Special Report

Spotlight Report: Implications of COVID-19 for China’s economy and key industries

  • Multi Asset
  • Multi Sector
  • Global

China has reported no locally transmitted COVID-19 cases since 18 March, but extensive questions remain around its timeline to economic recovery. This report distills these Interviews’ key economic insights, unearthed across five sectors: Healthcare, Consumer, Commercial Real Estate, Technology, Media & Telecommunications and Industrials, Materials & Energy. It clarifies COVID-19’s macroeconomic impact in China, and the nation’s status as a bellwether for economies and industries facing earlier stages of the pandemic.

Industries Facing Operational Challenges during the COVID-19 Crisis

E-commerce – Although e-commerce players have fared better than bricks-and-mortar retailers, the COVID-19 outbreak has negatively impacted overall e-commerce demand as consumers have cut back on discretionary spending, focusing their outlay on necessities such as groceries, cleaning products or medical supplies. This was exacerbated by an extreme shortage of couriers and express sevices. In particular, companies without their own logistics networks and supply chains have struggled.

Luxury Goods – Offline domestic luxury demand declined 90-95% in February, with limited offset from online channels as consumers reduced discretionary purchases.

Restaurant Chains – Chains have experienced major revenue declines. One expert estimates that Xibei, one of the largest chains in China, experienced losses of RMB 170m per day during its shutdown.

Tourism – China’s tourism market was projected to grow 10% YoY in 2020, but is now forecast to drop 14- 18% YoY. Inbound travel will likely be the last tourism segment to recover, with 40-50 million fewer tourists and USD 35bn-40bn less revenue generated than previously expected.

Macau Gambling – This industry will lose 85-90% of expected February revenue and revenues will decline 65-70% in Q1.

OTAs – Q1 room night volumes and GMVs of online travel agencies (OTAs) such as Meituan Dianping, and Fliggy could decrease by 80-85% YoY.

Movies – Temporary cinema closures might lead to a loss of over RMB 10bn, almost one-sixth of China’s total annual box office revenue.

Advertising – Significant Q1 ad revenue shortfalls are expected due to ad budget cuts from travel, auto and real estate companies.

Hotel Operators – Hotel occupancy was below 1-2% on average during the initial outbreak in China. Consolidation is likely, with better capitalised companies purchasing challenged independent players.

Airlines – Aircraft occupancy rates dropped to below 50% between 28 January and 18 February, a decline of over 40% YoY.

Rail – High-speed rail passenger volumes reached 210 million during the mid-February Chinese New Year travel rush, less than 50% of the government’s original expectation of approximately 440-470 million.

Autos – It should take auto dealers 2-3 months to clear inventory once the crisis has passed. A price war seems inevitable.

Oil – Crude oil demand in China could shrink by 700,000 barrels per day in 2020.

Natural Gas – Downstream natural gas companies have reduced prices by 5-10%, potentially resulting in a 3-5% decrease in profitability.

Methanol – Coal-based methanol manufacturers are operating at breakeven, with market prices at around RMB 1,600-1,700 per tonne compared to approximately RMB 2,000-2,300 per tonne in 2019. Production is expected to be cut by one-quarter in Q1 due to declining product prices and demand.

Showroom Live-streaming – This sector has experienced a drastic drop in active users and GMV. Q1 2020 GMV in YY and Momo’s top clubs decreased by at least 30% YoY.

Commercial Real Estate – Players have been cutting or waiving rents due to low demand and overcapacity.

IRLs & CROs – Independent research laboratories (IRLs) will likely experience a revenue shortfall due to disrupted projects, and contract research organisations’ (CROs) ongoing clinical trials have widely been delayed.

Homestay – Operators that proliferated in the last two years may not survive.

PV Module Manufacturers – International installed photovoltaic (PV) capacity in 2020 could be as low as 60GWh compared to expectations of 90-100GWh, due to PV installation delays.

Industries with Demand Growth during the COVID-19 Crisis

E-commerce –Players with self-owned supply chains and logistics, such as, have thrived.’s Q1 revenue could exceed 20% YoY growth.

Business Video Conferencing – Service providers are receiving 40-50 inquiries per week compared to 10 per week before the outbreak.

Pharmacy Chains – Pharmacy chains have had a substantial rise in business, with customer traffic increasing 8x. The revenue and ARPU generated by sterilisation and protective products has increased 2-3x.

Online Health Consultations & Drug E-delivery – Demand for online health consultations and e-drug delivery services from companies such as Meituan Dianping has surged. Meituan Dianping’s drug delivery order volumes increased 3x from a 70,000-100,000 run rate since the initial coronavirus outbreak.

Online Education – The coronavirus pandemic may catalyse a secular shift to online education from offline models.

Therapeutic Solutions – Traditional Chinese medicine (TCM) regimens are widely being applied to treat COVID-19. This has led to a demand increase for treatments such as Lianhua Qingwen and Xuebijing. Lianhua Qingwen is also being shipped to Italy to help with its crisis.

Grocery Delivery Platforms – Platforms such as Alibaba’s Hema, MissFresh and Dingdong Maicai have been overwhelmed by demand. Business has surged for grocery delivery providers such as Meituan Waimai and

Infrastructure Investment & 5G Build-out – China’s 5G build-out should resume by early April, driven by post-crisis government stimulus.

Packaged Goods – Producers with online channels have experienced demand tailwinds. Leading instant noodle brands such as Uni President, Master Kong and White Elephant have had a major uptick in business and sold out of stock at certain price points.

Video Streaming Platforms – Viewing traffic of leading video streaming platforms including iQiyi and Tencent Video grew significantly, but the revenue upside will be tempered by Q1 ad revenue headwinds.

RNA Development – RNA companies such as Stemirna and Moderna could be beneficiaries given their shorter production timelines for potential vaccine solutions.


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