How Coronavirus (COVID-19) will Impacts your Businesses in China

Coronavirus in 2020

With the current outbreak of coronavirus throughout China, the response to the new coronavirus outbreak is unprecedented in human history. and China’s unprecedented efforts are endorsed by the World Health Organization (WHO)

But businesses are having to consider how to effectively utilize their employees under the situation where physical contact between individuals is being restricted to a very high degree. And that’s also very urgent to review how Coronavirus will Impacts your businesses in China.

1. Current Situation

Recognize the current situation of Coronavirus in China. You can read lots of news from the Internet( Xinhua News).

2. Workers

The visible, immediate impact is that some staff will not be able to return to work on the intended date February 9 or even later, as the virus appears to have a two-week incubation period. Your Chinese factory might shut down till Mid of Feb 2020, and many employees may not show up for work at your supplier again because they don’t want to work with others who might be spreading the coronavirus.

Many of them went back to their home towns. Especially workers located from Hubei Province and more particularly from Wuhan City, They may be unable to leave their city. This means that offices and factories should prepare to be understaffed until that time. Meanwhile, Transport services and other services can be expected to be severely disrupted.

But if the factory’s management and/or the operators come mostly from the area, you might check with them when the factory could be re-open? Communicate with the suppliers where the staffs are and the impacts

3. Conditions to resume Production?

First, the government already impose some sanitary rules, especially in specific sectors (food, medical devices, etc.). The government might simply postpone the opening of all offices and factories, but In the absence of government decisions, suppliers should think about to enforce certain rules too (e.g. masks and gloves for all workers, regular disinfection of certain area, etc.).

But If the death toll keeps rising sharply, and if the economy takes a serious dive, many factories may just stop their business.

4. Will the Suppliers Keep Delivering?

Coronavirus likely will constitute a force majeure event for your Chinese counter-parties, and this will mean they can breach their contracts with you without much if any legal repercussion.
But like we introduced the situation of workers in part 2, Though your suppliers might get back to work, some factories in your supply chain might not re-open for several weeks or ever. Be ready to look for new sources. But Is it desirable and realistic to start manufacturing in another country, to reduce exposure to China? You know it will take months. If your orders are relatively small and if you can’t afford to pay a higher price, you will probably not find any good option in Vietnam, Thailand, or Indonesia.

5. Logistics, Delivery

If some products were already finished before the New Year, Logistics should still function as usual in the next few weeks. This will probably be no problem with delivery, but you should check with the suppliers if the workers are showing up.

6. Cash in hand

Check with your supplier if they can maintain at least three to four months’ worth of total operating costs. This is especially true when times are tough, as contingency financing is more likely to be called upon at short notice.

Summary

Now is an ideal time to conduct a health check on your business as it is impacted by China. Conduct an inventory of planned shipments from China and establish whether or not these could be impacted. Open communications channels with suppliers to discuss delivery problems and prepare backup from alternatives elsewhere. Examine your business plan, budgets, and cash flow to be prepared for a hit.

Importers should check on the viability of receiving shipments on time and make contingency plans if in doubt.

Meanwhile, please contact us at info@aqiservice.com for advice or medical and regulatory updates as issued by the Chinese government

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