As the health and economic impacts of the covid-19 crisis unfold, it is easy to lose sight of longer-standing sources of uncertainty that companies face. In the Greater China region (comprising mainland China, Hong Kong, Macau and Taiwan), business leaders were already grappling with heightened trade volatility, talent shortages, rapid technology advances and the ever-changing behaviours of consumers. The pandemic has naturally pushed management’s attention to shorterterm survival and recovery. But businesses in the region know the need to address more familiar challenges cannot take a back seat for long. If anything, the pandemic crisis has added propellant to the trends driving them rather than freezing them in place.
Changes in customer behaviour—and by extension to markets—pose as much near-term uncertainty to Greater China executives surveyed by The Economist Intelligence Unit as do concerns about the pandemic. Over the longer term, the difficulties of securing and retaining talent cause the greatest degree of management unease, along with changes in customer behaviour, technology and market structure. Alongside some predictable measures of retrenchment, such as reducing headcount and postponing expansion plans, many surveyed firms say they are proactively implementing measures to increase their scalability, speed and efficiency.
Other major findings of the study are:
- Amidst gloom, pockets of optimism. Hopes for business improvement this year are low across the Greater Bay Area (Hong Kong, Macau and Guangdong). Spirits are higher in Taiwan, and markedly so on the mainland. Around half (49%) of executives in mainland tier 1 (T1) and 62% in tier 2 (T2) expect industry conditions to improve in the coming months. Almost all respondents in T1 cities (96%, and 80% in T2 cities) express confidence in their firms’ ability to grow revenue in the next 12 months.
- Improving scalability is high on the agenda. About half of business leaders (49%) believe workforce rigidity holds back the implementation of their business strategy. To address this, the majority of respondent firms (77%) plan to increase their use of temporary or shortterm workers in the coming months. Nearly the same number say they will undertake some form of organisational restructuring and will consolidate work locations. Staff-sharing—a practice launched during the lockdown—is likely to help firms deal with future periods of volatility.
- Even pessimists are keeping their options open. Among the roughly 20% of respondent firms that expect business conditions to worsen in the next 12 months, only about one-third plan to reduce their spending on technology and research and development (R&D) while around one-sixth plan to increase it. Another 42% will “reorganise their workspace”, which includes redesigning, consolidating or moving offices or other work locations.
- Remote working is here to stay. Workers will return to their offices as the pandemic crisis recedes, but working remotely is likely to be much more commonplace. More than three-quarters of respondent firms (76%) plan to implement work-from-home and work-from-anywhere practices during the next 12 months, leveraging capabilities such as cloud computing and mobility technology.
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