How did Chinese Enterprises Handle the Impact of COVID-19?

Across China, people are taking precautions in an attempt to avoid infection with a new coronavirus.(Wu Hong / EPA/Shutterstock)

By Allison Malmsten

While China is now in the suppression stage of the COVID-19 outbreak, many other countries are currently bearing the worst of it. Enterprises around the world can get a leg-up by learning from those who have already been through the unforgiving impact of the outbreak. These are the lessons that can be deduced from analyzing the COVID-19 crisis management tactics of large companies operating in China, as well as anecdotes and recommendation’s from founders of SMEs and startups.

To summarize the economic impact of COVID-19 on China, most predictions of 2020 GDP annual growth are in the range of 1-2.6%. Though keeping its head just above the water of recession, which may submerge many other countries this year, it will still be the first time China’s GDP growth dropped below 6% since 1990.

 

Corporate social responsibility, there is a return on generosity

Among Coronavirus crisis response strategies of large companies in China, the most reoccurring strategy involved social responsibility. Whether donating money, lending company resources, or even giving free important information, the companies that took on responsibility to serve the community were rewarded. Though the reward does not come in the form of immediate increased product demand, they are rewarded with the long term benefits of increased brand image, staying on top of mind for when demand does return back to normal.

One outstanding example of CSR as a crisis response during the outbreak is from DiDi Chuxing, China’s ride hailing APP. DiDi was hit hard by the outbreak, it was suspended in 50 cities and a had sharp decline in demand in the rest of the country. Many drivers would only have one customer in two hours. With a lack of demand among regular customers, the ride hailing company thought of how they could put their resources to better use. DiDi deployed two fleets of drivers, dressed in protective gear, driving regularly disinfected cars to offer free transportation to medical workers in Wuhan and Shanghai. The fleet transported more than 9,500 medical workers. As a result of this generous crisis response, DiDi’s actions were recognized and praised by millions of netizens on Weibo, and even the Hothot government.

 

Treatment of employees – communication and care

According to a survey of over 200 business executives by the Economist Intelligence Network, when it comes to working remote, employee morale is more of a concern than technology challenges. Daxue consulting’s research on successful COVID-19 crisis responses in China also shows that managers prioritized employee morale.

In their daily lives, employees are faced with an overabundance of news and advice, which may cause anxiety, stress and confusion. Back in 2019, an AmCham survey shows 39.7% of companies have considered or were actively moving their supply chains out of China With a surge of anxiety also comes an increased likeliness of conflict in the workplace, according to the head of psychology at ChingHo clinic, David Ammerschlaeger. Hence managers should be invested in the mental wellbeing of employees as the outbreak hits their countries.

The founder of Siveco China, Bruno Lhopiteau, shared his experience running his business during COVID-19 in China, and recommends proactively communicating to provide guidance and security to employees. “Over-communication can certainly help to provide clarity, consistent information and overall direction,” Lhophiteau told daxue consulting.

As for essential workers, who did not have the privilege to work from home, it was common for Chinese companies to supply facemasks, instant sanitizers, disinfectant sprays and routinely take temperature of staff. This was the case for the company Xiaomi, a large Chinese tech enterprise. Xiaomi even went to the extent of providing paper towels in factory elevators to employees did not need to make direct contact with elevator buttons.

 

Finding the right marketing channel

Live-streaming was blossoming in China, and only naturally does it become even more popular when everyone is locked inside. Many Chinese companies took this chance to explore live-streaming. One Chinese night club even raised nearly 300 thousand USD on live-stream. Thanks to apps like Douyin (known as TikTok outside of China), any company of any industry can hold live stream marketing campaigns.

Xiaomi had originally planned to launch a new smart phone at an offline event that was cancelled due to the outbreak. So the company decided to hold a 72-hour live-stream event, where they announced the new product on the second day. In the 55 seconds following the launch of Xiaomi 10 pro, it had reached 200 million RMB sales through online platforms.

Live-stream is indeed closing the gap between online and offline customer experiences. Many Chinese were not able to attend luxury fashion shows in Europe due to travel bans in January and February. The organizers of 30 shows in Milan, and 13 shows in Paris collaborated with Tencent to digitally bring the shows to the living rooms of China. The Milan fashion show live-stream reached 16 million views, and had 130 million reads on Weibo. The message here is not necessarily just about live-stream technology, but about adapting to the local tech and entertainment trends.

 

Convey a message of solidarity and support

In addition to finding the right marketing channel, brands must have the right message. During tough times, expressing solidarity with those suffering is an important message. One example is Dongfeng Motors, which during the outbreak, marketed on live-stream for the first time ever. It opened official accounts on Douyin and Kuaishou, two of China’s top live-streaming apps. Alongside marketing light vehicles on live-stream, the company also shared a video of their deputy general manager, Yan Hongbin, cooking Wuhan’s traditional noodle dish. Despite the economic impact of the outbreak, in January, Dongfeng Passenger Vehicles had a sales volume increase of 4.5% compared to the year before.

 

Be flexible, adapt to what is in demand.

Consumer demand has drastically changed both during and after the Coronavirus outbreak in China. While demand for some products has plummeted, demand for others has skyrocketed. For example, the demand for lipstick is in trouble when everyone is wearing face masks, but eye makeup; on the other hand, some stores have seen double the sales volume according to Chinanews.

Companies operating in China adapted to the new demands of Chinese consumers, some of which are virtual entertainment, health related products, delivery and real-time information about the virus.

Travel companies started live-streamed tours of popular tourist destinations. DiDi expanded their business to include delivery instead of just ride-hailing. Baidu satisfied the demand for real-time information about the Coronavirus spread by creating a Coronavirus map and a page on their APP which has a part dedicated to dispelling rumors about the virus, updating real-time data on number of cases, and even a health inquiry platform.

While some businesses, like restaurants and hotels, could not keep staff employed, other businesses, like grocers and delivery, experienced a surge in demand. Rather than laying off or giving furloughs to employees, many Chinese restaurants lent their employees to a new retail grocer called Hema Xiansheng.

 

What does this mean for the rest of the world?

Crisis response comes in many ways, shapes and forms. These are the tactics that large companies, SME’s, and startups in China used to survive, or, for some, thrive, during the COVID-19 crisis. However, the overarching lessons of generosity to society and employees, appropriate marketing, and adaptability are transferrable across national borders.

About the Author

Allison Malmsten is the marketing manager and market analyst at daxue consulting, a market research and consulting firm in Shanghai, China. She has been quoted sharing China market insights in Reuters, Taipei Times, and Crain’s New York.

 

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of All China Review.

1 COMMENT

  1. “most predictions of 2020 GDP annual growth are in the range of 1-2.6%.”

    Most predictions are made by the same people who made these predictions:

    1990. China’s economy has come to a halt. The Economist
    1996. China’s economy will face a hard landing. The Economist
    1998. China’s economy’s dangerous period of sluggish growth. The Economist
    1999. Likelihood of a hard landing for the Chinese economy. Bank of Canada
    2000. China currency move nails hard landing risk coffin. Chicago Tribune
    2001. A hard landing in China. Wilbanks, Smith & Thomas
    2002. China Seeks a Soft Economic Landing. Westchester University
    2003. Banking crisis imperils China. New York Times
    2004. The great fall of China? The Economist
    2005. The Risk of a Hard Landing in China. Nouriel Roubini
    2006. Can China Achieve a Soft Landing? International Economy
    2007. Can China avoid a hard landing? TIME
    2008. Hard Landing In China? Forbes
    2009. China’s hard landing. China must find a way to recover. Fortune
    2010: Hard landing coming in China. Nouriel Roubini
    2011: Chinese Hard Landing Closer Than You Think. Business Insider
    2012: Economic News from China: Hard Landing. American Interest 
    2013: A Hard Landing In China. Zero Hedge 
    2014. A hard landing in China. CNBC
    2015. Congratulations, You Got Yourself A Chinese Hard Landing. Forbes 
    2016. Hard landing looms for China. The Economist
    2017. Is China’s Economy Going To Crash? National Interest
    2018. China’s Coming Financial Meltdown. The Daily Reckoning.
    2019 China’s Economic Slowdown: How worried should we be? BBC
    2020. Coronavirus Could End China’s Decades-Long Economic Growth Streak. NY Times

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