Despite some inspiring legislative reform, companies in China are going through a crucial test this year. Those that survive will have proven the strength and resilience of their business models. Frankie Wang asks senior in-house counsel and lawyers about the dangers, and the silver linings, that lie ahead in 2020

While economic fluctuations and the hurdles of the trade war with the US could be to a certain extent anticipated and priced in, the COVID-19 pandemic is a black swan event that has caused severe disruption, first in China and increasingly now in the rest of world.

The impact of COVID-19 on Chinese business sentiment has been acute. According to the National Bureau of Statistics, the country’s official Purchasing Managers’ Index (PMI) dropped to 35.7 in February, lower than the 38.8 it recorded in November 2008 at the start of the global financial crisis (GFC). Still, the nation has been on a reform spree, introducing transformative legislation in a bid to open its doors to the world even as it battles with lockdowns, downward economic pressure and the protracted trade war.

As China Business Law Journal reached out to corporate counsel in China to understand what is in store for the year ahead, the pandemic is a topic that is impossible to avoid. All counsel we spoke to agree that these are testing times for businesses, and that the pandemic will expose companies’ resilience.

“The current situation gives companies an opportunity to review their business model, and if their management is good enough to cope with the changing environment,” says John Zhao, vice president of business development at RPX Asia Corporation.

pandemicAndrew Zhang, a partner in Beijing at Commerce & Finance Law Offices, says that China’s economy at a macro level has been impacted by the pandemic. “The financial crisis in 2008 can be said to be mainly an economic one, while this time it may be a complex of economic and social crisis,” says Zhang. “If COVID-19 breaks out on a large scale around the world, and is not timely and effectively controlled, this will lead to the stagnation of many social and economic activities, and the negative effects will be far more than a general economic crisis.”

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