Businesses restarting after the pandemic-induced pause face new legal headaches surrounding declines in demand and disruptions to global supply chains. How should in-house counsel manage these and other risks? Luna Jin reports

Perhaps necessity is also the mother of reinvention. BYD, a Shenzhen-based electric carmaker, recently received an order for 300 million N95 masks and 100 million surgical masks from the California government. With car sales suffering, the Chinese automaker has transformed itself into the world’s largest manufacturer of masks, with a reported capacity to produce 15 million a day.

The invisible hand of the market seems to have cast its magic in this case, aligning the fates of two disparate industries – automobiles and masks. BYD isn’t a unique case, and businesses across industries are repurposing their manufacturing facilities to fight the pandemic and keep their business afloat.

In a similar case, a Chinese ethylene supplier in the petrochemical industry, which used to provide finished and semi-finished products for automobile production, changed a part of its production line to produce melt-blown cloth, a fabric that plays a key role in mask production, in response to the pandemic.

This was a transition that was timely and astute. The supply of melt-blown cloth had fallen far short of demand because of the difficulty of expanding production in a short time, even for China, due to long investment cycles and the high cost of setting up a production line. The shortage had sent the prices of melt-blown cloth soaring by 40 times at one point.

“The pandemic has unleashed the potential of Chinese manufacturing,” says Jeffrey Quan, a senior partner at ETR Law Firm in Guangzhou. “Manufacturing is the foundation of economic recovery, and creative responses like this have not only brought profits to the enterprises themselves, but also contributed to the welfare of society and people’s livelihoods.”

Quan, however, notes that the ethylene supplier had issued “pandemic bonds” to raise funds, and the new business helps it fulfil the fundraising condition of producing “key medical materials”.

Mary Ma, general counsel at Chinese online travel aggregator Tongcheng Elong, says that, “innovative businesses are booming, which requires in-house counsel to have comprehensive business thinking and be able balance the commercial and legal risks in handling these new businesses”.

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