A glimmer of hope for businesses as restrictions begin easing in China

By Trang Tran-Sutherland, APAC Senior Investment Manager

April 2020

As Coronavirus spreads through the world with millions under lockdown and countries closing their borders, for the first time since the virus was identified last year, there are now more reported cases outside of mainland China than inside. However, with the Coronavirus now confirmed as a pandemic, it’s too early for China to drop its guard. This period could be vulnerable if a new wave of local infections were to emerge.

As of now, country lockdown and restrictions in Mainland China are slowly being unwound after no new domestic infections have been reported for several consecutive days. People are returning to work following the extended Spring Festival holiday as the number of new Coronavirus infections fall and are mostly confined to Hubei province, and there is a further easing on controls of movement outside the province. The early epicentre is gearing up to return to a full state of normalcy.

Traffic congestion delays currently stand at 73% of 2019 levels, up from 62% at the worst part of the epidemic according to Harvard Business Review, indicating that the movement of people and goods is resuming. Additionally, a survey report by the Joint Tourism Big Data Lab of China Tourism Academy and Ctrip – China’s leading online travel agency also shows the potential demand in domestic tourism remains high after the dwindling of the Covid-19 epidemic just in time for the reopening of national attractions and museums in preparation for Spring outings.

While global travel is restricted, domestic travel is favoured by the majority especially with a series of major holiday periods forthcoming. May is predicted to be the start of a domestic tourism ramp-up commencing with the Labour Day five-day public holiday. Notably, according to online travel company Tongcheng-Elong Holdings Ltd., advanced hotel bookings surged 40% compared to the week before 1st March. Peak daily bookings for domestic flights soared 230% from the lowest level recorded in February. Bookings for June jumped 250% in the last week of February from the previous week demonstrating an encouraging sign for Summer months. A surge in traffic is forecasted for the October Golden Week when the national seven-day holiday takes place.

China appears to be in early stages of economic rebound just over six weeks since the initial outbreak, but it could be too early for a definite victory as the number of imported cases are increasing within Mainland China. The growing fear of a second wave of infection extends over the region including Hong Kong, Singapore and Taiwan where there had been signs of success in controlling domestic cases. The return of the outbreak could unravel their progress to recovery according to the BBC. Undoubtedly, international or even regional travel will take longer to rally.

Within this current climate, many businesses impulses are to slash marketing and advertising budgets, a common approach however one which has been shown to be an error often made during crisis periods. Once the Coronavirus outbreak passes, consumption is likely to recover significantly, based on the Financial Times’ observations of other outbreaks in the past, with recent reports from Blue Media confirming the same result. It is therefore critical that brands keep a constant voice and message through periods of uncertainty as well as closely monitor trends and data to seize upcoming opportunities. For instance, according to Trip.com, data shows that search volume related to the May Labour Day holiday in China this year is higher than it was last year, which suggests that a significant amount of domestic consumer spending could be around the corner.

Brand engagement is important as it will play a role in easing people’s concern and sense of isolation. Many brands have generated messages of solidarity and hope such as Chinese beauty brand Perfect Diary’s safety recommendations, and intimate wear company Neiwai’s reminder to stay healthy and strong; some made practical contributions such as tech giant Alibaba refocussing Alibaba Health (the company’s health care arm) as a telemedicine centre which patients can access on their Alipay and Taobao app, and has also blocked vendors from jacking up prices on facial masks and other health care and cleaning supplies. From big donations to small messages, brands should be sensitive to their consumers during this crisis.

As a result of an emotional engagement, a mutual understanding and bonding is formed. This valuable exchange yields as significant a return on investment as any standard marketing campaign or strategy.

It is vital to remember that eventually the curve will flatten, shops will reopen, transportation will resume services and people will remember the brands that were there when times were tough.  As an old Chinese proverb goes “When the winds of change blow, some people build walls and others build windmills”.