Economic activities must be restored. China’s model shows us the way: analysis
As coronavirus disease (Covid-19) spread worldwide, India decided to opt for a complete national blockade. In fact, it helped control the infection, but, predictably, it was also very cost-effective. The crisis in China was equally monumental. Can you teach us how to deal with the crisis?
China opted for a collaborative, data-driven approach, with tech companies like Alibaba, Tencent, Baidu, Huawei and Meituan helping the government to take timely action to prevent the spread of the virus and, at the same time, keep the economy running. .
But the equally important fact is that China did not opt for as strict a national blockade as India did. It completely closed Wuhan, the most affected city in the country, but allowed the least affected regions to partially open up. You allowed e-commerce availability for all items at all times. Transportation services continue to operate. Grocery stores and restaurants also remained open throughout the shutdown, despite the fact that transactions were conducted primarily online.
Tencent and Alibaba launched an app that alerted users if they were near an infected person. Alibaba Health launched a healthcare service with Tmall that delivered medications to chronic patients in 30 minutes in 10 cities. It also collaborated with more than 50 of the main national and foreign pharmaceutical companies for this purpose. In just one day, the number of chronic patients seeking medication increased by 200%.
Big brands could survive, but the long period of blockade threatened small businesses. Hyperlocal delivery services like Meituan, Koubei and Ele.me (similar to Dunzo and Swiggy Go) leveraged their online platforms to link consumers with offline services and on-demand deliveries. As of the end of February, 50,000 offline stores had migrated online, in part because the platforms reduced or waived fees. In mid-March, between 500,000 and one million merchants benefited from the Meituan, Koubei and Ele.me commission reduction / exemption scheme.
Digital migration and digital sales channels backed by the Chinese government, which gave consumers and small and medium-sized businesses the confidence to move online. As a result, categories such as health and wellness and digital accessories experienced increased sales during closing. Household appliances, such as rice cookers, sandwich makers, and juices, increased as more people cooked at home. Compared to its 2019 sales, Nike and Uniqlo sales increased by more than 25% between February 12 and March 12.
The increase in online sales allowed many companies to create temporary employment schemes, absorbing independent employees who were affected by the blockade.
But as new cases stalled, companies gradually resumed offline work. Corporations, educational institutions and other organizations received personalized mandates and processes on ways to minimize risk as they opened up. Temperature controls and sanitizing stations were installed at all main entry and exit points in public places, offices and shopping center entrances.
Workplaces instituted daily online health checks for their employees, even on weekends. People using public transportation for intercity travel were expected to be quarantined for seven to 14 days, depending on the severity of the infection in their hometown. Employees who traveled between cities to work were mandated to use only private transportation.
Local services provided contactless meal delivery to employees and healthcare workers. Best practices around resuming work were communicated through live streaming, also leveraged by small offline stores to offset losses due to the shutdown. Flexible job offers helped small businesses resume work.
China may have seen its worst situation by now. But India has not yet reached its peak. To minimize economic disruption, you must find ways to strategically open up the economy in a way that doesn’t add to infections. E-commerce, which is the surest way to keep the economy running while ensuring social distancing, must be fully opened, in red, orange and green areas. As of now, India only allows essential articles on e-commerce platforms. But defining the essentiality of a commodity is a difficult exercise. Are online classes essential? Are computers used to do the essentials? Is a malfunctioning phone charger essential or are the glasses prescription? The interconnectedness of the economy allows the sale of nonessential items produced by an economically weak person, with the profits that push him to buy the essentials and thus help him to contribute taxes.
Like China, can the Indian government work with technology-based retail companies like Flipkart, Amazon, Swiggy, Dunzo, PayTM to keep the economy running? Opening up the economy is a slow process and, if not well planned, involves risks. However, keeping economic activities suppressed for a long time can have much greater consequences.
Divya Joseph is an MBA graduate from the China Europe International Business School (CEIBS) and works for Alibaba’s Tmall Global Operations Team in Hangzhou, China. S Ramakrishna Velamuri is Professor of Entrepreneurship at Chengwei Ventures at CEIBS
The opinions expressed are personal.