidance to territories that have yet to begin their transition back to growth."

Qian Jin, president of Hilton for China and Mongolia, said the hospitality giant has stepped up the gradual reopening of its hotels as the company wakes from its coronavirus-related closure during the height of the outbreak.

"We've seen a particular rebound in niche product segments like short-haul trips around major cities, notably at weekends and minor vacations," he said.

Qian believes China's tourism market is on a benign and sustainable track, as driving forces such as the expanding middle class, consumption upgrades and China's prominent role on the global stage remain intact from the virus. "Therefore, we will stay deeply committed to China and continue to explore business development (here)," he said.

Industrial conglomerate Honeywell has just registered a wholly owned subsidiary in Wuhan, Hubei province, as the company's headquarters for mass-mid segment business in China.

"This demonstrates Honeywell's continuous commitment to China," the company said in a statement to China Daily. It described Wuhan as "a key city in central China, strategically located, and an important industrial base, as well as a technology and research hub in the country".

It continued: "Honeywell would like to enhance cooperation with Wuhan, promote innovative technologies, provide better coverage in Central and western China, and further fulfill the vast market needs of China's mass-mid segment. This initiative will further solidify the execution of Honeywell's 'East for East' strategy in China."

Lilly China, the local affiliate of global pharmaceutical company Eli Lilly, is offering an online map of pharmacies so diabetics can easily locate the medicines they need. To ensure patients receive proper treatment, Lilly worked with third-party internet hospital platforms to provide one-stop services so patients can be treated at home without the risk of going outside.

Workers at the construction site of the second phase of Tesla's Shanghai plant last month. QIU DAOCEN/FOR CHINA DAILY

Packaging line operations at Lilly's manufacturing site in Suzhou, Jiangsu province, resumed on Feb 10, the first day possible in light of government rules related to the resumption of business after an extended Chinese New Year. The site is operating at full capacity to ensure that patients who use Lilly's medicines can access reliable supplies. To facilitate that, the company has ensured that front-line factory workers have sufficient supplies of face masks.

"Patients are always at the heart of what we do," Julio Gay-Ger, the company's China president and general manager, said. "We would like to work with the healthcare community and contribute our efforts in fighting the outbreak together."

Such optimism and commitment aren't just restricted to US companies. Mauro De Felip, general manager of Ferrero China, the Italian confectionary company, believes the impact of the outbreak will be short term.

"As we are moving from the containment phase to the recovery phase domestically, businesses are gradually returning to normal," he said. "The favorable policies formulated by the government will also help ease the burden and boost the smooth recovery pace of companies' operations."

German chemicals giant Covestro, which generates one-fifth of its revenue in China, has just expanded its regional headquarters in Pudong New Area, Shanghai, as the company remains upbeat about growth in China.

"We regard China as our home market. Our long-term strategy remains intact and it enables us to be resilient in responding to the epidemic," Holly Lei, the company's China president, said.

Companies like skin care giant L'Oreal have witnessed a robust rebound after a short-term tumble. Not only has the French cosmetics giant resumed nearly all its offline retail presence nationwide, its China market sales even bucked the overall gloomy trend, posting year-on-year growth of 6.4 percent.

"Even the epidemic cannot hinder people's pursuit of a beautiful life," said Fabrice Megarbane, president and CEO of L'Oreal China. "On the contrary, people have taken the opportunity to reflect on relationships between individuals, society and the environment, and have formed more positive, rational and responsible consumption attitudes. This definitely provides an even broader space for our business growth."

Despite the current challenges, Eddie Chen, China managing director of Eurazeo, a global investment company, believes that the market will "eventually adjust itself based on the new normal".

"In fact, we have entered a new era for the Sino-European relationship, which has been underestimated historically. Our strategy won't be changed by the short-term impact. We retain our positive views on China for the long run," he said.

For example, Chen cited booming business opportunities in information technology and healthcare, as well as the long-term digitalization and industrialization of all businesses. These latest trends will create new values for better managing portfolio companies in China, he said.

Most executives point to the "In China for China" strategy as a winning recipe to sustain growth, and the coronavirus outbreak actually provides a window of opportunity for testing new practices and improving operational excellence.

For example, Covestro's Lei said she is excited about the growing opportunities in smart infrastructure, including smart city, smart logistics and various internet of things applications, where the company's cutting-edge materials and local partnerships stand to play a role.

"In China, for example, we are working with Southeast University of China (in Nanjing, Jiangsu) on the optimization of radio frequency data transmittance for 5G applications as our polycarbonates are mechanically robust, lightweight, transparent to radio frequencies and suitable for injection molding," she said.

Employees of FESTO China keep a distance at lunch tables after the company resumed operations in Shanghai. GAO ERQIANG/CHINA DAILY

Riding the livestreaming wave, a Hilton facility in Jinan, Shandong province, has kicked off a weekly online broadcasting session, customizing recipes for international cuisines and beverages, and sharing baking techniques by leading chefs.

"People have become increasingly familiar with, and reliant on, online services. This has prompted us to carry out more aggressive digital reforms and become agile in our daily operations, such as the rollout of high-end catering delivery services," Qian, from Hilton, said.

Ferrero's De Felip pointed to the importance of having an e-commerce presence in China through partnerships with local platforms like Alibaba and JD.

"We are moving to a 'Next Normal' reality, which requires great resilience and operational efficiency in the way of doing business. The rise of the contactless economy will impose adjustments on our operations, will change consumer behavior, and market attractiveness will be different," he said.

He added that new models and businesses are quickly emerging in China, including the acceleration of omnichannel transformation, e-commerce and the big data-driven digital economy, which are creating new ways of engaging with consumers.

L'Oreal also sees China as a crucial market for new product launches and debuts. The latest moves have included a skin care product tailored for the domestic market and a smart foundation that uses algorithms to help determine skin tones and choose the right shade for the customer.

According to Megarbane, the company has further strengthened digital services, such as livestreaming, virtual product launches and makeup trials, as well as artificial intelligence-empowered skin condition examinations.

"I've always liked the Chinese way of interpreting 'crisis', or Wei Ji, which literally translates as 'opportunities embedded in crisis'," he said. "Don't waste any opportunities brought about by a crisis."

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