Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
China will not set an economic growth goal for this year as it deals with the fallout from the coronavirus pandemic.
It is the first time Beijing has not had a gross domestic product (GDP) target since 1990 when records began.
The announcement was made by Premier Li Keqiang at the start of the country’s annual parliament meeting.
The world’s second largest economy shrank by 6.8% in the first quarter from a year ago as lockdowns paralysed businesses.
“This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment,” Premier Li said.
The country’s leadership has promised to boost economic support measures amid growing concerns that rising unemployment could threaten social stability.
The move comes as tensions between Beijing and Washington are becoming increasingly strained over the coronavirus pandemic, trade and Hong Kong.
On Thursday, President Donald Trump stepped up his attacks on China, suggesting that the country’s leader, Xi Jinping, is behind a “disinformation and propaganda attack on the United States and Europe.”
It came as Mr Trump and other Republicans have escalated their criticism of Beijing’s handling of the early stages of the outbreak.
Also on Thursday, China announced plans to impose new national security legislation on Hong Kong after last year’s pro-democracy protests.
The announcement was met with a warning from Mr Trump that the US would react “very strongly” against any attempt to gain more control over the former British colony.
Separately, two US senators have proposed legislation to punish Chinese entities involved in enforcing the planned new laws and penalise banks that do business with them.
Earlier this week, the US Senate unanimously passed a proposal to delist Chinese companies from American stock exchanges if they fail to comply with US financial reporting standards.
US-listed Chinese companies have come under increasing scrutiny in recent weeks after Luckin Coffee revealed that an internal investigation found hundreds of millions of dollars of its sales last year were “fabricated”.
GUBEI WATER TOWN, China (Reuters) – The mock Qing dynasty village nestled below the Great Wall would normally be teeming with tourists on Labour Day, but the thin crowds on Friday showed that while China’s coronavirus epidemic has subsided, people’s fears could take longer to fade.
During holidays, some 100,000 visitors a day would traipse round the quaint stone-paved streets of Gubei Water Town, 110 kilometres (68 miles) northeast of Beijing. Its marketing manager reckoned on getting just a tenth of that number this year.
“People have concerns about the virus and are unwilling to travel long distances,” said Guo Baorong. For a start, there will be no international tourists this time, he said, noting foreigners would normally make up around 15% of visitors.
About 70% of China’s tourist attractions had reopened as of Thursday, according to China’s Ministry of Culture and Tourism, but all sites have had to cap visitors to 30% of designed capacity.
More sites, including the Forbidden City in Beijing, were set to reopen Friday.
Staff at the entrance to Gubei Water Town checked visitors’ temperatures and health tracking codes. And inside, lines on the ground directed tourists to stand one meter apart and stores used ropes to keep crowds from forming. Like everywhere in China since the lockdowns were imposed to stem the epidemic, everyone wore masks.
Still, in places where tourists squeezed together as the streets narrowed, staff shouted at them to spread out.
Some tourists enjoyed the smaller crowds.
Xiao Chen, a 24-year-old student wearing traditional Chinese garb known as “Hanfu” came to Gubei to take pictures around ancient architecture.
“It’s good to come out of the city. There was barely anyone in Gubei Water Town yesterday, and even today, it’s not crowded,” she said.
The tranquility may not last. Room bookings jumped on Thursday after Beijing and nearby areas began easing coronavirus restrictions, with about 90% of accommodation now reserved.
“We were not expecting that many people to come in,” said Guo.
Outbound flights from Beijing were 15 times higher on one travel site within half an hour of Beijing relaxing quarantine requirements on the city
The rebound in bookings spells some hope for online travel providers in China as the country emerges from a pandemic which saw widespread travel restrictions
Passengers arrive from a domestic flight at Beijing Capital Airport on March 27, 2020. Photo: AFP
Within an hour of Beijing downgrading its emergency response level, relaxing quarantine requirements for some arrivals to the Chinese capital city, travel bookings on some sites surged up to 15 times.
Thirty minutes after the announcement on Wednesday, bookings for outbound flights from Beijing were 15 times higher than before the announcement on Qunar, one of the biggest online travel service providers in China. Searches for travel packages and hotel bookings on the platform also increased three-fold, according to a Qunar report.
On Alibaba Group Holding‘s Fliggy travel platform, bookings for flight and trains heading in and out of Beijing increased 500 per cent and 300 per cent respectively one hour after the announcement, compared to the same time a day ago, according to a Fliggy report. Alibaba owns the South China Morning Post.
Bookings for flight and train tickets in Beijing for the upcoming Labour Day long weekend also increased more than 300 per cent and 160 per cent respectively on Chinese group buying site Meituan Dianping on Wednesday after the announcement compared to the day before, while searches for the attractions in the Beijing area on the platform increased almost three times from a week ago, according to Meituan.
“The surge in searches for travel in Beijing was because the lockdown measures in the city were the strictest in the country after work resumed,” said Jiang Xinwei, senior analyst with Analysys. “Consumption among residents was suppressed [during the lockdowns], so there is now a rebound in bookings.”
China’s online travel sites prepare for surge in domestic tourism
21 Mar 2020
The rebound in bookings spells some hope for online travel providers in China as the country gradually emerges from a pandemic which the Chinese government responded to by implementing strict quarantine measures, shutting down tourist attractions and suspending group tours.
Beijing-based consultancy Analysys estimates that China’s national tourism economy lost at least 10 billion yuan (US$1.4 billion) a day on average during the outbreak, with travel service providers like Qunar and Ctrip overloaded with millions of booking changes as well as cancellation and refund requests.
The relaxation of travel restrictions in and out of Beijing also comes ahead of a
, which starts on Friday and is the first extended public holiday after Lunar New Year in late January.
In November, the Chinese government lengthened the holiday from the original three days to five to stimulate consumption and encourage travelling amid a slowing economy weighed down by the US-China trade war.
Some cities, such as Huzhou in eastern China’s Zhejiang province and Kunming in southwestern province Yunnan, have issued travel vouchers to stimulate consumption for the tourist industry, according to the Ministry of Culture and Tourism.
Ctrip estimated that there would be more than 86 million domestic tourists during the long weekend – more than double the number of travellers seen during the Ching Ming Festival in April, which recorded 43 million tourists, according to the China Tourism Academy.
However, Jiang said the rebound this week does not mean the Chinese travel industry is out of the red. “The travel industry will recover partially during the public holiday, but this will not be more than 60 per cent [of levels before the pandemic],” he said. “The government needs to do more to signal that travelling is safe and encourage residents to do so.”
Concerns are rising that China is repeating its mistake of a decade ago by pursuing short-term debt-fuelled economic growth at the cost of long-term sustainability
Local governments are stepping up spending on infrastructure projects in a bid to offset the slowdown caused by the coronavirus outbreak and subsequent lockdowns
Construction of high-speed railways, motorways and airports is an old tactic that Beijing dusted off after the pandemic led to a 6.8 per cent economic contraction in the first quarter. Photo: Xinhua
China’s huge stockpile of local government debt, one of the biggest “grey rhino” risks threatening the Chinese economy’s future, is set to rise steeply as local authorities rush to increase capital spending to help offset the damage caused by the coronavirus outbreak.
As Beijing discusses increasing the central government budget deficit and monetary policy easing to spur economic growth, many local governments see the situation as a golden opportunity to realise their investment ambitions, fanning concerns that China is repeating its mistake of a decade ago by pursuing short-term debt-fuelled economic growth at the cost of long-term sustainability.
In one of the latest investment drives, the southeastern province of Fujian announced on Sunday that it had signed contracts for 391 new projects with a combined investment value of 783.6 billion yuan (US$110.6 billion). Projects undertaken by central government-owned companies, which received significant lending support in the first quarter, accounted for more than half of the promised investment in Fujian, some 92 projects worth 424.5 billion yuan.
The landlocked eastern province of Anhui is also planning 2,583 new projects this year at a cost of 450 billion yuan, a third of which have been created in the last two weeks.
Construction begins for major sea crossing to link Shenzhen and Zhongshan in Greater Bay Area
In addition to work on existing construction projects, costing around 850 billion yuan, the province has also prepared a list of 3,300 reserve projects with a total investment value of 5.4 trillion yuan (US$762 billion) which could theoretically be started at any point in the future, pending government approval and funding support.
“The most powerful and effective way to offset the economic slowdown is to increase the size of investments,” Wang Qikang, an official with the Anhui economic planning office said on Friday. “[We] must quicken the pace of construction, working day and night to win back the lost time [from the coronavirus lockdowns].”
Construction of high-speed railways, motorways and airports is an old tactic that Beijing dusted off after the pandemic led to a 6.8 per cent economic contraction in the first quarter.
Infrastructure construction has already been hit hard amid the lockdowns, plunging 19.7 per cent in the first three months of the year compared to a year earlier.
Many [local governments] are still striving to achieve a high growth rate without the guidance of a national [gross domestic product] target – Liu Xuezhi
“The investment stimulus mindset has hardly been eradicated at the local level,” said Liu Xuezhi, a senior researcher with the Bank of Communications in Shanghai. “In particular, many [local governments] are still striving to achieve a high growth rate without the guidance of a national [gross domestic product] target.”
Before the start of the coronavirus outbreak, Beijing was thought to be targeting a
of around 6 per cent this year after achieving 6.1 per cent in 2019, although many local governments appear to be setting their own annual targets still using the original expected goal as a guide.
However, that target was never made public because the meeting of the
scheduled for early March, where the growth target would normally have been released, was postponed due to the virus.
The government announced on Wednesday that the NPC will be held from May 22, when a new, likely lower, growth target could be announced.
China’s first-quarter GDP shrinks for the first time since 1976 as coronavirus cripples economy
International rating agency Moody’s warned that greater infrastructure spending would result in higher debt for regional and local governments, increasing their financial risks amid a sharp slowdown in tax revenues.
“Such investments are less likely to be a main support measure [chosen by Beijing] now given the government’s focus on avoiding a rapid increase in leverage and asset price inflation,” Moody’s analysts Michael Taylor and Lilian Li said on Tuesday.
At the end of March, local government debt stood at 22.8 trillion yuan (US$3.2 trillion), according to the Ministry of Finance. But implicit liabilities, which are hidden in local financing vehicles, state firms and public-private partnership projects, are believed to be much larger, with some estimates pointing towards an additional debt of over 30 trillion yuan.
Chinese central bank governor Yi Gang, along with other officials, have already warned against excessive economic stimulus, saying it would add risks to China’s financial system.
A key risk is that local governments are front-loading China’s long-term investment plan, especially in the railway sector, with more than 357 railway projects proposed by local governments.
Shandong province, for example, is preparing to build four new railway lines, including the Shandong portion of a second high-speed railway between Beijing to Shanghai.
“There is still a chance for infrastructure investment growth to hit 10 per cent if the government releases 2 trillion yuan (US$282 billion) in funding through local special purpose bonds and special treasury bonds,” said Haitong Securities’ chief economist Jiang Chao on Monday.
However, a local government debt monitoring report issued on Tuesday by the National Institution of Finance and Development warned that China’s local government fiscal situation is worsening rapidly as expenses surge and revenues drop.
“All levels of local governments in China will face huge debt repayment pressure in five years,” warned Yin Jianfeng, deputy director of the Beijing-based think-tank.
BEIJING (Reuters) – China’s factory activity likely rose for a second straight month in April as more businesses re-opened from strict lockdowns implemented to contain the coronavirus outbreak, which has now paralysed the global economy.
The official manufacturing Purchasing Manager’s Index (PMI), due for release on Thursday, is forecast to fall to 51 in April, from 52 in March, according to the median forecast of 32 economists polled by Reuters. A reading above the 50-point mark indicates an expansion in activity.
While the forecast PMI would show a slight moderation in China’s factory activity growth, it would be a stark contrast to recent PMIs in other economies, which plummeted to previously unimaginable lows.
That global slump, caused by heavy government-ordered lockdowns, as well as the cautious resumption of business in China, suggests any recovery in the world’s second-largest economy is likely to be some way off.
“The recovery so far has been led by a bounce-back in production, however, the growth bottleneck has decisively shifted to the demand side, as global growth has weakened and consumption recovery has lagged amid continued social distancing,” Morgan Stanley said in a note.
“The expected slump in external demand has likely capped further recovery in industrial production.”
The latest official data showed 84% of mid-sized and small business had reopened as of April 15, compared with 71.7% on March 24.
Hobbled by the coronavirus, China’s economy shrank 6.8% in the first quarter from a year earlier, the first contraction since current quarterly records began.
That has left Chinese manufacturers with reduced export orders and a logistics logjam, as many exporters grapple with rising inventory, high costs and falling profits. Some have let workers go as part of the cost-cutting efforts.
A China-based brokerage Zhongtai Securities estimated that the country’s real unemployment rate, measured using international standards, could exceed 20%, equal to more than 70 million job losses and much higher than March’s official reading of 5.9%.
Sheng Laiyun, deputy head at the statistics bureau, said on Sunday migrant workers and college graduates are facing increasing pressures to secure jobs, while official jobless surveys show nearly 20% of employed workers not working in March.
Chinese authorities have rolled out more support to revive the economy. The People’s Bank of China earlier in April cut the amount of cash banks must hold as reserves and reduced the interest rate on lenders’ excess reserves.
(Reuters) – Consumer goods giant Unilever Plc (ULVR.L) (UNA.AS) withdrew its full-year forecast on Thursday, saying the hit from lockdowns in China and India, as well as lower ice cream sales, offset strong U.S. and European sales of cleaning items, sending its shares down 5%.
Underlying sales across Asia, the Middle East and Russia, fell 3.7%, as lockdowns in the quarter restricted restaurant visits and shopping in China and led to factory shutdowns that halted production in India.
In Europe, Turkey and Latin America, Unilever’s 3 billion euro ice cream business was hit by national efforts to prevent the spread of the coronavirus, deterring distributors in holiday destinations from buying stock.
“Many of our classic out-of-home retailers like leisure sites, travel hubs, beaches and tourist destinations were closed,” Chief Financial Officer Graeme Pitkethly said on a call.
These factors countered increased sales in the United States and Europe, where consumers stocked up on laundry detergents, Domestos bleach, Cif cleaning products and personal hygiene items, as the virus spread to those regions.
Overall, first-quarter turnover rose 0.2% to 12.40 billion euros ($13.42 billion), slightly missing the estimate of 12.77 billion euros based on analysts polled by Factset.
The company withdrew its sales performance targets for the year, which forecast growth at the lower end of a 3%-5% range, saying it could not “reliably assess the impact” of the virus, , although it said it would still pay its interim dividend.
Jefferies analysts said investors would be asking why Unilever “has apparently been hit so badly, and early, by the negative impacts of COVID-19 without seeing much of the positives. We expect a difficult day for the shares.”
Shares in Unilever, which joins spirits maker Diageo (DGE.L) and other consumer goods companies in withdrawing guidance, was down 5.5% at 4,008 pence in early trading.
The Anglo-Dutch company’s report follows results from larger U.S. rival Procter & Gamble (PG.N), which last week said its U.S. sales had seen their biggest rise in decades.
Unilever also said underlying sales grew strongly in North America, rising 4.8% as shoppers stocked up on personal hygiene products, Knorr soups and Hellmann’s dressings.
In Europe, sales growth was led by Germany and Britain, although prices across the region fell.
“We are adapting to new demand patterns and are preparing for lasting changes in consumer behaviour, in each country, as we move out of the crisis and into recovery,” Unilever Chief Executive Alan Jope said in a statement.
The company said it was directing a chunk of its 500 million euro package to support suppliers towards its ice cream distribution partners, which Pitkethly called the “jewel” in its supplier relationships.
BENGALURU (Reuters) – The Indian economy is likely to suffer its worst quarter since the mid-1990s, hit by the ongoing lockdown imposed to stem the spread of coronavirus, according to a Reuters poll, which predicted a mild and gradual recovery.
Over 2.6 million people tmsnrt.rs/3aIRuz7 have been infected by the coronavirus worldwide and more than 180,000 have died. Business and household lockdowns have disrupted supply chains globally, bringing growth to a halt.
The April 17-22 Reuters poll predicted the economy expanded at an annual pace of 3.0% last quarter but will shrink 5.2% in the three months ending in June, far weaker than expectations in a poll published last month for 4.0% and 2.0% growth, respectively.
The predicted contraction would be the first – under any gross domestic product calculation, which has changed a few times – since the mid-1990s, when official reporting for quarterly data began.
“The extended lockdown until early May adds further downside risk to our view of a 5% year-on-year GDP fall in the current quarter, the worst in the last few decades,” said Prakash Sakpal, Asia economist at ING.
“We don’t consider economic stimulus as strong enough to position the economy for a speedy recovery once the pandemic ends,” he said.
(Graphic: Reuters poll graphic on coronavirus impact on the Indian economy IMAGE link: here)
The Indian government announced a spending package of 1.7 trillion rupees in March to cushion the economy from the initial lockdown, which has been extended until May 3.
In an emergency meeting last week, the Reserve Bank of India cut its deposit rate again, after reducing it on March 27 and lowering the main policy rate by 75 basis points. It also announced another round of targeted long-term repo operations to ease liquidity.
But even with those measures, 40% of economists, or 13 of 32 – who provided quarterly figures – predicted an outright recession this year. Only one had expected a recession last month.
In the worst case, a smaller sample of respondents predicted, the economy would contract 9.3% in the current quarter. That compares with 0.5% growth in the previous poll’s worst-case forecast in late March, underscoring how rapidly the outlook has deteriorated.
The latest poll’s consensus view still shows the economy recovering again slowly in the July-September quarter, growing 0.8%, then 4.2% in October-December and 6.0% in the final quarter of the fiscal year, in early 2021.
But that compares with considerably more optimistic near-term forecasts of 3.3%, 5.0% and 5.6%, respectively, in the previous poll.
“A rebound in economic activity following the disruption is expected, but the low starting point of growth implies a gradual recovery,” said Upasana Chachra, chief India economist at Morgan Stanley.
“Indeed, before disruptions related to COVID-19, growth was slowing, with domestic issues of risk aversion in financial sector … (and) those concerns will likely stay after the COVID-19 disruptions have passed unless the policy response is much larger than expected,” she said.
The unemployment rate has tripled to 23.8% since the lockdown started on March 25, according to the Centre for Monitoring Indian Economy, a Mumbai-based research firm.
The Indian economy was now forecast to expand 1.5% in the fiscal year ending on March 31, 2021 – the weakest since 1991 and significantly lower than 3.6% predicted in late March. It probably grew 4.6% in the fiscal year that just ended.
Under a worst-case scenario, the median showed the economy shrinking 1.0% this fiscal year. That would be the first officially reported economic contraction for a 12-month period since GDP was reported to have contracted for calendar year 1979.
“Unless fiscal policy is also loosened aggressively alongside monetary policy, there is a big risk the drastic economic slowdown currently underway morphs into an annual contraction in output and that the recovery is hampered,” said Shilan Shah, senior India economist at Capital Economics.
All 37 economists who answered a separate question unanimously said the RBI would follow up with more easing, including lowering the repo and reverse repo rates and expanding the new long-term loans programme.
The RBI was expected to cut its repo rate by another 40 basis points to 4.00% by the end of this quarter. Already lowered twice over the past month by a cumulative 115 basis points, the reverse repo rate was forecast to be trimmed by another 25 points by end-June to 3.50%.
Israeli medical equipment firm IceCure Medical, with an initial US$4 million sales and marketing effort, will open its first Chinese office in Shanghai
English shopping outlet company Value Retail sees the chance to lure consumers who have been under lockdowns aimed at halting the spread of the coronavirus
Foreign firms, including Israeli medical equipment maker IceCure Medical and English shopping outlet company Value Retail, still see opportunities in China despite the coronavirus. Photo: AFP
Not only has the coronavirus pandemic not watered down one company’s expansion plans for China, it has given it even greater reason to push forward into the Chinese market.
Israeli company IceCure Medical is forging ahead with opening its first Chinese office in Shanghai, with plans to spend up to US$4 million for the initial sales and marketing effort for its non-surgical breast cancer treatments.
Chief executive Eyal Shamir said he has seen an uptick in Chinese interest in the company’s ProSense product, which allows the freezing of tumours outside a hospital environment, because it can free up facilities badly needed for Covid-19 patients.
The government approval of the company’s Chinese subsidiary is now only days away following a successful product console registration, according to Shamir, and it has already sold two units to the Fudan University Shanghai Cancer Centre for a clinical study.
World Health Organisation warns the ‘worst still ahead’ in coronavirus pandemic
“We are planning a full launch of the product in China for both breast cancer and breast benign tumours as well as other organs,” Shamir said.
“Post Covid-19, there will be a backlog of many surgeries and not only for breast cancer patients.”
IceCure Medical, though, is not the only foreign company eyeing expansion into China despite the risk of secondary outbreaks of coronavirus.
West of Shanghai, English shopping outlet company Value Retail is also expanding its retail space, banking on Chinese shoppers re-emerging from lockdowns to begin
After being cooped at home for weeks, people want to be outdoors to enjoy the beautiful spring weather – Value Retail
Value Retail is proceeding with plans to enlarge its Suzhou Village shopping centre from 35,000 square metres (378,000 sq ft) to over 50,000 square metres, while also increasing the number of shops from 120 to 200, which will make it the largest of the 11 venues its controls globally.
It is working closely with the Yang Cheng Lake Peninsula government on a date for construction to start, after seeing a surprising increase in retail sales at its centres in early April. The company’s Chinese subsidiary, Value Retail China, attributed the rise to an increasing number of consumers wanting to “get outside” of their homes after being isolated for several weeks.
Suzhou Village sales have increased 40 per cent each week since the start of April, the company said.
“Thanks to the positive recovery [in spending] over the past several weeks, we are going ahead with the Suzhou Village expansion,” the company said in a statement. “After being cooped at home for weeks, people want to be outdoors to enjoy the beautiful spring weather. We provide a shopping experience for guests in an outdoor environment … the motivation for such an experience after isolation is huge. [Being] outdoors is seen as a luxury now.”
In addition, customers are flocking to both its Suzhou and Shanghai Village centres as a form of domestic tourism because of the curb on overseas travel, Value Retail China said.
Despite the economic destruction that the coronavirus pandemic has caused in China, it also is opening up expansion opportunities for entrepreneurial firms in several industries, such as e-commerce and online delivery, life sciences and infrastructure construction, said EY Asia-Pacific transaction advisory services leader Harsha Basnayake.
However, while businesses within Asia-Pacific expressed a desire for opportunistic expansions, most companies still held a pessimistic view of economic recovery that would drag on into 2021.
American companies already operating in China were even less optimistic with over 70 per cent of businesses surveyed by the American Chamber of Commerce in March saying they were reluctant about expanding in the coming year.
Although it is too early to say if retail property will rise – particularly when we are seeing new habits forming, going from shopfronts to online and how far this new behaviour will stick. China will gives us lots of lessons on this. – Harsha Basnayake
“We are expecting opportunities in real estate, particularly in commercial property and logistics, and we think industries in life sciences, some parts of health care and infrastructure will be interesting,” Basnayake said.
“Although it is too early to say if retail property will rise – particularly when we are seeing new habits forming, going from shopfronts to online and how far this new behaviour will stick. China will gives us lots of lessons on this.”
The Chinese government’s move to increase infrastructure spending to boost the economy will also benefit certain industries, such as cement production.
Despite suffering a 24 per cent drop in sales in the first quarter due to virus-related delays in construction activities, China’s largest cement manufacturer, Anhui Conch Cement, is likely to move forward with plans to expand in part due to its participation in the Belt and Road Initiative, according to analysts at S&P Global.
Though no one would be able to tell exactly what will happen when the Covid-19 uncertainties are not completely gone, signs of recovery in China have brought encouragement to us – Justin Channe
Desires to expand are also not limited to these industries, and even the hard-hit hotel industry is starting to show green shoots.
International hotel chain IHG said that the coronavirus would not derail its new Regent-branded hotel project in Chengdu, which is expected to start construction later this year.
“Though no one would be able to tell exactly what will happen when the Covid-19 uncertainties are not completely gone, signs of recovery in China have brought encouragement to us,” said Regent Hotels & Resorts managing director Justin Channe.
“While we saw business pickup across China over the past Qing Ming Festival holiday, Chengdu and its nearby destinations were among the leading ones. In the long run, we stay confident of the outlook for the China hotel industry, including the luxury segment.”
Analysing how coronavirus broke China’s historic economic growth run
Beyond the crisis, there will be ample opportunities for new merger and acquisitions (M&A) amid business restructures and failures, particularly in China, Basnayake added.
A new EY survey found 52 per cent of Asia-Pacific businesses planned on pursuing M&A in the next year.
“While the crisis is having a severe impact on M&A sentiment, there’s evidence from the survey that M&A activity intentions remain steady in the long term. There are many who recognise this is a time where valuations will be reset, and there will be stressed and distressed acquisition opportunities,” Basnayake said.
“For example, from our interviews with corporations in China, a majority said that Covid-19 has not impacted their M&A strategies, noting that the situation has not led to any cancellations or withdrawals from deals, but only in delays in closing deals.”
Young people starting out in the jobs market face a hit to their prospects that could endure years after the Covid-19-induced downturn has run its course
A generation of angry youth raises the spectre of political instability
Freelance filmmaker Anita Reza Zein had grown used to jam-packed production schedules requiring her to put in long hours and run on little sleep. Until Covid-19 struck.
Today, the talented Indonesian is suddenly free. With five projects on hold and many more potentially cancelled, she now spends her time working on a personal project, doing research for her work and occasionally going for a ride on a bicycle.
“I feel calm and patient although I’m jobless. Maybe because it’s still the third week [of social distancing] and I still have enough savings from my previous work,” said the 26-year-old, who is from Yogyakarta. “But I imagine life will become tougher in the next few months if the situation gets worse.”
Like her, millions of youths are now part of a job market in Southeast Asia that has been ravaged by the coronavirus pandemic. They are the unlucky cohort of 2020 whose fortunes have changed so drastically, so quickly.
Freelance filmmaker Anita Reza Zein now spends most of her time at home as her projects have all been frozen due to the spread of Covid-19. Photo: Anita Reza Zein
Just three months ago, many eager graduates were about to partake in a strong economy and possibly land decent pay cheques.
Today, job offers are being withdrawn and hiring halted, leading to a spike in regional youth unemployment in the short term. In the long term, the effects on the Covid-19 cohort could lead to wider social and political problems.
JOB MARKETS SHUT
The virus’ impact on economies and the job market in the region has been swift and devastating. Borders have been slammed shut, workers ordered to stay at home, and thousands of companies closed every week.
The biggest problem is the lack of certainty about how long this will last – the longer the governments keep their countries on lockdown, the worse the economic impact.
In Indonesia, for example, the virus has caused almost 2.8 million people to lose their jobs, according to the Manpower Ministry and the Workers Social Security Agency. Likewise, in Malaysia, an estimated 2.4 million people are expected to lose their jobs, going by data from the Malaysian Institute of Economic Research (MIER).
is bracing itself for a 5.3 per cent contraction in GDP for the full year, the worst since the Asian financial crisis in 1997.
“We think about seven million jobs have been lost already, and the figure will hit 10 million if the outbreak drags on for two to three more months,” said Kalin Sarasin, council member and head of the Thai Chamber of Commerce.
Lockdown for 34 million people in capital Jakarta as Indonesia fights surge in coronavirus deaths
For young jobseekers, the outbreak of the Covid-19 pandemic could hurt even more, with companies unwilling to open up new jobs for them.
“My clients who were open to fresh graduates previously have realigned searches [for candidates] who have at least one year of experience, as it’s a lot faster for someone with experience to scale up quickly and contribute,” said Joanne Pek, a recruiter at Cornerstone Global Partners’ Singapore office.
For many small and medium-sized enterprises (SMEs) such as Singapore-based restaurant chain The Soup Spoon, saving jobs – rather than recruiting – is the priority.
“We don’t want to let anyone go during this period, so we’re focused on protecting jobs,” said co-founder and director Benedict Leow, who employs some 250 workers.
THE COVID-19 COHORT
The looming economic downturn could have distinct consequences for the Class of 2020 that will outlast the economic downturn itself.
For one thing, the paucity of jobs could result in the Covid-19 cohort becoming a “lost generation” of sorts, said Achim Schmillen, a senior economist at the World Bank Social Protection and Jobs Global Practice.
“Research from around the globe shows that graduating in a recession can have significant and long-lasting impacts that can affect the entire career. In particular, it can lead to large initial earnings losses which only slowly recede over time,” he said.
Coronavirus: why there’s no quick fix for a Covid-19 vaccine
12 Apr 2020
Economics professor Jeff Borland of the University of Melbourne said that international studies showed that what happened to people when they first entered the labour market would affect them for the rest of their working lives.
“Many international studies have shown that trying to move into employment during a major economic downturn cuts the probability of employment and future earnings for a decade or more.
“Why this occurs is less well-established. Reasons suggested include being forced to take lower-quality jobs, losing skills and losing psychological well-being,” he said in a piece published on The Conversation website.
Malaysia sets up Covid-19 test zones in the capital to hunt for ‘hidden’ coronavirus cases
This could create “lasting scarring” on the graduates this year, said labour economist Walter Theseira.
“If their careers start badly, it would affect their earnings for a number of years because they would lack the same experience as peers who started in a more secure position,” the associate professor of economics at Singapore University of Social Sciences said.
Shrinking salaries and the downsizing of companies mean that graduates might have to seek out professions outside their areas of study to survive, said Grace Lee Hooi Yean, head of the Economics Department at Monash University, Malaysia.
She said youth unemployment in the country, which stands at 11.67 per cent, could rise sharply.
“This looming crisis could trap a generation of educated and capable youth in a limbo of unmet expectations and lasting vulnerability if the graduates are not ready to face reality and adapt to the new challenges,” she said.
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This is fast becoming the reality for final-year medical student Rebecca K. Somasundaram, who has been left without a job due to the pandemic.
After being offered a residency programme at a top specialist hospital in Kuala Lumpur, she was notified a month ago that her placement had been made void until further notice. This has thrown the 24-year-old’s plans into disarray as she was hoping to enter the workforce soon to pay off her student debts. Her plans to get married next year have also been put on hold temporarily.
“I am in constant talks with the hospital to see if there is any way I can join them soon but seeing how things are unfolding so quickly, I am slowly losing hope,” she said.
Over in Indonesia, the pandemic will trigger job losses on a national scale. To combat this, the government would need to introduce strong fiscal measures and beef up its social protection policies, said the country’s former minister of finance Muhamad Chatib Basri.
Many people on lower incomes tend to work in the extraction industry, such as mining and palm oil, and these are the first industries hit due to the global slowdown.
“The rich will be able to brave the storm, but the poor have no means to do so,” he said.
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SPECTRE OF 1997
With partial lockdowns imposed in the capital of Jakarta, more needs to be done to ensure that vulnerable citizens have access to food and financial support.
Without government intervention, economic woes could soon translate into political instability, a scenario last seen in the Asian financial crisis.
In 1997, waves of discontent sparked racial riots in Indonesia that toppled the country’s long-time strongman Suharto, while in Thailand a political crisis created the conditions for populist leader Thaksin Shinawatra to rise.
Rising discontent could have serious implications at the ballot boxes, warned Basri, who said young voters were a key voting bloc for President Joko “Jokowi” Widodo.
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In last year’s general elections, Jokowi proved a hit among the lower-educated youth who had benefited from the creation of largely unskilled jobs during his tenure.
“With more young people expected to become unemployed in the coming months, things will only get worse from here,” said Basri, who added that the country’s youth unemployment stood at almost 20 per cent in 2018.
Indonesia, which has 268 million people and is Southeast Asia’s largest economy, had 133 million workers as of last August, according to official data.
Close to 10 per cent or about 12.27 million are university graduates but among this group, about 5.67 per cent or some 730,000 were unemployed. This was higher than the country’s overall unemployment rate at that time, which was 5.28 per cent.
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GETTING IT RIGHT
Economists say, however, that all is not lost. Much will depend on policy and how governments focus on battling the virus on the public health and economic fronts. They point to Singapore, which has launched a robust response to the crisis.
On April 6, the Singapore government announced its third budget in two months to help companies and households tide over the crisis. In all, Singapore’s total stimulus package, which aims to save jobs and keep funds flowing to companies, will cost the government a massive S$59.9 billion (US$42 billion).
The Singapore government was also preparing for a labour market that would be reluctant to hire fresh graduates on a full-time basis, said Theseira.
“There are plans to implement large-scale subsidised traineeships, which may be more palatable to companies which are worried about taking on permanent headcount this year,” he noted. “As the economic situation improves, they can be converted to permanent positions.”
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While jobs were being created for fresh graduates, many would still have to temper their expectations, such as taking jobs with lower starting pay, said DBS Bank economist Irvin Seah.
“There are still some jobs to go around. There are still some companies that may need workers. But they will need to be realistic,” he said.
For instance, despite the downturn, Singapore telco Singtel expects to recruit over 300 fresh graduates for various permanent positions this year, according to Aileen Tan, the company’s Group Chief Human Resources Officer. Many of the new hires will be in new growth areas such as the Internet of Things, analytics and cloud.
The Singtel Comcentre building in Singapore. Photo: Roy Issa
Other companies that continue to hire include those in tech across the region, including e-commerce giant Shopee, food-delivery service Foodpanda and Amazon.
In Australia, Borland suggested helping young people to remain plugged into the labour market through government-funded paid internships, or even offering them loans to go for further studies and prevent a spell of unemployment.
For now, while some young jobseekers are taking a wait-and-see approach, the reality is hitting hard for others.
Final-year National University of Singapore student H.P. Tan had all but secured a job at a public relations firm last month, after three rounds of interviews.
The Faculty of Arts and Social Sciences undergraduate was rejected via an email from the agency, which said that they could no longer hire after Covid-19 started to drastically cut business.
“When I got that rejection, it was a turning point. I didn’t think I would be directly impacted,” said the 23-year-old.
“I also applied to a few other agencies but the response has been slow, so I am now freaking out at the possibility of not being able to find a job after graduation.”
China’s economy shrank for the first time in decades in the first quarter of the year, as the virus forced factories and businesses to close.
The world’s second biggest economy contracted 6.8% according to official data released on Friday.
The financial toll the coronavirus is having on the Chinese economy will be a huge concern to other countries.
China is an economic powerhouse as a major consumer and producer of goods and services.
This is the first time China has seen its economy shrink in the first three months of the year since it started recording quarterly figures in 1992.
“The GDP contraction in January-March will translate into permanent income losses, reflected in bankruptcies across small companies and job losses,” said Yue Su at the Economist Intelligence Unit.
Last year, China saw healthy economic growth of 6.4% in the first quarter, a period when it was locked in a trade war with the US.
In the last two decades, China has seen average economic growth of around 9% a year, although experts have regularly questioned the accuracy of its economic data.
Its economy had ground to a halt during the first three months of the year as it introduced large-scale shutdowns and quarantines to prevent the virus spread in late January.
As a result, economists had expected bleak figures, but the official data comes in slightly worse than expected.
Among other key figures released in Friday’s report:
Factory output was down 1.1% for March as China slowly starts manufacturing again.
Retail sales plummeted 15.8% last month as many of shoppers stayed at home.
Unemployment hit 5.9% in March, slightly better than February’s all-time high of 6.2%.
Analysis: A 6% expansion wiped out
Robin Brant, BBC News, Shanghai
The huge decline shows the profound impact that the virus outbreak, and the government’s draconian reaction to it, had on the world’s second largest economy. It wipes out the 6% expansion in China’s economy recorded in the last set of figures at the end of last year.
Beijing has signalled a significant economic stimulus is on the way as it tries to stabilise its economy and recover. Earlier this week the official mouthpiece of the ruling Communist Party, the People’s Daily, reported it would “expand domestic demand”.
But the slowdown in the rest of the global economy presents a significant problem as exports still play a major role in China’s economy. If it comes this will not be a quick recovery.
On Thursday the International Monetary Fund forecast China’s economy would avoid a recession but grow by just 1.2% this year. Job figures released recently showed the official government unemployment figure had risen sharply, with the number working in companies linked to export trade falling the most.
China has unveiled a range of financial support measures to cushion the impact of the slowdown, but not on the same scale as other major economies.
“We don’t expect large stimulus, given that that remains unpopular in Beijing. Instead, we think policymakers will accept low growth this year, given the prospects for a better 2021,” said Louis Kuijs, an analyst with Oxford Economics.
Since March, China has slowly started letting factories resume production and letting businesses reopen, but this is a gradual process to return to pre-lockdown levels.
Media caption Why does China’s economy matter to you?
China relies heavily on its factories and manufacturing plants for economic growth, and has been dubbed “the world’s factory”.
Stock markets in the region showed mixed reaction to the Chinese economic data, with China’s benchmark Shanghai Composite index up 0.9%.
Image copyright GETTY IMAGES
CHINDIA ALERT: You'll be living in their world, very soon 
