Huang Kefeng, owner of a 4,000-square-meter Shenzhen factory, which produces cosmetics products for various brands. (PHOTO PROVIDED TO CHINA DAILY)
Although a large number of enterprises in Shenzhen resumed production as Guangdong province lowered its alert level for the novel coronavirus outbreak from the highest to Grade 2 this week after the epidemic showed signs of easing off, Huang Kefeng is still apprehensive.
His 4,000-square-meter Shenzhen factory, which produces cosmetics products for brands, including popular national names Herborist, Pechoin and Inoherb, remains shut.
Among the plant’s 100 workers, about a half of them are from Hubei province, the epicenter of the outbreak, which is still under lockdown. What’s more, several Hubei employees are responsible for the core and secret part of product formulation. Without them, production comes to a standstill.
Businesses get hammered
“We used to produce about 1 million units of cosmetics a month, but now the output is zero,” lamented Huang, who owns the factory.
Manufacturing is just a part of Huang’s business. He’s also engaged in e-commerce and catering business in Shenzhen. “Total losses for all my businesses reach several million yuan a day,” he said.
We used to produce about 1 million units of cosmetics a month, but now the output is zero. ... Total losses for all my businesses reach several million yuan a day
Huang Kefeng, an entrepreneur in Shenzhen
Huang is among hundreds of thousands of Shenzhen entrepreneurs grappling with a slump caused by the coronavirus epidemic, which has claimed more than 2,700 lives and infected over 78,000 people worldwide.
Compared with owners of large enterprises, they’re more vulnerable, with inadequate cash flow to withstand the economic storm and limited access to bank loans.
To help entrepreneurs to pull through, the Shenzhen government has launched a series of preferential policies, including tax breaks, low-interest loans and subsidies.
In Guangdong, banking and insurance regulators have asked banks to expand loans to small and micro businesses and offer those hard hit by the outbreak preferential measures, such as lower interest rates or waiving them altogether.
But some entrepreneurs say it’s still hard for them to benefit from them. “To secure bank loans, you need collateral, whether it’s properties or cars. But, for young entrepreneurs, how many of them are able to provide it?” asked Huang.
Lina Lin knows where she stands. She hasn’t much of a choice, but to rely on herself. Lin runs two rental apartments in Shenzhen’s upmarket Nanshan and Futian districts on a short-term basis, with a combined monthly rent of 60,000 yuan (US$8,560).
The Lunar New Year break, traditionally, is the peak season for tourism, with millions of people booking rooms when they travel. Lin’s rooms had all been booked before the holidays but, due to the coronavirus outbreak, she had to cancel the orders.
“I talked to my landlords to see if they can partially cut the rents in this difficult time, but they refused. With no income and such high rents, I’m on the brink of death,” Lin lamented. She plans to shut down the rental home business in Futian soon.
Investors say entrepreneurs, having struggled through last year’s funding difficulties, are facing another “chilly winter” that’s likely to get worse.
The epidemic has severely disrupted the financing activities of entrepreneurs, said Jin Ming, managing partner of Cygnus Equity, which provides financing services and advice to enterprises.
Cash-strapped entrepreneurs would normally start funding plans for their projects after the Lunar New Year holiday but, due to the epidemic, they haven’t been able to meet investors, and this has dampened their plans, Jin said.
Investors are adopting a wait-and-see attitude and are less likely to make major decisions in the first quarter, he added.
According to a survey by the Cheung Kong Graduate School of Business, conducted between Feb 17 and 26, up to 68 percent of 178 entrepreneurs polled said their businesses had deteriorated in the first quarter of this year, compared with the same period a year earlier. About 62 percent of them said financing has become more difficult for startups.
Zhao Chenxi, a partner of venture capital and private equity firm SB China Capital, said startups should adjust their strategies and accept the possibility there won’t be new funds coming in the first half of this year, or the whole year.
For those with negative cash flows, they would have to put off new projects to cut costs and explore new growth drivers, Zhao said in an interview earlier this month.
Opportunities come along
But there may still be a silver lining. Crisis always brings with it opportunities, and some entrepreneurs have taken advantage of it to achieve self-development.
Zhang Tao, founder and chief executive of Shenzhen tech company Pudu Technology, which makes food-delivery robots, has made his company better known to the public by sending robots to hospitals in Wuhan, the capital city of Hubei province, and other mainland cities.
So far, more than 130 of the company’s robots are being deployed in more than 60 hospitals on the mainland. The robots are also being used at Hong Kong’s Queen Elizabeth Hospital.
“For us, this (the outbreak) is a great opportunity to showcase our products. We can test the market and prove their value,” said Zhang.
Huang has also spotted fresh opportunities for his e-commerce business. He has been exploring the new retail model of overseas cosmetics brands since early last year, and has opened four shops in Shenzhen, where customers can test the cosmetics products on site and buy them online by scanning the QR code in the shops. The products will then be delivered from the Qianhai bonded area to their homes.
“The SARS epidemic in 2003 had propelled the growth of online shopping. Similarly, this coronavirus outbreak will lead to the development of new retail methods as people confined at home become more accustomed to online-to-offline shopping. The epidemic has cultivated such a market for us,” said Huang.
This year, he plans to open up 100 to 200 new shops across the country.
