The Covid-19 crisis has pushed the world economy into recession. Governments all over the world are developing stimulus plans to support companies that are forced to shut down and to provide safety nets to a growing number of unemployed workers.
On the 5th of May the Belgian-Chinese Chamber of Commerce (BCECC) organized a webinar with the trade commissioners of Flanders Investment & Trade (FIT), Wallonia Export-Investment Agency (AWEX) and hub.brussels, all based in China. The three China experts discussed the current economic situation in China, the impact of Covid-19 and how these regional government agencies can assist Belgian companies during this difficult period, in particular with their China business.
After a foreword by BCECC’s president Mr. Bernard Dewit, Ms. Colognesi from AWEX introduced the Covid-19 aid measures available to Walloon businesses. She presented the allowances and special loans to support SMEs in Wallonia. Additionally, a lot of indirect measures have been implemented and guarantees can be given to help companies in cash flow problems.
Similar policies are implemented in Flanders and Brussels. Mr. Struyvelt from Flanders Investment & Trade (FIT) introduced the ‘go beyond corona strategy’ of the Flemish export agency. The FIT team in Brussels is following the development and measures of each country in detail and can guide Flemish companies by organizing webinars and virtual meeting days in Belgium and in FIT’s foreign offices.
Mr. Debroyer from hub.brussels introduced the one-off allowances, grants and public guarantees available to Brussels companies. Furthermore, other measures apply, such as temporary unemployment, replacement revenues and fiscal measures. He advised companies exporting to China to stay in touch with their stakeholders in China and followup the market and regulatory changes in the following months.
All regional agencies are actively supporting Belgian companies which planned to participate in exhibitions in China in 2020. Although there are still a lot of travel restrictions and more cancellations are to be expected, FIT, AWEX and hub.brussels plan to organize information booths on selected Chinese exhibitions or online fairs. Belgian companies will have the chance to showcase their product samples at the Belgium booth and also posters, catalogues and other marketing materials. Although the companies will not be able to travel to China, visitors can still get to know the companies and their products, either online or offline.
In China, the fiscal measures announced so far are approximately 3 trillion yuan, accounting for 3% of GDP. This includes policies and directives from the Central government, but also policies implemented at provincial, municipal and city levels. Examples of these measures are the exemption and reduction of social insurance payments by Chinese SMEs, emergency financing to SMEs, the encouragement to property owners to give rent compensation, the possibility for SMEs to apply for deferring of tax payments up to 3 months, refunds of unemployment insurance payments, the lowering of electricity prices and suspended administrative charges, etc. Furthermore, the People’s Bank of China has arranged a special loan of 300 billion yuan to support financial institutions in providing preferential interest rate loans to key enterprises for epidemic prevention and control.
Since March, China has broadly succeeded in raising production, with work resumption rates climbing to between 70 and 95% of pre-Covid-19 days. However, a similar recovery in domestic demand seems to be lagging. Retail sales in March fell 15.8% year on year. Spending on eating out plunged 46.8% and car sales fell by 18.1% in March. This strongly decreased domestic demand is due to the combination of a rapidly worsening labor market on the one hand, and higher unemployment rates and collapsing disposable income on the other hand.
To conclude, the worst period of the Covid-19 contagion might have already passed in China, but the Chinese economy will still be under great pressure with regard to the revival of domestic consumer demand. This doesn’t even take into account plummeting external demand and deflationary pressures, hence there is still a long way to go to get out of this unprecedented crisis.
The Belgian-Chinese Chamber of Commerce (BCECC) is available to support Belgian and Chinese companies during these challenging times and is planning to organize additional webinars and activities in the following months.
Image: Qilai Shen/Bloomberg