As Coronavirus hits Cambridge companies worse may be ahead for UK-China trade?
This year UK trade with China (goods and services) was expected to exceed £100 billion for the very first time. That is, until the Coronavirus hit, writes Ting Zhang – founder & CEO of Crayfish.io in Cambridge.
Almost inevitably, we have seen the domino effect rippling out of China and impacting UK|China business dramatically here in the UK. Companies therefore need to properly prepare for a worst-case scenario, just in case – because while the situation may well improve over the next three months, things could equally get worse.
Local governments in China have been very efficient in issuing guidelines for businesses with regular updates – and it’s important for UK and other foreign companies who trade with China to stay up-to-date with these and think about how to interpret the guidance in terms of your local business ventures over the coming months.
The most immediate problem for UK companies trading with China has been the difficulty getting air shipping space or even one clearing customs. One affected company is Cambridge-based life science company, Biorbyt.
As Qun Yang, Biorbyt’s Co-founder, explains: “The problem is that, in order to clear customs, the importer (our subsidiary in Wuhan) has to produce the relevant certification. We then have also to pay the tariff duty and import VAT upfront – and this is processed online with a security keypad linked to our registered customs portal account.
“However, because our office in China is located at the heart of the Coronavirus pandemic, it’s completely shut down. And while it would be possible to clear customs from other port instead of Wuhan port, no one has access to the security keypad for making the upfront payment to the customs and tax authorities, which is locked in an office locker. It’s a very frustrating situation.”
The entire supply chain is affected simply because suppliers can’t supply. The priority for all logistics is getting medical supplies to hospitals across China.
Companies are also having to shoulder the additional financial burden of the Chinese government extending an extra one week’s paid holiday to all its residents to ensure they stay at home. If the situation continues, this will undoubtedly cause many businesses to have cash-flow problems, and we could start to see small businesses going bust.
As of February 3, some Chinese service companies started their staff working from home - although many companies and most government institutions have delayed until February 10.
However, the Beijing government is now allowing companies to negotiate with their employees to reduce working hours or agree zero pay for this period before the situation improves – which will inevitably cause a fresh set of HR headaches.
However, the Beijing government is encouraging banks to renew some loans to help ease the liquidity crisis. And, in Beijing at least, they have extended the time required for companies to pay their social security contributions.
Meanwhile, the Chinese government has asked the financial system to operate as much as it can – but, at the same time, has told banks not to chase debt which has directly arisen from the current situation. Not great news for UK companies waiting for money payable from China.
One UK company we are working with, that has recently been very successful in China, has now seen their project put on hold for at least two months.
But every government department in China is in “firefighting mode” – and their priority focus is virus protection not commercial ventures or the procurement of anything not related to the virus.
And there is definitely no decision-making for anything unrelated beyond a few weeks. This can be very frustrating for UK businesses in the middle of getting a deal done or waiting to get a contract signed.
The really bad news is that, however you operate in or with China, you are going to be hit one way or another.
The UK has just pledged £20 million to help develop new vaccines against emerging diseases including coronavirus – which includes three new programmes to develop vaccines against the novel coronavirus, 2019-nCoV and aims to advance 2019-nCoV vaccine candidates into clinical testing as quickly as possible. It is very encouraging to see the UK government acting so quickly and lending timely support to this global fight against Coronavirus.
The news is now being widely shared on Chinese social media, with many praising this fantastic initiative by the UK government and calling the UK a “true friend”.
Similarly, the Beijing government has issued regulations to ensure that all goods related to fighting the virus or helping with medical supplies is fast-tracked in customs clearance – which, of course, means everything else unrelated gets slow-tracked.
However, as they have made funding available for any company that can help with medical supplies or fighting the virus, there is an opportunity for a UK company to contribute and help – and get into the Chinese market although not (at least not initially) to make a profit.
We at Crayfish.io are happy to help and advise any companies affected by the Coronavirus situation and going through difficult scenarios.
Additionally, for the duration of this epidemic situation, we are offering the use of a dedicated medical translation platform free of charge to all companies working in medical and life science sectors, who are helping to stop Coronavirus.
This translation platform, developed by one of Crayfish.io’s strategic partners in China, uses state-of-the-art AI technology to provide machine translation solutions for scientific, medical and health industry users worldwide.
To obtain your free access to the translation platform, contact us via supportwuhan [at] crayfish.io and we will send details.
• Ting Zhang is founder & CEO of Crayfish.io, the first full-service platform dedicated to helping businesses better engage with China. Ting has 25+ years’ experience of UK-China international business, trade and investment.