Happy Year of the Rat, although it hasn’t started off too cheerful in China. This year’s Lunar NY holiday won’t be remembered for the usual festivities of red envelopes, feasts, fireworks and badgering sons and daughters for not bringing home a potential spouse. Rather, people will look back on the eerie queues for face mask rations, the city-wide lockdowns, outlandish rumours, viral videos showing all sorts of protective plastic creations and China’s ability to build things phenomenally fast.
Since writing the first Weekly Skinny in 2012, we have not seen something that has had such a swift and significant impact in China as the coronavirus. Although some would argue the response in Wuhan could have been quicker, in the past two weeks China has taken unprecedented measures to contain the outbreak. It has pooled national medical teams and supplies to the hardest hit regions, built new hospitals, extended the Lunar NY holiday, postponed the opening dates for schools and businesses, and imposed travel restrictions. China’s leaders have acknowledged the outbreak is a “major test of China’s governance system and capacity,” and will use their unique powers to do everything they can to contain it.
A lot of comparisons have been made between the coronavirus and SARS. While there are many parallels, China learnt many things in 2003 and lot since. The country is much wealthier than it was 17 years ago with GDP almost nine times larger, affording it more resources to deal with the issue. It is also much more digitally connected – with over 1,000% more people online – allowing much faster dissemination of information. Notwithstanding, the number of coronavirus fatalities in China has surpassed that of SARS, although the overall global count is currently about half of what SARS was.
The interconnectivity between China and rest of the world will mean more of us will be impacted in the short term. When SARS hit, China accounted for around 5% of global trade. Now it is over 12%. Chinese travellers took less than 17 million trips in 2002, last year it was more than 150 million. A little over 100,000 Chinese studied abroad around the time of SARS; 17 years later it is almost 700,000. Tourism and Education are likely to be two of the sectors most impacted by trip cancellations, group travel bans, and countries’ travel bans. The goods trade may also see a dip as visitors and students get less exposure to foreign products, and as a result, are less likely to advocate them to their family, friends and colleagues back in the mainland.
Although most news around the coronavirus may portray doom and gloom for China, the medium-long term prospects remain unchanged. Brands should refrain from panicking. After the 1997 Asian Financial Crisis and 2003 SARS epidemic, China bounced back quickly. China’s GDP actually grew 10.0% in 2003, faster than the 9.1% in 2002. There was pent up demand when things settled, and positive emotions and spending followed. Well-marketed foreign goods could benefit from the outbreak, as the cleanliness, safety and healthiness of imported products is reinforced. Tourism, education and even migration may also rise as Chinese seek safer places to travel, study and live. There could be a rise in car sales as consumers look to avoid crowded public transport in the short term, which happened during SARS. We may even see a much needed bump in fertility rates and mum & baby products as cooped-up people look for things to do.
Chinese consumers respond well to brands and countries they don’t see as ‘fair weather friends’, as the much-praised decision by Canada to not follow the US travel ban will attest. Similarly, Japan has been applauded for its respectfulness, donating face masks accompanied with traditional poetry to describe their relationship with Chinese people: “when you say you don’t have clothes, we share ours with you.” Similarly, when reporting infections, the Japanese government did not reveal the nationality of the patients, saying “it has nothing to do with dealing with the situation.”
Brands that continue to respect and connect with Chinese consumers over this period are likely to benefit the most when things get back to normal. As we saw with the H7N9 virus in 2013, when China’s digital adoption had come of age, consumers rode out the storm online, researching, ordering and entertaining themselves on their devices with both positive and negative experiences going viral. This reiterates the importance of ensuring that your digital strategy is still relevant and optimised for China.
In the short term, Chinese stores are likely to continue checking shoppers’ temperatures and enforce masks. Food and ecommerce delivery will take a little longer and be ‘contactless‘ (meaning goods are left at a designated area rather than taken to the door), but online purchases will likely increase as a share overall. Above all, there remains hundreds of millions of affluent Chinese who will continue to consume.
Although the Skinny HQ in Shanghai is closed – as per the Shanghai government shutdown extension, our team is working remotely to assist you to adapt and sell more in China. Please don’t hesitate to email us to discuss what we can do and how we do it. In the meantime, stay well and don’t forget to wash your hands! Go to Page 2 to see this week’s China news and highlights.