Chinese astrology has it that 2020 is a “metal rat” year, and is associated with turbulence. Covid-19 has certainly provided a quantum of it. With a steep market dive in the first quarter, and sharp worldwide economic contraction, Asian business has had a rough ride. As star signs go, 2020 has so far lived up to its ratty astrological reputation.
The results of a survey conducted from August to September of Hong Kong-based Asia Business Council’s members, who are the chairmen and CEOs of some of Asia’s leading multi-national companies, collectively valued at nearly $3 trillion, and with some 3 million employees, offer insights against the turbulent backdrop of a year dominated by Covid-19. With a response rate of 83% (58 out of 70 members), the results showed a latent optimism and the confidence to re-tool investment focus. Though the outlook for job growth remains uncertain, not surprisingly, these leaders ranked public health and geopolitics as top concerns for their businesses.
A lot of numbers follow here, but they are very telling. When asked their outlook for business conditions in Asia over the next 12 months, and in spite of significant declines in their own revenues, half said they expect to see an improvement, while 33% expect conditions to worsen. Though not a table-pounding endorsement, this is a significant change from 2019, when 55% expected conditions to worsen.
Only 16% of members foresee a prolonged downturn or depression, and just 5% anticipate inflation. The wide distribution of an effective vaccine for Covid-19 is viewed as a pre-condition for a return to pre-pandemic economic levels–an opinion expressed by 91%—that speaks well of the latent, “coiled-spring” potential of the Asian economy.
In line with a worldwide trend toward touch-less payments, deliveries, more Zoom meetings than in-person gatherings, a number of respondents noted the pandemic has accelerated their adoption of digital business models.
Demonstrating agility, over 40% of respondents reported having changed investment plans. Undertaking or planning a restructuring was the second-most prevalent response. While for business this is a demonstration of resilience and agility, it, combined with increasingly digitalized business models, leaves open the possibility that 2021, the year of the Metal Ox, may bring a jobless recovery. Indeed, nearly 38% of respondents said employment at their companies will decrease in the next 12 months.
In terms of the upcoming U.S. presidential election, a Trump win would catch respondents on the back foot, as a resounding 75% predict a Biden victory. Perhaps even more telling is the muted outlook for a resulting improvement in U.S.-China relations after the presidential election. Of those who predict a Biden win, only 43% expect post-election U.S.-China relations to improve, 43% expect no change, and 14% expect they will worsen. Among those expecting a Trump win, 50% foresee a post-election worsening in U.S.-China relations.
As a fact check on Trump, who likes to boast about supply chain disruption in Asia and jobs coming back to the U.S. from China, the survey showed little such evidence. Executives surveyed said China is the most attractive region for increasing existing investment in the next 12 months—followed by the U.S., India, Singapore and Europe. Asked if they planned to shift production from, or reliance away from, the U.S., a resounding 84% said they “have not considered” doing so. For China the number was 72%.
In terms of new investment location over the next 12 months, China again was the most attractive, with the U.S., Singapore, and Malaysia in a 3-way tie for second. Vietnam, which has benefited strongly from the China Plus One strategy, a way of diversifying supply-chain reliance away from China, was the third most popular. Hong Kong, until lately prized for its rule of law, free press, and open markets, came in fourth, along with Indonesia and Japan.
In a year of belt tightening and capital re-allocation, the survey showed leaders are prioritizing sustainability. 53% of leaders said that their sustainability efforts around environmental and climate change issues have accelerated. This is an auspicious sign for climate awareness, as big businesses like these are often standard-setters for other companies in their industry.
Working together, business and civil society have acted as force multipliers to some Asian government’s efforts in pandemic containment. Asked to list their response to help with Covid-19, respondents cited cash assistance, the purchase and distribution of personal protective equipment (PPE), programs to support healthcare professionals, financial assistance for small and medium enterprises (SMEs), and the provision of food to many in need, often in partnership with charitable organizations and NGOs during the pandemic.
East Asian CEOs have reason to be optimistic. These economies have handled Covid-19 better than most of the rest of the world, with far lower cases and deaths per 100,000 persons than the OECD average. Asian economies, especially those where growth is driven by industries benefiting from digitalization, went into the pandemic growing at a faster rate, and will likely bounce back faster than the rest of the world. But what will that look like? And will it be a jobless recovery?
Thankfully, given how 2020 is going so far, Chinese zodiac cycles call for a metal rat year only every 60 years. Looking forward, 2021 is a metal ox year, imbued with qualities of dependability, strength and determination. After the grinding turbulence of 2020, we might all hope this prediction comes true. Thus, Asian businesses, with their long-term approach to planning, experience with past pandemics, financial crises, and environmental disasters, are well-prepared to shine in 2021 and beyond.