NZ firms take evasive action
Axing business trips among steps to ease expected financial hit, survey finds
Kiwi businesses in China are braced for a big hit to revenue and are taking evasive action such as cancelling business travel and advising staff to work from home, according to a survey by the New Zealand Business Roundtable in China (NZBRIC).
Some are already evaluating their long-term strategy in China.
The survey of 170 New Zealand firms operating in China found that 87 per cent expect to suffer a hit of at least 10 per cent this quarter, while 31 per cent expected the damage will exceed 40 per cent of revenue.
“While most of the downturn is expected to be in the first quarter, more than four in five Kiwi exporters expect 2020 to end with China revenue down at least 10 per cent, ” said NZBRIC chairman Ivan Kinsella.
“China’s forceful quarantine measures taken to contain . . . the virus have heavily impacted production and supply chain reliability.”
The most common change in business behaviour from the Covid-19 outbreak was cancelling business trips, which 81 per cent had already experienced. Some 57 per cent had adopted work-from-home practices.
Half expected to rely more heavily on e-commerce and digital channels in future.
While there was significant uncertainly surrounding the containment of Covid-19, most respondents expected the issue to clear up within the next six months. Nevertheless, 58 per cent were still taking a “wait and see” approach to evaluating their longer-term China strategy.
“Once the restrictions are removed, the economy is expected to bounce back quickly although it might not regain all of the lost ground,” Kinsella said.
Most businesses (60 per cent) expected the Covid-19 outbreak to negatively impact their business for six months or less. The most common view was impacts lasting three to six months, with 45 per cent of respondents putting it in that time frame.
Nine per cent were more pessimistic, expecting the downturn to last for more than nine months while 12 per cent were not sure.
The survey respondents represented all of New Zealand’s major export sectors — with about one third based in China and two thirds New Zealand based.
They range from New Zealand’s largest companies, the likes of Fonterra and Zespri, to small exporters.
The majority of respondents ( 58 per cent) said it was too early to reevaluate their longer-term China strategy in light of the outbreak while 10 per cent had already started doing so.
Some 32 per cent said they were not planning to change their strategy.
The most common concerns were general and supply chain disruption, slowing of operations and revenue, and the inability to travel for business.
Respondents’ own health and their staff’s safety also featured strongly.
There has been much speculation about the impact on China’s economic growth rate this year.
In a report this week ratings agency Moody’s lowered its China GDP forecasts from 6 per cent to 5.2 per cent — the lowest level since 1989.
It expects to see a bounceback to 5.7 per cent in 2021.
Moody’s baseline assumption is that the economic disruption will be largely limited to the first quarter but it warned a longer outbreak would cause “second-round effects” including severe supply chain disruption.