May 30, 2020

China confident of rapid recovery if no coronavirus outbreaks

Correspondent in Beijing



Gleaming, the cars keep leaving every few minutes from the factory that Mercedes-Benz has with the state partner BAIC in Beijing, at the end of a assembly line barely stopped by the coronavirus epidemic. Although production was interrupted by the outbreak of the disease in Wuhan in late January, on the full holiday of the Lunar New Year, it resumed on February 10. “There have been no infections between employees and we are operating at the level of market demand,” explains the president of the German brand in China, Arno van der Merwe, on a visit to the plant. With 11,500 workers and an annual production of 430,000 sedans of class C and E and SUVs GLA and GLC, this factory is the flagship of the automobile giant in the Chinese market, which is the largest in the world with 25.8 million vehicles sold in 2019 but has been falling for two years. The slowdown in the Chinese economy will be added this year to the impact of the coronavirus, which caused a 6.8% contraction in GDP in the first quarter, the first since opening to capitalism after Mao’s death in 1976.

Despite this crash, which will be widespread throughout the world, there is some confidence in China that economic recovery will be faster than expected as long as there are no severe outbreaks of the coronavirus. “The situation is more stable now than it was two months ago and will improve in the future. I do not expect this short experience to affect us in the long term, “explains Var der Merwe, who announces that” in April we have seen a moderately positive recovery in sales. “

Enhanced security

On the assembly line, workers scramble to assemble parts to the tune of robots passing under the cranes that lift the skeletons of vehicles. To ensure the health of staff and production, the company established an emergency committee in January and has tightened security, forcing the use of masks and enabling 47 observation rooms in the factory clinic. If they exceed 37.7 degrees of temperature, the employees are sent there, who are received by nurses with special protective suits. Meanwhile, in the administrative canteen social distancing is kept with a table for each worker, who also cannot speak to each other. To keep production running smoothly, Mercedes-Benz is confident that there will be no infections thanks to these controls, which are also applied in other factories.

This is seen in the semiconductor, microcontroller and chip factory that the Japanese firm Renesas It operates on the outskirts of Beijing, one of the largest in the group with 940 employees. With 600 in the production chain and the rest divided between engineers and office workers, 90 percent of them are from outside the capital and the epidemic caught them spending the Lunar New Year holidays in their cities. Although there is one from Hubei province, the epicenter of the coronavirus, which has not yet returned, all the others have already rejoined the pit.

Renesas semiconductor factory in Beijing. To avoid contagion of the coronavirus, the social distancing is kept in the canteen with one employee per table
Renesas semiconductor factory in Beijing. To avoid coronavirus infections, in the canteen social distancing is kept with one employee per table – PABLO M. DÍEZ

«We asked them to come in private vehicles or we went to pick them up so they would not take public transport and then they underwent a two-week quarantine in the factory dorms where they livewhere we controlled the temperature and brought the food to them, “says the president of the company in China, Hiroyuki Hamada. “Although production was paralyzed for a very short period,” he says, he recalls that “normal activity returned a month after the workers have returned with great desire to make up for lost time.”

With headquarters in Tokyo and 19,000 employees spread over more than 20 countries, Renesas has a total of 14 factories located in Japan, China, the United States and Malaysia. As one of the world’s leading manufacturers of semiconductors and microcontrollers for the automotive and industrial sectors, with a production of 50 million pieces per day, Renesas expects «A strong impact in the short term and uncertainty in the long», details Hamada. But it does not foresee “a reduction in demand in China, which is our market, because the situation has now stabilized.”

In addition to the usual safety measures in an electronic components factory, where operators are equipped with special protective overalls to prevent contamination of such sensitive devices with dust or body particles, the controls to prevent coronavirus infections, as seen on the assembly line through a glass pane.

Cautious optimism

“The economy is going to recover faster than we expected. Although the impact has been very strong in the first quarter, I estimate that it will be short, “the professor predicts by phone from Shanghai. Xu Bin, from the Chinese-European International Business School (CEIBS). After the fall of the first trimester, for the second it calculates a growth of 1% and for the whole year around 2%, as long as the return to the “new normal” of the postcoronavirus world is not affected by the outbreaks. “We are still concerned about the epidemic, but business was at 50% in April and will reach 70-80% in May and June,” he ventures with optimism that is not without some caution.

Good proof of this is that Industrial production rebounded 3.9% year-on-year in April, more than double the forecast by Bloomberg, after sinking 8.4% in the first quarter. To a large extent, this increase is due to the increase in medical equipment exports due to the pandemic, but retail sales fell by 7.5% year-on-year in April and investment in fixed assets by 10.3% in the first four months of the year. Although they are notable reductions, they are less than those suffered in the first quarter: 15.8% and 16.1% respectively. For its part, the official unemployment rate stands at 6%, but the real figure is higher.

Added to the economic impact of the coronavirus is the worsening of the «Cold War» between the USA and China due to the pandemic and the growing misgivings of the international community towards the authoritarian Beijing regime, which threaten a decoupling of the second economic power on the planet. “China has to depend more on its internal market and its innovation because its relationship with the rest of the world will fundamentally change and it will be displaced,” predicts Professor Xu. But, in his opinion, “there will not be a total interruption, since China depends for example on microchips and planes from the West, where companies are governed by their economic interests and not by those of the State. They will follow businesses because they are private, not at the state level. China will continue to benefit from investments because it is a large market and the government will continue to be committed to reform and openness. “


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