Preferential financial policies in place to help businesses get back on track
With the gradual resumption of business after the latest wave of COVID-19 in Shanghai, foreign-funded industrial enterprises based in the city remain confident about the development of the Chinese market, while seeking approaches to adapt their businesses to the difficult times.
The Sika Shanghai Sarnafil factory in Minhang district, which falls under Swiss chemical giant Sika Group, has resumed all production lines after a month-long suspension from March 28 to April 26.
According to Zhang Yejiong, President of Sika China, production capacity since June has recovered to pre-March level and has seen a 10% increase.
This includes export orders delivered to New Zealand, Japan and Australia. Orders to Southeast Asian countries are being processed, the company said.
“We have not lowered our original growth target this year and still expect double-digit revenue growth,” Zhang said.
During closed-loop management before June, Xinzhuang Industrial Park, where the factory is based, provided instructions for epidemic control and disinfection, and shared resources for daily necessities for workers living on the spot.
The company benefited from preferential financial policies, including tax exemptions and reductions and deferred payments for social insurance and other operating expenses such as electricity.
“It has boosted our confidence in business recovery. Although the growth rate has slowed this year due to the previous situation of two factories in the city during the temporary lockdown, we are still optimistic about the business outlook domestically,” he said.
Zhang said he witnessed the local government’s determination to support hard-hit sectors, and the Chinese market remains the one with the most dynamic potential in the world.
“Market potential and revenue are key to our investment. We appreciate the opportunities the domestic market and long-term national strategies provide, which expand business opportunities,” he said.
Zhang said the green energy field is a good example representing China’s goal of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060.
In recent years, the company has developed a field localization plan, covering technology research and production capacity, and achievements have been made so far.
The average annual total domestic wind power generation mold orders in Sika factory, located in Waigaoqiao Free Trade Zone of Pudong New Area, in the past three years was more than 100 times higher than ten years ago.
“In addition, the infrastructure field the company has devoted itself to has been promising due to the construction of megacities, including Beijing, Chengdu in Sichuan Province and Changsha in Hunan Province,” Zhang said.
“We will accelerate the exploration of new markets, the launch of advanced products and the application of technologies. In addition, cooperation with domestic enterprises will be strengthened.”
However, the main hurdle the company faces is ensuring a smooth supply chain for imported materials and export orders.
“Over the next two years, we will improve our R&D to locate raw materials. Additionally, decentralization of manufacturing sites will be another focus, building factories in central and western parts of China, in addition to eastern regions, to mitigate COVID-19. -related impacts,” Zhang said.
Similar work is also underway at German auto parts maker Voith Turbo to mitigate the impact of the pandemic and build resilience.
Martin Wawra, CEO of Voith Turbo’s mobility division, said performance had not returned to pre-outbreak levels as sales fell 60% year-on-year in the second quarter. The Chinese market contributed a quarter of the company’s global sales of 4.3 billion euros ($4.4 billion) in 2021.
Declining demand from its customers is the main cause of the situation, where orders for heavy goods vehicles – one of the main pillars of the business – have declined, due to activity limits in the prevention measures of the COVID-19 around the world since 2021.
“Recovery will take time over the next half year and we will be taking steps now to reduce company expenses and consider which products to offer for additional market segments,” Wawra said.
The company will lead the manufacture of components for hydrogen vehicles and vessels for the low-carbon market.