How to handle the impact of the Coronavirus in your China business

When facing a health crisis such as the one affecting China right now,

the most natural reaction is to panic and make rush decisions, which

could hurt the future of your business in the region. The better

informed you are, the better measures you will be able to take to

protect your interests and those of your partners and employees.

Understanding how the coronavirus behaves and spreads is the first step. The virus appears to be spread via respiratory drops: sneezing and coughing; and has a 7-14-day, non-symptomatic incubation period, during which carriers may feel fine while actually being infectious. This is why 7-14-day quarantine periods and bans on travel in China are being put into effect. Additional travel bans could be expected in the next few days throughout the Asian region.

A lot has changed in the weeks since doctors in Wuhan, China, noticed a few cases involving a mysterious pneumonia-like illness, which now has an official name: COVID-19. In that time, Chinese scientists sequenced the pathogen’s genome and shared it online, causing a worldwide effort to beat the disease. Already, many scientific papers have been published and multiple vaccines are in development.

Recently, the World Health Organization (WHO), which repeatedly discouraged the curtailing of travel and trade, classified the contagion as a Public Health Emergency of International Concern and informed that it holds a very grave threat for the rest of the world.

At the moment, about 60 million people in China remain under quarantine. The wider Wuhan region’s workers are a vital part of the global supply chain for the automotive, electronics, pharmaceutical, and fashion industries (among others). Apple and Hyundai are among the companies that have already acknowledged disruptions to their supply chains, with the South Korean automaker suspending production at some factories owing to parts shortages.

China is an important manufacturer of intermediate parts. The numerous factory closings will affect the supply chain and companies should be prepared to face supply issues for thousands of parts.

Experts estimate that the total cost of the outbreak to the economy will range from USD $90 billion to USD $270 billion, depending on when it subsides.

Some immediate measures foreign companies can implement are to keep all travel to China to a minimum, and if possible, none at all, as well as establish communications with all employees, suppliers, and other vital connections to your business.

Since travel in China is likely to remain locked down for some time, it is essential to establish work from home procedures. Software such as Sharepoint could be used to enable staff to remotely access necessary administration.

Another smart step would be to review 2020 and Q1 budgets and be aware of the potential financial impact of severely impacted operations and income during this period. Use worst case scenarios for financial modelling and prepare to release operational reserves to carry over the next quarter.

In order to help businesses face the difficulties caused by this health crisis, China’s State Tax Administration has announced an extension nationwide for the deadline for tax filing in January, from the originally planned deadline of February 17, 2020 to February 24, 2020.

Additional local government measures have not yet been announced.

Epidemiologists and economists alike have struggled to put numbers or context around what they’re looking at. Early efforts to benchmark this outbreak and its likely impacts against the 2003 SARS (severe acute respiratory syndrome) outbreak—also caused by a coronavirus—have been largely abandoned, given China’s larger role in the world economy, and COVID-19’s far more rapid spread.

Other Asian countries are being affected as well and have decided to cancel Visa on Arrival. Many others will undoubtedly follow.

The return to normality for businesses in China is not expected during this month and probably through until late March, if not April/May. For this reason, it is best to prepare to remotely manage and administer your China business with minimal or no office staff in situ.

Experts hope that ultimately the virus circulates like a seasonal flu, albeit a potentially more dangerous one. That is not unprecedented, though, since we currently live with several viral respiratory diseases that can cause severe illness.

To prevent another outbreak, a heightened state of readiness is necessary, as well as more investment in research, preparedness, and prevention.

For any questions on how to handle the impact of the coronavirus on your China business contact us by completing the online inquiry here below.

DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.


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