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Chinese tech companies battle to contain economic impact of coronavirus

Internet companies have launched work-from-home policy to mitigate impact, with mixed results.

As the stock market’s closing bell struck on Feb. 3, the first official workday after the Chinese New Year, the wider economic impact of the coronavirus on the world’s second-largest economy became clear. 

Stocks plummeted 8% with nearly 3,500 shares falling by the 10% daily limit, signaling the market’s negative response to the epidemic. Prior to the reopen day, China’s central bank announced it will pump RMB 1.2 trillion (USD 174 billion) into markets to mitigate volatility.

The epidemic, which has killed 426 people in China as of Feb. 4, slammed the brakes on many facets of the economy, with extended public holidays, quarantined cities, and the shutdown of stores, restaurants, factories and other businesses.

To make matters worse, China’s gross domestic product (GDP) growth in 2019—6.1%—marked the slowest expansion in nearly three decades, compounding difficulties faced by companies in weathering the crisis.

“Compared to the SARS crisis in 2003, the impacts of the Wuhan coronavirus outbreak are more worrisome financially amid the economic slowdown,” Ren Zeping, chief economist of Evergrande Group, said in his latest report.

Work-from-home measures garner mixed results for tech companies

In response to containment measures, major Chinese companies including Baidu, Alibaba, Meituan Dianping, Xiaomi, and ByteDance will let most of their employees work remotely from Feb. 3 to Feb. 7. They will also require them to check and report their temperatures every day. The policy has been dubbed as “the world’s largest work from home experiment.”

Working from home is far less common in China than in America or Europe, leading some to wonder about the potential impacts on productivity and workflow, especially if the policy is further extended beyond the current back-to-work date, Feb. 10.

For example, employees in Hubei province will work from home for even longer—as circumstances on the ground dictate. Over 50 million people in the province have been placed under quarantine or self-quarantine.

So far, the results of work-from-home measures have been mixed.

Factors like lower efficiency in communication and an unstable internet connection can hamper the quality of work, as many Chinese netizens have complained on Weibo, China’s Twitter-like microblog platform.

“It’s already 2020, isn’t the internet at my house a little slow?” a Weibo user wrote with the hashtag #WorkingRemotely, posting a picture showing the download speed of just 10 Kbps.

DingTalk, Alibaba’s business communication and office collaboration tool, known as the Chinese answer to Slack, encountered a server crash on Monday morning, since users flooded onto the platform for online meetings. Tencent’s WeChat Work and Huawei’s similar offering WeLink experienced similar troubles as well.

Not everyone is pessimistic, though. In fact, the crisis may force companies and the market to adapt, creating a more resilient internet economy in the future.

Higher degree of digitalization makes companies in the internet, information technology, and media industries fit into the working from home mode much more easily,” local media Rancaijing wrote, citing Sun Mengzi, an analyst from third-party research institution Analysys.

She added that in the short term, the spreading of coronavirus forces enterprises to take their work online, and in the long term, the market of workplace collaboration products in China will develop.

The main players in China’s office collaboration sector are getting a chance to attract more users and help them accomplish in the “work-from-home experiment.”  For example, ByteDance’s Lark, or “Feishu” in Chinese, has opened its services to the public for free, which includes video meeting functions, G-suite-style feature, and a cloud drive with 100GB. Also, it released a new daily health report feature to help enterprises track employees’ conditions.

More than 32% of internet companies have chosen to let employees work from home during this period, the highest ratio among all industries, according to a report from Zhilian, one of China’s biggest online recruiting platforms.

Wide-reaching economic disruption

The social and economic effect of the coronavirus is going well beyond any industry or segment.

To contain the outbreak, many residential districts have rolled out strict in-and-out check measures, significantly disrupting the lives and daily routines of countless employees around the country. In some cases, tenants found themselves barred from their own homes upon returning from the holidays—with some neighborhood committees requiring a self-quarantine of 14 days outside of the community, and proof of good health by hospitals.

This, on top of other countries’ travel bans, airline cancellations, and rescheduled conferences and events.

Foreign tech companies that have presences in China, including Apple, Amazon, and Google have announced travel restrictions to and from China amid the epidemic. Apple and Samsung have also closed down all their stores in mainland China.

For industries that rely heavily on factories, logistics companies, offline retail outlets, and consumers, it’s nearly impossible to take their work online.

Chinese smartphone vendors, for example, have been especially hard-hit as storefronts shutter and the supply chain has been disrupted with factory delays. According to research firm Strategy Analytics, China—responsible for 70% of all smartphones sold worldwide—will likely slump 30% in the first quarter of 2020, if the coronavirus spread will be contained by late February or March of 2020.