China's economic recovery from COVID-19

Today is Wednesday here in Asia, and as we are about to start the business day here, it's pretty much business as usual as far as we're concerned here in Hong Kong. I have got six or seven business meetings lined up today, and some of our panelists in Shanghai and other parts of China also have busy days ahead of them. So China, as you all know, was the first major global economy to enter the coronavirus lockdown. And it's also the first major economy to emerge out of it. And how it has its journey through that entire lockdown and its journey towards an economy recovery, probably provides a very good template to how the rest of the world can manage its struggle and its journey out of this pandemic.

So today, we are very lucky, thanks to Milken Institute, to have three speakers who are probably, I would say, at the front row seat of how the Chinese economy is dealing with this pandemic. So I'm going to quickly introduce our three panelists and give them a bit of time to also introduce themselves and their businesses. And also a bit of housekeeping.

Miss Sun, the CEO of Trip.com, can only be with us for the first 30 minutes of our discussion. There will be a Q and A session at the end of today's session. But because she will not be with us, Mr. Eric Chen and Mr. Shen will take most of the questions, but if there are any specific questions directed at Ms. Sun, we can take that down and relay that to her team after the event, if that works with everybody. So without further ado, let's welcome Ms. Sun from TRIP. And if you could tell us a little bit about your own business quickly and I believe you also have an announcement you want to make about travel and you could go through that quickly.

Yeah, so China, as you said, it was the first country who got hit by the coronavirus and it was the first country who observed a lockdown. So let me take you through quickly about the three stages we have been through the past, when we were under the pressure for the lockdown, we launched 2 billion Natural Disaster Relief Fund to help our customers with the cancellation delay of their trips right before the Chinese New Year. And we also launched 1 billion Punishment Fund to help the ecosystem of the travel industry.

Right now, the current environment is that we are already in the recovery stage. We launched a recovery revival plan on March the 5th before the market was recovered. So far we have seen anywhere between 50% to 100% recovery depending on the business line. For example, the rental car businesses are fully recovered with 100% recovery. Some other business lines have recovered anywhere between 50 to 80%. So we have seen the trajectory for recovery has been quite well on track. Now going forward, we very much like to lead our recovery in the neighborhood countries.

So based on the data, Japan, Korea, Singapore, Thailand, Vietnam have very good control on the outbreak of the virus. So yesterday we launched our travel on plan in the global places, hoping to link the demand from our global customers to our partners around the world. So what we do is we saw lots of perishable inventory from hotel, airlines, local tour operators and that enables these partners to offer good products to our customers around the world and help them to improve the cash flow and meanwhile our customers also get very good discounted product at a very high quality. So far the launch has been very successful.

Thank you Jane. Eric, welcome to the panel. Your SoftBank Vision Fund is one of the big investors in the Chinese economy. Could you give us us a very quick profile of your investee companies and give us the rundown of how they are doing during this coronavirus pandemic.

Sure. Thank you, Eugene. So I'm Eric Chen. I manage South Bank investment in China. As most of you probably know, the Vision Fund was put together to invest in the age of intelligence. We do believe that artificial intelligence, or broadly speaking, data-driven sciences is gonna have a deep impact on the future. And so most of our investments are concentrated in that particular area. In terms of the industries they serve is actually quite broad, from real estate transactions and management to online education, telemedicine, to fundamental technology that are enabling for data science for artificial intelligence. Pretty much scanned the, you know, all of the tech-driven or data science-driven parts of the economy in different shape or form. The observation, there's some very similar observations as Jane has mentioned. You can sort of look at the whole reaction to the coronavirus among our portfolio companies in several phases. The first one is always a sort of an emergency reaction. You know, they're trying very hard to keep their employees safe, to keep the partners safe is very much of a health-oriented focus.

And the next phase will be to stabilize the situation as the economy gradually reopens. They're trying to figure out where their business is and what their recovery trajectory is likely going to be. And I think all of the portfolio companies are at different stages of the recovery by now. Some of them even already resumed growth year over year, depending on the sector, very much similar to what Jane has described so far. I think also at this point in time I think most of the CEOs are starting to think long-term because this event though unfortunate for everyone but it's likely going to have a lingering and long-lasting effect on the shape of the economy and each CEO is thinking through what they are going to be doing to fit their business into that overall trend. Some positive, some very challenging of course.

Right, thank you. And Mr. Shen, welcome to the panel. You work for JD Digits and this is a unit of JD.com. Would you quickly like to explain and sort of run through the same sort of a rundown, describe how your company is dealing with the coronavirus?

I'm the chief economist. I used to work in the central banks and the banks. So it's interesting for me to speak from a company perspective. Actually from JD.com's perspective, we are one of the biggest e-commerce companies in China. Actually we are doing very well. Of course without pandemic, probably our growth will be even faster. During the recent shopping festival, June 18th shopping festival, our business grew by 33%. We reached the sales of 269 billion renminbi during this festival. So I think the online business are doing very well in China, especially not only our e-commerce online shopping, but also we know this online education, online conference, you know, this kind of all the companies engaged in those areas.

Actually, I think this pandemic will actually stimulate tremendously the development of online business, you know, so-called the digital economy of Chinese economy. The Chinese government is also, you know, actually encouraging so-called new infrastructure investment, which is primarily focused in digital economy. So I think this part of the business is doing actually very well in China. Of course, the whole economy is recovering. Of course, there is an uneven, I call it uneven recovery. The production side nationwide had been growing already. It's around 4.5% industrial production growing in May already. But consumption you still have a negative growth. Retail sales, for example, nationwide in May is around minus 2.5%. So I think this creates a problem is there is surplus supply of goods. So actually this is, I think, the main issue in the Chinese economy.

But for online business, you know, many like us, you know, we are growing, as I mentioned, 33% during that festival already. But of course, even during the worst period in pandemic, I can give you an example. Retail nationwide declined by 20%, declined by 20% in the first two months of this year, including online and offline total. But our company in the first quarter, the business grew by 20%. This is the difference between online and offline business in China. I think that's very clear the differences. That's also why all the companies, shops, manufacturers are actually very, very keen to engage in this digital economy. They are investing heavily in this technology and software to be possible to do online business. Actually I think will stimulate this whole business to be to see to help those companies to be digitalized. So I think that's a very very important thing that is happening in China.

Thank you Dr. Shen. That sort of segues into the first major question that we want to tackle with regards to to this session, what shape will China's economy recovery take? Will it be a U-shaped recovery? Is it going to be a V-shaped, sharp recovery? Or is it going to be a L-shaped recovery with a very, very long tail? The whole world, the central banks of the whole world, have unleashed an unprecedented level of liquidity into the global economy to try and bolster the economy. Estimates run anywhere from $6 trillion to up to $8 trillion. And United States economy, for example, is projected, if I'm not mistaken, to contract by 6% this year. But the more optimistic assessment for China's economy is a growth actually of between 2% to 3%. So I want to get from your sense, as you are all running businesses and you all have your feet on the ground in China. How exactly is that taking shape? If we could just go back to Ms. Sun. You are seeing, you say that you're seeing a lot of travel recovering from before the pandemic. This is all internal domestic travel, I presume?

Correct. So for our business, probably it is the most carefully managed business for the central government. So far, we have seen restaurant business, retail business, online businesses have already recovered fully. However, travel, because it is connecting people to people, so it's managed very methodically and opened up very methodically. So the wisdom our government needs to take in is, one hand, you need to control the outbreak of the virus very carefully. But on the other hand, you also need to be very brave to push forward the promotion in the travel business, because travel accounts for about 10% of the GDP and 10% of the employment. So our team took the leadership to start to reopen the business ahead of everybody else. So what we have done is that we inject our partnership fund into the ecosystem to help our customers and our partners to resume and restart their business so that somebody needs to take the pioneer position and showcase for the central government and the local government. They need to be brave and do that.

Right. As you say, as your business is largely built around traveling and consumption related to traveling, which involves people to people interaction, how has that had to adjust during this coronavirus period? How has consumer behavior changed? Maybe we can start with Dr. Chen, Eric. You are invested into so many different businesses, online education, telemedicine and so forth. How have you noticed consumer behavior changed during this Coronavirus pandemic?

Yeah, going back to your earlier question about the shape of the recovery, I would say first, it's not gonna or will, the recovery has already taken place. So we have data to show you can chart the different recovery curves of different industries. By and large, I think the recovery is V-shaped. It is a pretty quick rebound from the deer during the lockdown period. The angle at which it recovers to the right leg of that V varies from industry to industry. Travel is probably one of the slowest ones. Better industries can recover way faster. Manufacturing, in fact, was leading the recovery. and other parts of the consumer behavior will also recover faster than travel and leisure, which is in fact one of the most challenging sectors. I would say the other thing about the V-shaped recovery is that the right side of that V is at a slightly lower level compared to the left. That gap is created by lingering consumer concerns and lack of confidence, if you will. Of course, there are still consumers that are quite nervous about the pandemic and the virus, and therefore they're still imposing self-constraints relative to travels and spending and et cetera, et cetera. So, I would say this is broadly speaking, the picture that we're seeing here in China, the consumer behavioral change, I think generally speaking, again, number one, they're generally a little more cautious compared to the same period of last time, and there's more uncertainty in the world, more uncertainty in the economy. And but at the same time, I think is also very interesting to observe and discuss what is the long term behavioral changes that are likely going to stay with us, right? So called the new norm, work from home, trying to be remote, telling everything, relying on online services more, et cetera, et cetera. So we can have a much more engaged discussion about that topic as well.

Oh, sure, thank you. And I also want to take up a point that you made early on about consumer concern and throw that question to Dr. Shen. We know that this is, we're coming to the end of June. The beginning of July, August is the time when a huge population of Chinese school livers will enter the workforce. And the number of estimate is about 8 million people who enter the workforce. That's roughly in terms of context, that's roughly the entire population of Hong Kong entering the workforce in one fell swoop. Is that the kind of consumer concern that is holding back households in terms of their spending, Dr. Shen?

Yeah, I think of course the job income is the main reasons behind the consumption. But I think this question is also related to how fast the recovery will be. The shape of the recovery is very important. If the growth returns, there will be more jobs for the graduates. So what I'm seeing is very strong fiscal stimulus will be conducted in the second half, especially regarding investment side. So I think it's quite important to know that Chinese National People's Congress happened in May, and they announced roughly around 4% of GDP, fiscal stimulus package, which will be primary focus in the second half. So now you have to spend 4% of GDP in half year. So this actually will unleash an investment boom again. This is very different from 2008, so-called 4 trillion stimulus package. Everyone, I think, probably remembers, this is a tremendous drive in investment in that time, like high-speed train, that also in many industries. But this time, the government focus on the digital economy side, all the technology parts, and the application of the digital technology in all lines of business. And that's around, as I mentioned, it's around the 4 trillion renminbi stimulus again. So that I think already I'm seeing very strong recovery in like this heavy track sales, digging machines.

I can give you one number, it's in May digging machine sales rose by 70%, right? So this is, to me, it's a very good leading indicator to indicate the strong recovery in investments, especially infrastructure investments. And the hosting market is also recovering. I think this is, so the investment recovery will actually create more jobs. And of course, the issue you're asking is also very important is how to accommodate like eight million graduates. Of course, we know we are in the recovery stage. maybe the pace is not enough to accommodate all. So what government has been doing is create more civil service jobs. Announce a lot more, the government organizations is recruiting more workers. And they also expanded the graduate programs. All the universities are expanding graduate programs so accommodate more students, bachelor degree students to continue to study. So there's different ways to solve that issue. But I think that the most important issue is about economic recovery, how fast we can recover.

Right, let's talk about the efficacy of government stimulus. Early on I said that the global central banks have unleashed anywhere between six trillion to eight trillion US dollars of liquidity the global economy depending on how you count it. And various governments are adopting the measures in different ways. Here in Hong Kong, every permanent resident is eligible to 10,000 Hong Kong dollars per person. In Singapore, it's a split between stimulus package or one-time goodie, as well as a second package which goes towards helping you pay your utilities, your electricity bills and so on so forth. How that money is being spent is a big question. Some people may save it, some people may take it to the restaurant and have a nice dinner. Somewhere else, people are pumping money into the stock market. We see that in South Korea the amount of money that is being deposited into trading accounts for the stock market is at an all-time record high. So what are the best ways that governments can ensure that money is being used to bolster consumption? Are there any particular methods or technology in China for example that can be a useful example for the rest of the world? Dr Shen, you are with an online retailing giant. Would you have some examples to share?

Sure. I think the Chinese government adopted different methods, not giving cash like other countries. We know in other countries, for example, like in Hong Kong, the survey shows a lot of middle-class people, people, even richer people, they just deposit this government relief money, 10,000, mostly go to the bank. But in China, they actually distribute consumer vouchers. We are actually teaming up with Beijing government to distribute. So it's a digital and a very effective way, digital vouchers. So people have to spend this voucher on consumer goods or services. They cannot save it. And also there is a time limit. For example, you have to spend money. You get a voucher, you have to spend it in one month or three months. There is a time limit. So it will have an immediate impact. And secondly, there is a leverage. Like given the government issue a hundred, for example, dollar voucher, and then you probably need to spend $300 in order to use the voucher. So each dollar, there is a study that shows that the final consumption amount will be around three times. So that's another way to stimulate consumption. The areas, for example, you can buy electronics goods, you can buy home appliances, you can also spend on the restaurants or on travel links. So all kinds of different vouchers are being distributed mainly through these e-commerce platforms. So that's why we provide technology. So also the government is not only spending their own money, but also encourage our platform to also participate, also issue our vouchers. Then the shops, they also participate. So each participate, give away some profit in order to people to consume more. I think that is a different method. So we don't receive very little money distributed to just give the cash. Mostly it's distributed through consumer vouchers. So that's to make sure the money will be spent on consumer goods or services.

Right. Dr. Shen is referring to is a voucher with an expiry period, which is given out to eligible recipients. And the study has shown that the marginal propensity to consume, this was a study conducted by Tsinghua University in Anzhou was 3.5 times. In other words, 3.5 yuan for every single yuan of stimulus handed out. Eric, Dr. Chen, you are an investor in technology. Is there something from your investments, from your experience that can be brought to bear on this?

Well, generally, I think Dr. Chen from JD has offered some very interesting observations and insight into the dynamic there. But generally speaking, I think the consumer spending voucher or direct consumer subsidy is gonna play a lesser role in the Chinese economy as it may compared to what the role study might play in other economies. The Chinese economy is organized differently. The way the Chinese government can influence the economy can stimulate it or mitigate some of the risks in it, can take different routes. And as you know, the consumer side of the overall economy has been growing, but it's still, relatively speaking, a smaller portion of the general economy as compared to some of the more developed countries. I think the spending vouchers and so on and so forth are used as a kindle to restart the economy at the beginning of the recovery phase to get people out of their home, to get people into the shopping malls or the virtual shopping malls like JD and Alibaba, et cetera. I think the reliance on that type of methodology or methods will likely go into decline as we head into the deeper range of the recovery as we go forward. That will be my expectation.

Thank you, Eric. Jane is back, so let's grab her very quickly. Welcome back, Jane. Can we very quickly switch back to you and talk about changing consumer behavior? Your business is a tough business to be in. Travel is probably one of the most affected businesses in. Your company has actually ended up having to give out vouchers to your customers, right?

We make sure our partners have labeled their hotels, airlines, local tour operations with safety check. The second thing is, rather than traveling within bigger group, now consumers prefer to travel in a much smaller group with their families, with their close friends. Thirdly...

Oh no, okay. So from what we could grab, the change in consumer behavior is that consumers' travelers are traveling in smaller groups. Okay, that's well, as we, let's keep that in mind as we tackle the issue of long term consumer behavior, if this is going to become a new normal. Actually that segues very nicely into our next topic, which is if we assume that this Unfortunately, this coronavirus is going to be with us for the very long term. We will probably see a second wave, a third wave, multiple waves of recurrence for the very long term. Until a effective vaccine is developed and becomes affordable and becomes available, we will all have to deal with, as Dr. Chen early on said, tally everything. So if that were the case, looking sort of sometime into the mid-term, into the middle term, what are the businesses, let me put it this way, what are the businesses which will be the most badly hurt? What are the opportunities available for the smart investor out there thinking about pivoting to a new industry, new behavior, and capturing on the new normal. Eric, would you like to try?

Yeah, sure. I think generally speaking, the kind of businesses that depend on export and global supply chain probably will have a lot of challenges. It's interesting as we went into the coronavirus, because China, as we mentioned earlier, actually got into the situation first in the world, we thought that if we contained this in China, everything's going to be okay. Then we realized that it became a global situation. Then we hoped for the global situation to be contained as it has been in China, or other parts of Asia like Singapore, Taiwan, Hong Kong, or did a very good job, quick reaction to contain it. Then we came to the realization by today that that's unlikely, given the different culture and different government systems and different choices made by different government how to fight the virus, I think the trajectory of the containment is likely going to be very different in the world. So as we reopen the global economy, global travel, global trade, I think you're going to see a very uneven approach to the entire situation and therefore very uneven... It's going to be very, very difficult to eliminate this virus on a global basis in the foreseeable future, as you said, which means that we're going to be stuck in this kind of environment for a relatively long time. I think the sectors that are likely going to be impacted, if it is export oriented, heavy dependence on global logistics, is likely going to continue to be challenged in some ways. I think complete offline traditional businesses that require people gathering and particularly large crowds is probably going to be slower to recover as well. But on the other end of the spectrum, I think domestically oriented businesses, virtual businesses, you know, adding the telly to telly everything kind of businesses will likely going to see major benefits. In fact, as I will likely, some of this is already happening, right? Online education as an example that everybody knows is or has already enjoyed a major step function adoption among consumers during the lockdown period and a lot of that is likely going to continue as we reopen the economy. Those behavioral changes oftentimes do not dissipate very easily.

So in other words, avoid your traditional brick and mortar schools. Don't invest in restaurant chains unless they have an online dining and food delivery option. Definitely no cinemas or cinema chains unless they are in the business of streaming videos. and so forth. - Yes. By the way, I would say those statements probably was true for the last 10, 15 years for investors. So you can argue that is not that new. - Right, right, good point. You talked about the supply chain. Also we have noticed in the, maybe in the past year and a half, because of the trade war between the United States and China, that a lot of manufacturing had been diverted or shifted because of this need to avoid what we call a single country exposure. The just-in-time kind of model of supply chain that the world has gotten used to the past three decades or so have now shifted to a model where people are building up what we call just in case supply chains. So you do not put, put it simply, you do not put all your eggs in one basket. You do not put your entire supply chain in one geographic location just in case of trade disputes, just in case of taxation disputes, just in case of coronavirus lockdowns. So is this going to be an ongoing thing, and is this going to become the new normal? Dr. Shen?

Yeah, I think the two risks facing the Chinese recovery, one is the return of the pandemic. So there are already some cases, it's after many days of this no incidents, then there is a new patient emerging. So I think that's definitely one risk. risk is the trade war, whether the external demand will get much worse than today. That's I think the two primary concerns for me. Otherwise, I actually agree with Dr. Turner from SoftBank regarding consumer vouchers. It's a mechanism, it's a device to jumpstart consumption, to push people to return to the normal. Otherwise, people used to be staying at home. They don't spend a lot of money. They change their consumer consumption behavior. But in China, the main tool to stimulate the economy, as I mentioned earlier, is investment. The government unleashed this quite dramatic fiscal stimulus.

As I also mentioned, monetary stimulus in China is also quite significant. But I think the main differences in China from maybe America is that the government cannot only lower interest rates, they cannot only inject liquidity into the banking systems, but they can also order the banks to lend to SMEs, small business companies. This is the difference. In other countries, you cannot do that. We see all the money injected by central banks are going to stock markets, going to the financial markets for financial investment. But in China, the government, the central bank can set rules so that, for example, 40% of the bank's new loans have to go to the small, medium-sized companies, have to be spent on the real business. So that's actually make the monetary policy effectiveness very different. So that's, I think in China, the main issue is fiscal monetary policy to jumpstart economy. And so actually the key question in China is the domestic demand. I think the government already realized external demand is an uncertainty, but then have to focus on domestic demand. At the same time, it's also in order to prevent reemergence of the pandemic. So that's actually a big challenge. Thank you, Dr. Shen. What's very clear is that whatever is happening in the digital economy, the online business will become even more important. All this online shopping, for example, as I mentioned, all the delivery business, even And we are seeing demand actually from very remote areas. Before there was less demand, but not everywhere needed online services. And so we have to expand our delivery service nationwide to reach every county, every village. So that also needed a new investment. So I think everything related to the digital economy need to require also huge investment. I think is the next stage, why the government is actually so much focused on the digital investment, these themes in the second half of this.

Thank you. You've raised some very interesting points that I want to come back to later on the digital investment, but a viewer has just sent in a question and it's about the supply chain that we were talking about early on and I want to get back to that. We know that at the beginning of the very early stages of the coronavirus lockdown in China, South Korea's entire car manufacturing industry was paralyzed. Three of the country's five big car makers could not make a car because one worker in a factory in Beijing caught the coronavirus and that factory was responsible for making a very important component in the car. So as the the sort of saying goes, it takes about 25,000 different parts to make a car, but you can't make a car without that single part. So what is China doing to mitigate the risk of supply chain disruptions? Early on, we talk about this global shift towards this just in case supply chain. How quickly can that go? What is the extent to sort of unravel the entire network effect of the global factory? Eric, what do you think?

I think building a robust and agile supply chain is going to continue to be discussed in the C-suites and the boardrooms of manufacturing companies globally. And this is not just coronavirus. There are many factors related to that. Geopolitical situations. The fact that the supply chain is reshaping itself because the different parts of the world are following different growth trajectories. And we have a very, very deeply integrated global supply chain today. And I think that, as you pointed out, I think just in case, that's actually a very nice phrase to catch it, will remain very important. On the other hand, I think any movement in supply chain of meaningful scale and impact will take a very long time. Because this is very complicated stuff that we're talking about here. Just in case supply chain doesn't mean a very diverse supply chain, because by having a diverse supply chain you have to ship apart from Indonesia to Korea then to China then to Brazil it simply doesn't work and in fact in fact creates more challenges and vulnerability to different disruptions. So I think agility and responsiveness of the supply chain is it's going to be very important but the other thing I was I was going to say is that supply chain is a highly highly sticky, highly sticky thing. You can't move it one piece of it without moving the entire thing. So it's always one small discussion always become a very big discussion, right? A very big decision. I think this this topic of moving manufacturing out of China has been discussed and has been tried by different manufacturers. I think the effectiveness of that has been quite questionable just because the base of manufacturing is so large and powerful. The workforce is well trained, they work hard and the quality of the workforce is very good. The ecosystem is rich particularly when it comes to low-end manufacturing and also even electronics manufacturing here. It's very rich and robust, the availability of choices, it's unprecedented. You can't really unrival, you can't find it elsewhere in the world. So those factors are going to be the counterbalances to the desire to move stuff away. I think we've seen that struggle with global manufacturing companies already for a number of years is not an entirely new phenomenon.

So as you observe, you've seen some of these trends moving. So probably you will see some of the lower end, lower skill set of manufacturing production shift out of China elsewhere to the rest of the world, while the ones that require the very sophisticated ecosystem of suppliers, as you put it, or the abundant workforce-- China has, we're seeing eight million people entering the workforce in a couple of weeks, for example. That level of manufacturing will probably remain in China.

Yeah, I also think that you have a very responsive regulatory regime here. As an example, I'll just name an example. One of the highest profile manufacturing supply projects of recent years is Tesla's Gigafactory in Shanghai. I heard unconfirmed that that factory was the only factory that was open for a period of time as the world was struggling with lockdown, right? And I'm sure the local government and the local workforce worked extra hard to ensure continuity of production and at the same time protecting people's health. So the way to organize around this type of responses, it's something that is critical in the future of building the supply chain as well.

Right. We have got a few more questions coming in from our viewers. So I'm just gonna read this and see if anybody can, is willing to take this, right? So first of all, the first question relates to the digital investment that Dr. Shen mentioned earlier. And Jane, welcome back. if you have time, feel free to take this question as well. The question is whether the government's investment in new infrastructure, including 5G, data centers, Internet of Things, for example, does that present opportunities for overseas investors? If so, how?

Yeah, definitely. I think the way to stimulate the economy for China, primarily is through investment, as in the past. So, but the government don't want to return the old way of investing in real estate, in manufacturing, but instead in the digital, economic related issues like 5G, but also it's a lot of technology related, like AI technology, big data technology, all these important fundamental technology that underline all these applications will also be part of that. So the data center, for example, there will be a huge amount of data center to actually make it possible for all the business online. These are also very important thing. But also, I think, to me, I think I would rather to say a broader definition of digital investment is all those investments that are related to upgrade the traditional manufacturing companies, as well as the shops, to make them digitalized, to help them to engage in online business, and to upgrade them. So these are all related. So this, I believe, will create a huge amount of opportunity for everyone. We talked about before in our platform, to see, to consumers mainly. But now we are talking to B, to G. Government have huge demand for that and also companies have huge demand for that. So it's not only initiated, engaged by the government that is new digital investment theme, but also should be actually initiated by the companies. There is already a huge amount of business opportunities. It's a partnership between government and the companies. So I think this is a very, I think China is actually in a very good position, all the digital payment, the mobile payment, all this infrastructure related to online shopping, it's very strong. So I think they were built on this to expand to all kinds of areas that relate to common life and to manufacturing.

Thank you. we have Jane, let me grab Jane again. Again, back to this question that relates to what you were you were saying just now about the change in consumer behavior. People are traveling smaller groups with a lot of large groups. Your business again affects, is affected by the rest of the world. How will your recovery be impacted by recovery issues in the rest of the world? Yeah, so

China compared to the rest of the world is recovering much much ahead of the rest of the world. When I talk to our partners in Europe and in the United States, everybody is envious about the recovery speed in China. However, as the leader in this industry, we are more ambitious. So we launched Vee plan leading the rest of the world for the recovery. Basically yesterday we launched our recovery plan within Great China including Hong Kong, Macau and the next stop will be in Korea, Japan, Thailand, Singapore. These countries have demonstrated their ability to control the outbreak of the virus. So for the local people who have trouble demand, our inventory will be very suitable for them to use. And after that it's the cross-border travel that takes a lot of diplomacy between countries and I know for example China, Singapore we already opened up the green lane for the business people to travel. That will give some confidence to the government to open up even more for the high end of the customers who travel on individual basis as well as on the smaller group basis.

In the very long term we were discussing just now that the coronavirus is probably going to be the new normal. After this, until we have effective, readily available and affordable vaccine, we probably have to deal with this in the second wave, the third wave, fourth wave and multiple waves. So as you say, the days of large groups of traveling to multiple countries, unleashing the spending power of the Chinese tourists, those days are probably coming to an end. So if that's the case, over the next foreseeable future, how should your business adjust? Can you survive on if every number that you have dealt with has to be divided by 10 or 100?

Yeah, so I think the trip outcome stress is on on the high end of the product. The most expensive tool we sell cost about 200,000 USD per person per trip. And guess how long did it take us to sell these packages? - Tell me. - Take a guess. - Three months? - Yeah, only 17 seconds. So I think the movement towards the high end and smaller group benefits the online travel companies more than traditional low end of the customers. So if you see our recovery speed is far more faster than the average market to recovery. So we're very positive on that. Secondly, a lot of customers who plan to travel abroad will this year spend a lot of money in the domestic travel market. Again, that's an opportunity a lot of high end hotel in China can capitalize on. Thirdly, I think regarding the high end of the customers who still wants to travel abroad, there is opportunities as well, because for Rosewood or Shangri-La, these kind of hotels, they will be able to capitalize lots of opportunity. Again, that's our strengths as well. So I think every time there is a crisis, we saw more opportunities in the global places.

Okay, I've got another question here from a reader, from a viewer. Are all of these measures to protect the Chinese economy from the COVID 19 recession, changing rates, injecting liquidity, etcetera, etcetera, are they just temporary or will the Chinese government continue these policies far into the future to sustain the economic growth that has seen in the past? Will these measures be used to raise the GDP growth even in the Mao downturns? Would anybody want to take up this question?

I'll take a crack at it. I think the responses from the government has ranged from short term liquidity focused monetary policies, which I think is unlikely gonna sustain over the long term, because as you probably know, before coronavirus, China was in a delivering phase, given the oversupply that already exists in the economy, overleveraged. So I think that will continue to be the theme, so long as the short-term disruption can be managed, right? The longer-term focus of the Chinese government in driving the economy, as Dr. Shen from JD has mentioned many times, and is actually focused on building a new digital infrastructure. I think that will continue. And as the name implies, it is infrastructure, which means that it's sort of an enabling factor to help other businesses and innovations to lower the cost of innovation, to lower the entry barriers of innovative business models, to provide different kinds of new services to the society. So I think that's going to be the longer term theme that will definitely sustain because it is well aligned with the country's overall plan for the medium and long term, even before coronavirus.

Dr. Shen, what do you think?

Yeah, I think the Chinese economy is growing less faster, that's for sure. The next decade probably growth will be, it's definitely not five, six, maybe three, four, that's a trend because when the economy getting richer. But I think the government focusing the digital economy investment is actually a way to enhance productivity, to actually lead in the next wave of technology advances. So I think that's a right strategy to go.

All right, I've got another question here. How has China made restaurants safe?

Oh, I can give it a try. For example, at one table you have to sit only like two people. In the beginning, it's only one person can sit in one table. So you eat by yourself, then everyone have to have a distance of like one or two meters. That's how they started. Then later become one table, you can only have two persons, et cetera, these kind of ways to make people feel safer to go to restaurants.

Right.

I would just add, it's not just restaurant, right? The approach that the Chinese government has taken to contain the virus actually heavily leverage technology. Every one of us has a health code, which basically pulls the data about this individual, traveled trajectory, medical data, et cetera, et cetera. All of those data is aggregated together to assess the risk of that particular person. And if this technology is basically ubiquitously deployed in the economy, in a population, And I think that the degree that you can exert in terms of control and tracking and so on and so forth, it basically affects every aspect of life, not just restaurants.

And that is assuming that data privacy doesn't carry as much of a concern in the population as elsewhere.

I think obviously different culture have different reactions to this point. So whatever China is doing may not be applicable for other cultures.

Right, okay, good point. Well, I think that's all the time that we have for this very invigorating session. Thank you all, our panelists, for taking the time to join us and to contribute to this very great discussion. And to our viewers, thank you also for taking the time to join us. Stay safe, wash your hands, wear your mask, social distancing, stay safe. Thank you, bye-bye.

Thank you. Thank you

Thank you.

Thank you, everyone.