Mar 13, 2020 10:52 AM

Greg Gilligan: China seen as a major consumption market

Key points by Greg Gilligan, Chairman of the American Chamber of Commerce (AmCham) in China, at the Caixin Global Webinar: How the Coronavirus Could Impact Global Supply Chains on March 11th.

Impact of the COVID-19 on MNCs:

AmCham China is doing a survey showing different phases that American companies in China are going through amid the COVID-19 crisis.

• In phase one, helping protect society and taking care of the employees are priority for companies. Among the American comnapies surveyed, 94% said that they were allowing and encouraging remote access for the workforce or work at home.

• In phase two, balancing health and human safety and resumption of work has become imminent. The major hurdle would be travel disruptions, which restrict both flow of people and goods.

• In phase three, assessing the long-term impact and adjusting strategies accordingly are essential. 43% of respondents said it's too soon to determine the commercial impact of the COVID-19. Nearly half expect 2020 China revenues to decrease if business cannot return to usual before April 30; nearly 1/5 say 2020 revenues will decline more than 50% if the virus epidemic extends through August 30.

The global supply chain will resume to full capacity by August 30.

• China needs inputs as well as outputs for resuming production. The rest of the world is now in virus combat mode. The entire global supply chain is interconnected and therefore impacted.

• It's going to take the rest of the world to sort through their issues and challenges as well for the global supply chain to really get back up to 100%.

Business Climate in China:

AmCham China’s 2020 China Business Climate Surevey was done before the signing of the US-China phase one trade deal, and also before the challenge of the COVID-19 crisis. Two key takeaways:

• We have anecdotal examples where some companies are saying they're going to move, but others in this environment, say that there's a different market now.

• The volume and composition of China’s economy has greatly changed since 2003. Consumption, which weighed around mid-thirties as a percentage of GDP, is now closer to the mid-fifties. Companies previously invested in China for export, now convert to import businesses.

• Commerce is the biggest part and the foundation of the U.S.-China relationship. The American businesses are trying to stay objective, stay in the middle, and reflect what the data tells them.


Source: AmCham China

Impact for the Implementation of the U.S.-China Trade Deal

• There was a significant purchasing element - supposed to be US$77 billion - to the phase one U.S.-China trade deal. Now that the transportation is at a standstill, the terms of the deal would remain in place, but that the timing of the deal will be impacted.

Both the United States and China have responsibility for the rhetoric of decoupling. The United States has shifted away from multilateralism to unilateral or bilateral approaches in terms of trade and foreign policy.

The definition of national security has become such broader to include economic security. The U.S. government should separate national security from law enforcement, and commercial and trade issues, so that corporations can make business driven decisions without considering political factors.

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