Kiwi exporters to China are more optimistic now than in February with less experiencing losses and more adapting strategies for the Covid-19 world.
The NZ Business Roundtable in China (NZBRiC) has released results from a survey of 61 New Zealand businesses trading with China. The survey, which took place in late May/early June provides a follow-up to a similar survey in early February.
The results quantify Kiwi exporters’ exposure, outlook and actions for China exports, identifying how they have changed over the past four months now we all have a better understanding of the effects of the pandemic.
Q1 results were better than many businesses had expected in early February, with just 70 percent of businesses experiencing a 10 percent or greater drop in revenue in Q1, down from 87 percent in the last survey. Those worst-affected – with revenue down 40 percent or more – tracked at a similar rate of around 30 percent.
Just 13 percent surveyed in February expected to have neutral or positive growth in Q1, however the results eventuated to be much more positive at 30 percent.
Respondents were similarly more optimistic about their full year results in May-June, having more time to assess the situation since the February shock. Sixty-four percent of respondents now expect their export revenue to be down at least ten percent versus a more pessimistic 81 percent in February.
However, those expecting revenue falls to be greater than 40 percent increased from 11 percent in February to 18 percent in May-June, indicating how those most negatively affected, are being impacted more than expected.
“While most New Zealand exporters have weathered the first few month of the pandemic better than originally forecast, nearly one in five expect sales to be down more than 40 percent,” says Ivan Kinsella, NZBRiC Chair.
One of the most dramatic changes between the February and May-June surveys was how long businesses expect the effects to be felt. In February, 60 percent expected things to be back to normal within six months. By May-June, just 18 percent expected things to clear up in the next six months, with 41 percent expecting impacts for at least 12 or more months.
Just four percent in February thought impacts would last more than a year, likely to be based on the swift recovery following previous pandemics in Asia. The average time business would be impacted increased from 5.4 months to 12.6 months.
Strategy re-evaluation
The pandemic has resulted in 25 percent of Kiwi businesses now re-evaluating their long-term China strategy, up from ten percent in February. Forty-nine percent still believe it is too early to say.
One noticeable change is the 61 percent of businesses increasing their reliance on ecommerce, versus 50 percent in February.
When asked what businesses would do differently, “move online faster” was the most commonly cited answer. As a result of the pandemic, 30 percent are either ‘more reliant’ or ‘much more reliant’ on China, versus 19 percent who are less-so.
The most visible change in business behaviour came from mitigation measures, were businesses were much more active in May-June than February, making operational adjustments such as working from home and rolling out online collaboration tools, much of it driven by New Zealand being bound into the lockdown.
Face-to-face-meetings and communications was the largest and fastest growing concern among respondents. Supply chain and logistics disruption was consistently high in recent times, and falling demand and sales remained high, although lower than February. Overall, businesses appear clearer about their concerns, with fewer respondents not providing an answer.
“New Zealand exporters expect the impact of Covid-19 to be much longer than earlier expected. Most remain committed to the China market but are adapting their market strategies including more focus on ecommerce,” says Kinsella.
A total of 61 NZ respondents, representing all major export sectors completed the follow-up survey. Around 45 percent of respondents were based in China while 55 percent were in New Zealand.
New Zealand exporters should visit NZTE’s site for New Zealand-relevant updates on the Covid-19 outbreak in China.
