We have already seen an economic slowdown in China in 2019. The national reforms to move from rapid growth to quality growth and the trade war between the US and China have both played an important role in it. Now, we have to take one more negative factor, a BIG one, into consideration: COVID-19. The massive efforts that China is undertaking to contain the spread of the coronavirus are having significant consequences on China’s economy and organizations. For example, China’s purchasing managers’ index dropped to 35.7 in February; all indices, from orders to production, have decreased significantly. The number of flight passengers dropped by 77%, and airline business may decline for the first time since 1990. Firms providing offline services in segments such as hotel, retail, entertainment, and catering are encountering a business operations crisis. Therefore, we are revising our China tech market forecast for 2020 downward to reflect a more accurate view.
In the baseline scenario, we predict that tech spending will drop by 2% in the first quarter and resume in Q2 and reach around 7–8% in the first half of the year. The full-year growth rate will return to 4.5%, slightly lower than the forecast of 6.6% we made in January, assuming the epidemic doesn’t worsen much further. Given how China interconnects with the global business ecosystem and how other countries’ economies are being impacted by COVID-19, we have also provided a pessimistic scenario about tech spending in China: It will go down by 6% in the first quarter and start to pick up in Q2 and the second half of the year, reaching 2.3% growth for the full year (see figure below).
Adaptiveness will be the key word in terms of how companies cope with uncertainty and surviving COVID-19 and incidents/crises alike in the future. Companies should bring adaptiveness on their radar and focus on improving it in the following three areas to turn uncertainty into business opportunity:
We are expecting that the pandemic will still last a while but pass eventually. As for now, we all need and have to equip ourselves with the right mindsets and capabilities and act quickly to survive these uncertain times. If you have stories about how your company is being adaptive during this crisis, we’d love to hear! You can also refer to my latest research, “Build An Adaptive Enterprise To Survive Uncertainty,” to learn about how Chinese companies are building adaptive enterprises.
The original article by Forrester's principal analyst Charlie Dai and analyst Guannan Lu is here. It was coauthored by Han Bao, senior research associate at Forrester. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Photo credit: iStockphoto/JoeyCheung