News Article

China business struggles to recover after the Coronavirus break

Traffic disruptions and state concern shuts many stores, factories and facilities

Hopes the Chinese economy would return to normal on Monday after an extended Lunar New Year holiday took a hit as several businesses announced that they would remain closed due to concerns about the coronavirus.

Consumer goods producers, leisure facilities providers, steel manufacturers are among those postponing operations, according to filings with stock exchanges in Shanghai, Shenzhen and Hong Kong, as the death toll from the virus reached 900.

Most of the reported delays come from firms operating in Wuhan, the outbreak’s hardest-hit city. The Wuhan Hanshang Group, which operates shopping malls, wedding photo shops and a convention centre in the area, shuttered all of its facilities on Jan. 23 and did not indicate when it will resume operations.

The day before the suspension, the Shanghai-listed company announced that, based on its preliminary estimate, its 2019 net profit had increased by about 50 per cent from the previous year. Nonetheless, the bottom line for this year will possibly take a hit from the extended closure time.

On Sunday evening, the major food chain Jiumaojiu International Holdings said it would extend the closure of all its restaurants, both self-operated and franchised, which have been closed since January 29. According to its year-end prospectus, the firm, which was listed in Hong Kong just last month, operates 287 restaurants directly and 41 others as franchises in four major cities and 15 provinces, including Wuhan, in Hubei Province.

Meanwhile, CABIO Bioengineering (Wuhan), which is listed in Shanghai, is grappling with the paralysed transport network in the city. The food ingredient producer says its plant, located in an economic development zone on the outskirts of Wuhan, is “unable to resume operation as scheduled” because suspensions of public transportation prohibit workers from coming to work.

The company also claimed in its statement that “various companies in Hubei Province can not resume operation before midnight on Feb. 13, based on a recent circular from the authorities.” Travel delays often prohibit businesses outside Wuhan from returning to work as planned.

On Friday China Vanadium Titano-Magnetite Mining announced that its Maoling Mine operations in the province of Sichuan would remain suspended after the extended holidays. The Hong Kong-listed company said that “a significant portion” of site workers carrying out underground operations in the magnetite mine is from the provinces of Hubei and Zhejiang and “will be unable to return to work.” Hengxing Gold Holding is also suspending the resumption of its scheduled initially Monday mining activities.

The business said on Friday that it is “uncertain” when it will be able to restart its Gold Mountain Mine in Xinjiang, subject to government approval, and “the return of the workforce.” The Hong Kong-listed miner expects “less gold production in the first quarter.” The mine produced 25,313 ounces, or 787.3 kg, of gold during the fourth quarter and 85,654 oz for all 2019.

“Chinese brick-and-mortar retailers selling discretionary items, travel-service providers and transportation companies are most exposed to disruptions stemming from the coronavirus outbreak,” said a team of analysts led by Cedric Lai at Moody’s Investor Service on Friday. “These disruptions include transportation suspensions, travel bans and reduced customer traffic flows,” which impacts a wide range of industries.

New Building Materials is expected to begin phased operations. The Shenzhen-listed Wanbangde company said its medicine and medical equipment units would “gradually resume” from Monday, while its subsidiary manufacturing aluminium content is scheduled to collect from Wednesday onwards.

As the outbreak struck during the high-demand Chinese New Year holiday season, the worst harm may have already been done for the service sector.

During the break, China Film had to close down all 141 of its cinemas across the country. At the same time, its Shanghai-listed rivals, Shanghai Film and Hengdian Entertainment, were in a similar situation. No figures have yet been released, but the box office sales of China Film during last year’s seven-day holiday season amounted to 144.03 million yuan ($20.6 million), which accounted for 8 per cent of its annual ticket sales.

The risk of the outbreak is also to affect less-anticipated regions. China Oriented International Holdings has suspended the operation of their two driving schools in Henan Province— Zhumadian Tongtai Large Vehicles Driver Training and Suiping County Shunda Driver Training. The Hong Kong-listed company claims it is “strictly prohibited” to reopen the schools without the permission of the authorities. The company hasn’t said if it got the authorization.

Even businesses that managed to restart operations warn of future problems to come. Hunan Valin, Iron & Steel Group, says production is “stable” for the time being but added that if work on construction sites is further delayed, it would “consider decreasing production.” Semiconductor Manufacturing International Corp., a major Chinese chip foundry, is “working hard to maintain the uninterrupted state of manufacturing operations” according to its disclosure to the Hong Kong Exchange.

The strategically important tech company is standing firm. Still, Chairman Zhou Zixue admitted in the statement: “The current prevention and control of the novel coronavirus are serious and the task is arduous.” SMIC’s announcement comes as the leading Taiwanese tech company Foxconn struggles to restart operations, going so far as to begin manufacturing its surgical masks for employees. Nevertheless, the Chinese authorities have not given the company the green light to reopen its large factories on the mainland that employ tens of thousands of workers.

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