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Many countries have had to navigate the balancing act of keeping the economy alive versus protecting citizens from COVID in recent years. In China, patience with its zero-COVID policy – one of the world’s toughest strategies for dealing with the pandemic – are wearing thin among workers and students. Sporadic protests have erupted all over China in recent weeks, triggered by the deaths of ten people in a fire in an apartment block in Ürümchi, Xinjiang in November. But even with signs that restrictions are starting to relax across the country, including those that were outlined by China’s State Council this week, the impact on the all-important economy will not be as straightforward as the government in China might hope.

The conundrum for China is that the state has promised its citizens safety from the virus through its zero-COVID policy, which has led to large sections of the vulnerable population being unvaccinated. No government wants to concede it may have been wrong about something, but it is particularly important for the credibility of the social contract between the Chinese Communist Party and the people. The authorities guarantee social and economic stability and the freedom to get rich, in exchange for absolute power. But with the slowing of China’s GDP growth, rising graduate unemployment (youth unemployment reached 20 percent in July), and increasing economic hardship, China’s social contract is starting to unravel.

Chinese Decision Making

The upside of authoritarian governance is that decisions can be made quickly in times of crisis. The Chinese government was quick to react to the 2008 global financial crisis with a 4 trillion yuan ($573 billion) fiscal package. After a sharp fall in GDP in 2008, the economy grew by 8.7 percent in 2009 and over 10 percent in 2010. The rate of growth then settled at a healthy but sustainable 6.8 percent.

When dealing with the pandemic, after the initial confusion about its source and apportionment of blame, the government in China acted swiftly to lock down the economy and flatten the curve. The result was that only 5,233 COVID deaths had been reported as of December 2022, compared to 1.1 million in the U.S. But daily COVID cases in China were at 37,828 on November 30, 2022, which is higher than the peak in April when the economically damaging lockdown in Shanghai was imposed. And the nation’s GDP fell by 2.6 percent in the second quarter of this year before recovering with a 3.6 percent rise in the next quarter.

So, clearly there is a trade-off to consider between the economic and social cost of China’s zero-COVID policy and the health benefits for the vulnerable. This means it is important to consider the short-term cost of the lockdown, as well as any long-term consequences. The immediate costs have been the disruption to production and global supply chains, but the domestic service sector was also particularly hard hit. Economic growth has moved from a steady quarterly rate of 1.7 percent following the 2008 global financial crisis, to a collapse and recovery in 2020 and a second downturn in quarter two of 2022.

The likely long-term economic impact is the uncertainty caused by policy changes, which has affected domestic and foreign investment and caused supply chain disruption. Real GDP per capita (real GDP divided by the population) is projected to grow at 6.3 percent a year in China and, according to my calculations using Federal Reserve Economic Data and population figures from the World Bank, this would put the cost of long-term lost output at a massive 72 percent of real GDP per capita relative to 2018 GDP. This is a huge loss for the economy in China and research shows that output loss on this scale is rarely recovered in the long term. 

Foreign firms – including those in the fashion and broader retail space – are rethinking their supply chain arrangements and the all-important human capital brought by foreign workers to China has been heading for the exit. As with after the financial crisis, the pandemic could lead to a new, lower trend growth rate that will only emerge with time.

Other Economic Headwinds

Of course, repositioning supply takes time and China is secure in the knowledge it remains the workshop of the world for now. But there are other headwinds: debt to GDP rose to 270 percent in 2020 driven by credit advances to real estate developers and also to local governments for infrastructure spending. Central government debt as a percentage of GDP has also risen from 20 percent in 1998 to nearly 70 percent in 2020. Government debt is set to rise to 78 percent in 2022. These are large figures for an emerging economy. And if China is to keep to its promise of protecting its vulnerable citizens, higher spending on health for its aging population could cause this debt ratio to rise further.

The pandemic has raised government spending in China, as it has done in all countries. This has created business opportunities, but it has also highlighted a difference between local government decision making and central government edicts. Sometimes, an overcautious regional response goes beyond the guidelines set by central government – for example, when provinces enforce longer lockdowns than the recommended five days or impose centralized quarantines rather than asking people to stay at home. This also affects the economy in China and must be taken into account by the government.

But of course, this is not just about economic costs, people’s wellbeing and health must also be considered. And things may even be worse in China than observers realize – recent research suggests that autocratic governments can overstate economic growth by as much as 35 percent. China’s anti-COVID protests are more than about COVID. They are expressions of frustration with a system that is opaque and unaccountable. Relaxing the restrictions is a step in the right direction, the effect depends very much on the decisions the government makes from now on.


Kent Matthews is a Professor of Banking and Finance at Cardiff University. (This article was initially published by The Conversation.)

It has been a difficult few years for those in business. Lockdowns shut down whole industrial sectors worldwide, turning profitable businesses into loss-making ones, while a lot of smaller businesses went under entirely. Many companies have been hoping for a return to some type of normality after the enduring impacts of the COVID-19 crisis. However, there are strong signals that a resumption of how things were is not on the cards any time soon, as the world appears to have entered into an age of accelerating grand crises.

Even before the pandemic hit in early 2020, the climate crisis was increasingly disrupting the world (and the companies operating it in) through extreme weather events. Then, just as some countries had declared their war against COVID to be won, the invasion of Ukraine has not only reshuffled global geopolitics, but also led to a dramatic increase in energy and food prices, having big knock-on effects on a whole host of other sectors. And still yet, as of this summer, brands, including those in the robust luxury space, were cutting down their expectations for the all-important Chinese market in light of the latest wave of COVID lockdowns. (“Forecasted growth for luxury and premium consumer brands was cut by 15 percentage points, and down nearly 25 percentage points for luxury brands alone,” CNBC reported in June, citing the results of an Oliver Wyman survey.)

One day there may be a time after COVID, after the Ukraine war, and even after the climate crisis, but there is unlikely to be a point of general stability any time soon. Humanity is pushing environmental limits to breaking point, risking further crises – whether in terms of disease, conflict, or natural disasters. Businesses, therefore, need to shift how they operate. The most drastic example of such action to date comes by way of Patagonia’s recent restructuring, which saw founder Yvon Chouinard and his family donate their $3 billion ownership stake in the privately-held outerwear-maker in order to “preserve the company’s independence and ensure that all of its profits are used to combat climate change and protect undeveloped land around the globe.”

Short of engaging in an unprecedented shift in ownership, there are things that companies and their leaders can do to respond to current crises, become better prepared for future crises, and address their own role in generating these crises in the first place. Here are three types of business models companies should start adopting now …

1. Respond to Crises

What is needed are reactive business models that can respond to crises at hand. Such adaptability will naturally have a survival element, in which organizations do whatever is necessary to mitigate negative effects on themselves. This means aligning companies’ management practices with the “new normal” after the crisis, instead of holding on to the old normal from before. Where appropriate, such models should also have a crisis-mitigation element, addressing the wider negative effects of the crisis at hand where they can.

It appears fossil fuel behemoths such as Shell and BP might be starting to do just that. Having long been under attack for knowingly contributing to the climate crisis and counteracting shifts to more sustainable energy systems, they appear to now be adapting to crisis forces. These forces include, most notably, the global trend towards phasing out fossil-fuel vehicles. As such, these companies have begun to transform key aspects of their business. A first move, for example, seems to be repurposing their petrol station operations into an electric vehicle charging infrastructure. As they ride the waves of the climate crisis, we can expect to see them make many disruptive greening changes like this.

2. Be Ready for Future Difficulty

Businesses also need to move from stability-based business models to accepting that the business reality is now one characterized by volatility, uncertainty, complexity and ambiguity. Value propositions encompass the benefits a business offers, for example to its customers, employees, and the community. Building business models for this new world means establishing value propositions for companies that are fit for the long run, that can morph into all kinds of crisis scenarios. It also means being agile and quick to adjust. 

One form this could take, for instance, is for a business to offer products and services that address timeless and fundamental needs like health, food, or security, rather than short-lived superficial wants like those related to fast fashion or the latest technological fads. A good example of such a business model is that of Chinese electronic goods corporation Haier, which has  explicitly tuned in to an ever-changing world, aiming to deliver “products that respond to the constantly changing needs of the modern home.” For instance, Haier responded to Asia’s air pollution crisis by developing an integrated air conditioner and air purifier.

Alongside this, Haier employs its unique “RenDanHeYi” (or 人单合一), which freely translates to “one single person in unity,” way of working, making it a collective of smaller, semi-autonomous companies that gives both individual freedom and collective responsibility to self-organized micro-entrepreneurs. This makes Haier a fluid, agile and resilient organization. By operating as a network of micro-enterprises, each of which works closely with customers to respond to their changing needs and situations, the business can evolve more easily as each new crisis plays out. Because of these features in their business model, Haier has done exceptionally well during and after the COVID crisis.

3. Help Prevent Crises of Tomorrow

Finally, businesses can better set themselves up for the future by adopting models that specifically mitigate or even prevent future crises. While COVID, the Ukraine crisis, and climate change are still ongoing problems, many business models have been geared towards keeping other things from becoming the next grand crisis. Some companies, for example, are adopting business models that promote reconciliation and peace, with view to preventing disruptive future armed conflict. Examples range from former Colombian guerrilla group members building adventure travel businesses that show the previously hidden side of the conflict, to coffee cooperatives in Rwanda designed for Hutus and Tutsis to reconcile through collaboration.

Managing businesses in an age of accelerating crises is challenging. However, transforming business models and managerial practices can go a long way in both making current and future crises manageable, and possibly even mitigating future crises.


Oliver Laasch is a Senior Lecturer in Entrepreneurship and Innovation at the University of Manchester. (This article was initially published by The Conversation.)

Ongoing tensions between the United States and China have affected many companies around the world. At the same time, the COVID-19 pandemic has also made it very clear that when it comes to a company’s supply chain, reliance on China can have disastrous consequences in the event that these supply chains are interrupted. During this consistently challenging and uncertain time, many companies across various industries have been trying to reorganize their supply chains and reduce dependencies that are vulnerable to political tensions and rising costs

While the pandemic has already compelled many companies to become more agile – for example by increasing their number of suppliers – business leaders must now start thinking about the long-term implications of increased uncertainty in the markets since volatility is likely here to stay. Ongoing research suggests two factors are most important when making decisions on how to respond to the U.S.-China trade war: location and supply chain dependence, and technology. 

Ending dependence on two fronts

The first factor deals with how much dependence companies have on Chinese suppliers and customers. China offers a uniquely complete combination of supply chains and a growing middle class that fuels high demand for almost any good; luxury goods (and the robustness of Chinese demand for them) are among the most headline-making. According to a United Nations report, China is home to almost every industry and its companies offer almost the full range of products and services in each of these industries. 

The second factor is technology dependence. In some industries, blazing a trail on the technology frontier is key to success. North America is still the leading region for many of these technologies (including biotechnologycultured meat, and artificial intelligence) and it is increasingly concerned about its intellectual property falling into Chinese hands. Recent restrictions on Chinese researchers in Canadian universities are one example of protectionist actions spurred by these concerns.

In the future, companies that deal with North American technologies in cutting-edge areas will probably have to avoid delivering to China or using this technology in collaborations with any Chinese companies.

Low vs. high Chinese dependence

Companies with different degrees of dependence on Chinese supply chains and North American technologies are likely to behave very differently. There are four scenarios. First there are companies with low reliance on both North American technology and Chinese supply chains that tend to relocate their manufacturing facilities to a third, low-wage country, such as Vietnam and India, because it is easy to find alternative production sites and to access technology. 

In addition to big names in the mass-market fashion and retail space, Samsung’s display business, which offers digital signage and hospitality displays, is an example. The tech company’s reliance on supply chains in China is low because it owns a relatively complete supply chain ranging from upstream activities (inputs to products, such as chip design) to downstream activities (outputs such as products, like smartphones). In short, Samsung designs, manufactures, and markets its own products. Its reliance on North American technology is also low because the technology required to produce display devices is not limited to North America. As a result, Samsung has shifted its manufacturing of IT and mobile displays from China to India, avoiding tariffs and higher wages in China.

But companies with high dependence on Chinese supply chains could have a hard time leaving China. Take Google’s Pixel phone as an example. In 2019, Google decided to relocate the manufacturing of the Pixel phone from China to Bac Ninh in northern Vietnam to avoid tariffs into the U.S., an important market for its phones. Two years later, Google reversed the decision and started producing the new smartphone in China due to supply chain problems amid increasing uncertainty from pandemic-related restrictions

Relocations to North America

Companies with a high reliance on North American technology and a relatively low reliance on Chinese supply chains, on the other hand, are likely to relocate manufacturing to North America. For instance, TSMC, one of the world’s leading semiconductor foundries, uses substantial American technologies and equipment, including advanced equipment for ultraviolet lithography. Therefore, the Taiwanese company decided to build a new advanced chip factory in Arizona, a decision closely connected to its dependence on both U.S. technology and customers. 

Companies with high reliance on both North American technology and the Chinese supply chain face the biggest challenges. They have no choice but to keep operating in both countries while navigating political risks and market turbulence. 

Tesla is a prime example of this. While dependent on its research and development in the U.S. to enhance its leading technology position, China’s supply chain benefits Tesla with manufacturing speed, cost, and proximity to the Chinese market. That leaves companies like Tesla with no choice but to navigate political tensions and stay present in both markets. As a result, Tesla has built and expanded a factory in Shanghai. Additionally, it has promised to conduct more research and development activities in China and to recruit local talent for local design.

The COVID-19 pandemic has been another wake-up call for business leaders – including in their retail space – that should have prompted them to consider the importance of technological progress and supply chain security. While we do not know how long the pandemic and its restrictions will endure, successful companies think ahead and build resilience and flexibility into their operations.


Felix Arndt is the John F. Wood Chair in Entrepreneurship at the University of Guelph. 

Abby Jingzi Zhou is an Associate Professor in International Business at the University of Nottingham. 

Christiaan Röell is a Lecturer in International Business at the University of Sheffield. 

Steven Shijin Zhou is an Associate Professor in International Business at the University of Nottingham. 

Xiaomeng Liu is a PhD Student in International Business at the University of Nottingham. (This article was initially published by The Conversation.)

Luxury brands’ latest revenue results and official reports on U.S. consumer spending, which held “steady” in July despite rising inflation, indicate that shoppers are shopping – but that does not mean that brands/retailers’ inventories are not also rising. Retail inventories grew by 2 percent in June (up from a 1.6 percent increase in May), the Commerce Department revealed this past week, pointing to an 18.5 percent overall rise in “business inventories” on a year-on-year basis in June. Retail titan Walmart, whose inventory is up by 25 percent compared to this time last year, said last week that “it had cleared most of its summer seasonal inventory,” per Reuters, “but still had work to do in reducing stock of electronics, home goods and apparel.” 

Reporting its results for the 3-month period that ended July 30, Target revealed that its profit fell by nearly 90 percent year-over-year due, in large part, to “steep markdowns” on sizable quantities of unwanted merchandise. The company said that unsold inventory for the quarter rose by 36 percent. Kohl’s also reported higher inventory levels – up 47.6 percent for the quarter that ended on July 30, with chief financial officer Jill Timm saying in a corresponding call that the company is “address[ing] inventory, including increasing promotions, being aggressive on clearing excess inventory and pulling back on receipts.” 

Not limited to mass-market entities, Michael Kors and Versace owner Capri Holdings reported earlier this month that for the quarter ending on July 2, it was left with $1.27 billion in inventory, a 66 percent increase over “a historically low level [of inventory] last year” when the group did “did not have enough inventory to meet consumer demand.” In a call with analysts, Capri chief financial and operating officer Thomas Edwards said that “first quarter inventory increased 25 percent,” but noted that the group “anticipated elevated inventory levels as we implemented new programs to receive seasonal merchandise earlier as well as hold more core inventory given supply chain delays.” Edwards contends that Capri expects that inventory levels “will moderate sequentially [for the remainder of the year] and as planned, be below prior year by the end of the fiscal year.” 

As for the impact of such enduring inventory excess on off-price market retailers, which have built big businesses by acquiring – and then selling – over-produced and/or unsold goods from brands and other retailers, the effect may not be as glowing or as straightforward as the media has been suggesting. Ross Stores reported its Q2 earnings on Thursday, stating that while average store inventory during the quarter was up by 15 percent compared to last year and total consolidated inventories were up 55 percent at the end of the quarter versus the same period in 2021, sales results were still “disappointing,” management said. Sales for the three months ending on July 30 totaled $4.6 billion versus the $4.8 billion in sales the Dublin, California-based generated during the same period last year. And its comparable store sales were down 7 percent on top of a “robust” 15 percent gain in the second quarter of 2021. 

Reflecting on the results of Ross Stores, one of the biggest players in the off-price space, Neev Capital managing director Rahul Sharma stated that a 55 percent rise in inventory and a five percent drop in sales makes for “one of the worst spreads in retail.” 

At the same time, revenue for T.J. Maxx, Marshalls, and HomeGoods-owner TJX Cos. similarly fell short of expectations in Q2, despite an influx of buying opportunities for the retail group, which reported a 5 percent decrease in comparable store sales for the quarter ending on July 30. The Framingham, Massachusetts-headquartered company’s net sales dropped to $11.8 billion for the quarter from Q2 2021’s $12.08 billion. Analysts expected TJX to generate $12.05 billion in revenue, and CEO Ernie Herrman blamed “historically high inflation” as putting a dent in consumers’ discretionary spending. In connection with its Q2 results, TJX updated its expectation for U.S. comparable store sales for the full fiscal year in 2023, projecting a decrease of 2 to 3 percent, versus its previous guidance of an increase of 1 to 2 percent. 

These results seem to stand in contrast with the usual course of business for off-price retailers, which traditionally benefit from economic downturns and consumers’ corresponding practice of “trading down” when it comes to discretionary goods, and also whose success is not not just dependent on price but by supply – namely, the companies’ abilities to provide consumers with access to desirable products at lower prices. This model makes the offerings, themselves – and the timeliness and attractiveness of those offerings – a vital part of the equation in driving demand.  (This is likely part of why even off-price retailers are currently stock up excess inventory.)

After all, TJX previously stated in a routine filing with the Securities and Exchange Commission that one of its core advantages is the way that it “consistently offer[s] customers a rapidly changing merchandise assortment at everyday prices,” a point that emphasizes the important of both price and selection of goods. (The demand-driven-by-supply model is not terribly unlike the resale market, with The RealReal founder and CEO Julie Wainwright previously asserting that supply is the “lifeblood” of the company’s business and the primary driver of demand.)

Stumbling by off-price retailers comes as the off-price segment has “increasingly been a growth engine: it expanded faster than the overall industry before the pandemic, it experienced a less pronounced dip in the initial phases, and it is set to grow five times faster than the full-price segment from 2025 to 2030,” McKinsey stated in a report this spring, which noted that growth will likely be compounded by the fact that off-price “has been well positioned to capture an increasing percentage of shoppers moving online.” It also follows from predictions from analysts that off-price names are among those that are situated to fare well in furtherance of the larger return to retail in the post-Covid marketplace.

No longer operating the way that they did in a pre-COVID world, fashion and luxury brands have been forced to face the reality that they cannot stay ahead without increasing their data capabilities. “Data will be the key to unlocking the insights needed to adapt to change and to reengage customers in the coming months and years,” McKinsey analysts stated in a note last year, reflecting on the impact of the pandemic on fashion and luxury brands. However, they asserted that the pandemic also “exposed a major shortfall in data gathering and analysis across much of the [fashion and luxury] industry,” meaning that “the sooner fashion and luxury companies learn to harness the power of data, the better.” 

The notion that fashion and luxury brands have access to a wealth of structured data on their customers that can be collected and processed to drive sales, but that they are “often under-utilizing this data, and, furthermore, ignoring the vast reams of unstructured data (such as consumer comments on social media, affluent influencers’ photo feeds on Instagram, and engagements across multi-channel customer journeys) that can be mined to glean invaluable insight into customer lifestyles, shopping preferences, and purchase behaviors,” is enduring in a post-pandemic world.  

A survey conducted by the Luxury Institute’s Affluent Analytics Lab reveals while some brands may have some out of the pandemic stronger thanks to their use of big data, most brands in luxury, across all categories and levels, are not there yet. Most brands appear to be playing at “aspirational” levels when it comes to their data and analytics capabilities, the Affluent Analytics Lab found in connection with a survey of executive-level figures from an array of global luxury goods and services brands, as well as their top consultants, this spring.  

The results indicate that data and analytics processes across most luxury enterprises are “broken,” the Affluent Analytics Lab states, which points to the following as some of the key highlights from its survey … 

Data Collection & Integration Capabilities 
When asked to rate their – or their client’s brand’s – data collection capabilities, a majority of respondents (56 percent) are neutral (34 percent), dissatisfied (20 percent), or very dissatisfied (2 percent). A scant 2 percent said they are very satisfied, while 42 percent are satisfied that their brand’s data collection is adequate. While data collection is the one area in which participants provide the highest ratings in data capabilities, beyond that, internal enterprise data and analytics capabilities ratings go downhill.

When asked to rate whether data collected from various internal (e.g., transaction and website navigation data) and external sources (e.g., vendor third party data) has been integrated into one seamless view of the customer, 72 percent of survey responders stated this spring that this critical step has only been “partially addressed,” while 15 percent stated that it has not been addressed. Only 13 percent said that they feel that this need has been addressed adequately by the enterprise.

Data Access for Analysis 
The ability to access data that is internally stored in one place is important for the various groups within the enterprise – including (but not limited to) logistics, finance, marketing, and sales – to be able to use the data readily. This is also known as data democratization within an enterprise. On this important process, 54 percent of survey participants responded that this is only partially addressed by their employer-company, 28 percent reported that it is not addressed, and a minority (18 percent) said that it is fully addressed.

Analytics Culture & Capabilities
With respect to having cultivated a data-driven, analytics-first mind-set and brand culture within their enterprise, a full two-thirds of responders (67 percent) state that this is only “partially addressed,” while 26 percent feel it is not yet addressed at the company level. Only a low 8 percent feel their enterprise has an analytics culture. With the foregoing in mind, it is no surprise then, given the prior reported lack of an analytics culture in most enterprises, that a strong 70 percent of survey responders gave a neutral (39 percent), dissatisfied (29 percent) or very dissatisfied (2 percent) rating to the analytics capabilities of the brand. A scant 2 percent said that they are very satisfied – while 29 percent said that they are dissatisfied.

Analytics Tools & Expertise 
Most luxury brands report that they lack analytics expertise. Only a scant minority (5 percent) reported that the brand has personnel with modern analytics training and skills, such as data science, AI, and machine learning, to execute their analytics. (In other words, companies are lacking key data architect, data scientist, and data steward professionals to help “ensure that core decision makers, such as designers, merchandising teams, and e-commerce teams, can translate data and analytics to fit business needs,” per McKinsey.) A whopping 95 percent reported that this critical need is partially addressed (56 percent) by the company or not addressed at all (39 percent).

And only 8 percent of luxury brands executives revealed that they use modern analytics tools, such as data visualization and powerful, self-service business intelligence tools, to conduct customer analytics. An overwhelming 92 percent of the responders stated that the need is not fully addressed (67 percent) or not addressed at all (25 percent).

Ultimately, data collection is an area where there is the highest level of satisfaction reported by luxury enterprises, according to the Luxury Institute. Yet, only a minority of brands reported being satisfied. Once the data is collected, most enterprises reported “systemic failures across all elements of the data management and data analytics processes and capabilities.” Qualitative responses as to how the data is used indicate that luxury brands primarily use data for “basic and rudimentary tasks, such as to measure outputs (email campaign results, total sales, etc.)” as opposed to generating high-performance inputs that “accurately define and respectfully target pinpoint, high propensity audiences.”