What is happening in Japan, South Korea, and China with COVID-19? Chilean Commercial Attachés in those markets share their vision on how the pandemic is affecting both the economy and the society.
Jaime Rivera, Chilean Commercial and Agricultural Attaché in Japan
On April 8th, Japan’s central government declared a 30-day state of emergency (until May 6th), only for seven prefectures. On April 16th, the authorities decided to expand the state of emergency to the entire Japanese territory, which could be extended if the spread of COVID-19 continues to increase or plateaus at the current daily infection rate of approximately 500 new cases throughout Japan, and 150 in Tokyo alone (average from the two weeks prior to April, XX).
Economic estimates adjusted to the effects being caused by the pandemic suggest that this year GDP growth will be negative, at -4.1%, and in 2021 it should reach +2.3%.
It should be noted that economic growth between April and June is expected to be -10%, while the unemployment rate will increase by 4%. It is expected that as of June this year (when the effects of the virus should be controlled), the Japanese economy will begin to gradually recover (estimates from the NLI Research Institute, https://www.nli-research.co.jp/report/detail/id=64220&pno=2?site=nli).
Experts think that for Japan to recover the growth levels experienced before the pandemic, central and local governments must work together and with the private sector to implement strong support and financing policies for various sectors of the economy, particularly those that have been most affected.
Some major changes are also taking place in Japanese society, where we can highlight the adoption of non-traditional working methods, such as teleworking; the reduction of restaurant and bar opening hours; the increase in online shopping (e-commerce); and the increase in retail channel sales, particularly supermarkets.
According to a report prepared by the Tokyo Chamber of Commerce and the Ministry of Transport (MLITT) released on April 17th, teleworking in the country has gone up from 13.2% to 27.9% nationwide, according to comparisons between March 9th to 15th and April 10th to 12th. In the case of Tokyo, that figure grew from 23.1% in March to 49.1% in April.
Regarding food supply in Japan, according to trade statistics from the Ministry of Finance, pork imports during February decreased by 17.9% (67,032 tons), when compared to the same month from the previous year. Frozen products, which are used for processing foods such as bacon and ham, dropped by 38.2%. This is the lowest level for the month of February in the last four years.
It is important to note that orders for February 2020 were placed between October and November of last year, a period in which China increased its demand because of the domestic shortage caused by the African swine fever, on the one hand, and the Chinese new year celebrations, on the other. Therefore, the price increased considerably, making Japanese importers unable to compete.
The reasons for this decrease are also explained by the collateral effects of the Japan-Europe EPA that entered into force in February 2019. Over the past year, importers purchased large quantities to take advantage of tariff preferences. The volume of imports in February 2019 was 20.2% higher than the same month of 2018.
According to the Agriculture & Livestock Industries Corporation (ALIC), by the end of February 2020 pork stocks were at 222,971 tons, a 23.9% increase when compared to the same period in 2019. This is largely explained by the strategy implemented by the sector of keeping larger stocks to be prepared in the event of the spread of African swine fever.
On the other hand, when analyzing sales channels for pork, a considerable change started on April 10th, when the governor of Tokyo asked restaurants and bars to refrain from opening their businesses, or to do so only from 5:00 to 8:00 p.m. -initially until May 6th, but it will continue until the state of emergency is lifted. This measure was later implemented throughout the country. This situation is considerably affecting the HORECA sector and might cause an overstock.
However, the Japan Chain Store Association reported that sales of livestock products in February were 107.1% higher than the same month of 2019. It is estimated that it will continue to grow while the state of emergency stays in place.
This is not the case for livestock products only, but for most foods. It is very likely that the situation lasts longer since part of the population will continue to avoid visiting places with high infection potential, such as restaurants and bars, even if the effects of COVID-19 are controlled.
José Miguel Sepúlveda, Chilean Commercial and Agricultural Attaché in South Korea
By April 22nd, 2020, South Korea has 10,694 positive cases and 238 deaths from coronavirus, and almost a week has gone by with less than 15 positive daily cases of COVID-19. These figures show a decrease in new infections, the flattening of the curve, and a low mortality rate. These numbers have earned South Korea the recognition of the international community for its handling and control of both the outbreaks and positive cases.
The good work done by the South Korean government was also recognized by its people. On April 15th, the country celebrated the first parliamentary election held during the pandemic with a 66% participation (a historical record since 1992) of more than 30 million voters. This high turnout meant an enormous boost for the current administration thanks to its efforts in containing the pandemic, which translates into a majority in Parliament and probably a continuity in power after the next presidential elections, in 2022.
A key aspect for the evolution of the global pandemic in the coming months, and particularly for South Korea, is that it will become one of the first countries able to control the infection curve and could soon be moving away from the risk of a new outbreak in the short-term. If there is a new outbreak, which has not been ruled out yet, it is expected for prevention measures and higher controls to be reactivated next winter in the Northern Hemisphere.
Given this situation, the South Korean government estimates a growth of around 1% for 2020, which is encouraging when compared to the negative estimates for many developed OECD countries. Additionally, authorities are focusing their efforts on economic recovery, with relief packages for small businesses and measures to offset unemployment with bonuses for the most vulnerable families.
In the coming months, South Korea is expected to show real signs of having the pandemic under control and to keep restrictions for entering the country, mainly the mandatory 15-day quarantine for foreign visitors. In the case of Chile, South Korea will require a visa to enter the country (which was not required until April 13th, 2020). These measures are focused on preventing the entry of new cases, particularly from those countries that are currently at the peak of their infection curves.
Trade fairs or missions are expected to be suspended until the second half of this year since delegations from other countries will not be able to attend, particularly those from countries more impacted by the virus and the unfeasibility caused by the mandatory quarantine.
It is expected for e-commerce and entertainment platforms to consolidate their positions this year, mainly thanks to the need of people to access content, and also the contactless economy. The contactless economy phenomenon has allowed the South Koreans’ food supply to be preserved during these months. The sector has shown a 20% to 30% growth in sales, while traditional retail stores have seen a 15% to 20% drop in sales. New consumers are turning to e-commerce.
The growth in e-commerce would not have been possible without the significant IT breakthroughs developed in South Korea, mainly powered by the 5G network. The arrival of this network in 2019 has allowed citizens to exchange data, communicate with each other, track their purchases, and make purchases safely.
Regarding food supply in South Korea, according to information provided by its authorities, during these health emergency months there have been no food shortages since the South Korean government took timely measures and provided guarantees to avoid speculation in food prices. Additionally, the South Korean government has kept the country open, except for quarantine restrictions. Regarding transportation of cargo, ports and airports are operating at full capacity, allowing Chilean exports to keep entering the country.
In the case of Chilean meat exports and pork in particular (other frozen pork), they saw a 12.6% increase in value during the last quarter compared to the same period of 2019. This is an encouraging sign that may arise from the looming risk over the international supply and logistics chain, mainly for food providers in South Korea. These risks have alerted South Korean importers, who have moved up their purchases from Chile in order to ensure future supply.
Finally, the South Korean government and the authorities involved in the entry of food products into the country are adopting relevant measures to facilitate trade and not affect the food supply chain. One of the measures implemented by the South Korean government is the creation of a group of countries from the region to agree on measures that help guarantee food supply and prevent additional difficulties in the most affected and least developed countries.
With this goal in mind, ProChile’s office in South Korea has promoted measures and coordinated specific actions between Chilean and South Korean authorities to facilitate trade. One of these measures is the exchange of information on certificates for Chilean food products to enter the country in a timely manner, without major delays in customs.
The trust placed in Chile by South Korean authorities is an important asset that we must protect and strengthen. This trust is the product of more than a decade of joint work between technical authorities from both countries, which began during the negotiation of the Free Trade Agreement between Chile and South Korea signed in 2004. This framework for trade has allowed Chile to be recognized by South Korea as a strategic partner during these critical times of paralysis in global trade, to implement trade facilitation measures and thus maintain the commercial flow.
This trade facilitation between both countries is a recognition of the competence of Chilean health agencies, who have become a key player in maintaining commercial flow. It is the duty of all those involved in the production and exporting chain to protect this intangible asset, which the Chilean public and private sectors have built throughout the years, particularly in times of great global commercial uncertainty.
Juan José Vidal, Chilean Commercial Attaché in Shanghai
Although domestic infections have reduced considerably, China is now facing the threat of an increase in “imported” cases. As a precaution, as of March 28th, China will restrict the entry of foreigners throughout its territory, including those with legal residence, although there are some exceptions.
As for commerce, activity is slowly resuming. Southern China, especially Guangzhou, has seen a recovery in business, but there are tighter restrictions to entry some markets, ports, and supply centers. In Beijing, commercial recovery is still slow. The HORECA sector is slowly starting to reopen, while schools are still closed and there is no news on when they might resume their activities.
It is not easy to give a certain forecast for the coming weeks or months, considering that the situation in China and the rest of the world is constantly changing due to this health emergency. Currently, the prevention and control of the epidemic in China continues to improve, but it will be necessary to accelerate production recovery and bring life back to normal. It is not a promising projection, but trade will be hit hard during the first half of 2020, although a new peak of activity is expected as of the second half of the year. This is why it is important to keep working in order to be ready when the time comes.
Regarding food supply in China, information coming from the United States and Europe indicates they are favoring the supply of meat products to domestic consumers. In the case of Canada and various European countries, there are logistics issues with export delivery and distribution, which is affecting the supply of meat products in China, thus opening up a great opportunity for Chilean meat exporters in this country.
In any case, it should be considered that currently China is also favoring the domestic market (mainland China) by reducing pork exports to markets such as Hong Kong.[:]