Question 1 - What is the situation on the ground in Shanghai for businesses these days in light of the ongoing Covid-lockdown?
Retail sales and services consumption have been hit hardest. Many companies started operating at limited capacity in mid-March, with literally half the staff under a community “grid” soft lock down. This then turned into an effective shutdown, as either staff or customers were in lockdown at home or in mass quarantine facilities. As a result, no shopping or dining out was possible, except for essential groceries shopping.
What is more, amid the deterioration in the macro environment, consumers are now rather saving than spending.The logistics sector with inter-provincial and intra-city delivery was also badly hit because vehicles and trucks are effectively “grounded” and operate with limited crew capacity, focusing resources on “essential” services.
Question 2 - How about the production industries?
Some B2B businesses in the Jiangsu and Zhejiang provinces were able to turn their production into a “closed loop” environment, as the staff agreed to stay and live on site. At the same time, large parts of production in Shanghai stopped as of April, and although a few companies on the whitelist have been allowed to “resume” their operation, supply chain and logistics issues remain a major challenge.
For companies in B2B trading, the key challenges are still logistic (inter-regional and city) and import, and the delivery to customers was not possible at the beginning of the lockdown, when staff could not go back to the warehouse and logistics has been suspended.
Many MNCs shift goods to warehouses in other cities, and some SMEs are changing the shipping address to an employee home address or work with distribution partners. However, with the dynamics of the ongoing lockdown, no option is a 100% “safe”. Many of companies cannot invoice their customers, so even though an order can be received, the topline is in quite poor shape.
Question 3 - You are chairing the Machine and Precision Tools working group for Swisscham Shanghai. What is the sentiment among the member companies? And how does this affect their bottom-line?
In cooperation with VDW, we launched a flash survey among Swiss precision tools and Swiss and German machine tool companies. Of the 48 companies that responded to the survey, 45% of machine tools companies and 61% of precision tools firms forecasted a decrease on their topline of more than 10% compared to budgeted revenues. Most affected are the Automotive, Mechanical Engineering and Mold & Die sectors. In the long run, only about half of the responding companies still believe the market will continue growing.
Question 4 - Is Fraisa taking and short-term and/or longer-term measures as a result of this?
Fraisa China – as many of other producers – will cut expenditures on marketing, especially for trade fairs, in the short term. We expect many of the exhibitions to be canceled or postponed anyway. We also expect marketing and other activities in China to be further digitized in future. But while the immediate outlook is gloomy, the potential of a growing market remains attractive, and there fundamentally remains a big demand for know-how of innovative technology.