US Firms In China Warn 2020 Earnings Could Miss Projections By 50 Pct

American companies in China indicate annual revenue could be off by almost 50 percent due to shortages created by the coronavirus pandemic, according to a survey by the American Chamber of Commerce (AmCham) in China on Thursday (Feb. 27).

Between travel restrictions and protective gear shortages, almost 50 percent of U.S. companies in China said revenue will likely be off in 2020 if the business climate doesn’t go back to normal by the end of April, according to a survey of 169 member companies conducted Feb. 17-20. One-fifth of respondents said earnings this year from China would decline by more than half if the coronavirus — also known as COVID-19 — pandemic continues through Aug. 30.

“AmCham China member companies, like much of society here, face a large number of uncertainties in combating COVID-19,” said AmCham China Chairman Greg Gilligan. “There is, in the short term, a clear and significant negative impact to member company operations, through travel disruptions, reduced staff productivity, increased costs, significant drops in revenue, and more.” 

Gilligan added that 43 percent of member firms said “it is still too early to tell” what the protracted consequences will be on market growth and “half feel it is too early to determine the impact on still-planned investments, while one-quarter report plans to maintain existing investment plans.”

Roughly 40 percent of responding firms said that annual budgets were being revised and 33 percent have implemented cost-cutting measures. Some 10 percent of respondents estimated that losses were mounting at a minimum of 500,000 yuan ($71,000) a day.

Companies that need employees to work on-site said the travel restrictions have been the biggest burden, however 94 percent of the respondents implemented work-from-home policies.

China is restricting arrivals from outside the country and has mandated quarantines for incoming travelers as the rate of infection rises in Europe, South Korea and Japan. Many migrant workers are stuck homebound due to travel restriction policies and mandatory quarantines within China.

“The crisis is real, and people are prioritizing the virus first and resumption of the economy second. Getting protective gear and getting it in the quantities necessary to keep the workforce safe is a challenge for a lot of companies,” AmCham Chairman Greg Gilligan told The Wall Street Journal.

The ripple effect of the coronavirus could hit the rollout of 5G. Chip firms have already been cutting production, and two of the top fiberoptic cable providers have facilities and headquarters in Wuhan, where the virus originated.