Europe's companies in China groan under the zero-Covid policy - Chamber of Commerce fears empty shelves in Europe

Created: 05/05/2022, 16:02

By: Christiane Kuehl

This container made it through to Rotterdam: lockdown and ship jams in Shanghai will soon also be felt in Europe © IMAGO/Jochen Tack

China's economy is suffering from the zero-Covid policy.

According to a recent survey, almost all European companies also have major problems with their day-to-day business.

Empty shopping shelves are threatening soon in Europe

Beijing/Munich – Zero Covid and no end: In China there is concern that the economy will continue to be burdened by new lockdowns and endless series of tests.

This is also affecting foreign companies more and more.

A new flash survey by the EU Chamber of Commerce (EUCCC) in China shows that virtually all European companies are affected by the zero-Covid policy - and to a huge extent.

For three quarters of those surveyed, the corona measures have had a negative impact on their overall operations.

92 percent report disrupted supply chains.

And there is no way out in sight.

Government representatives repeatedly emphasize that they will stick to the strict corona policy.

It is quite possible that China will only be the last country in the world to find its way out of the corona pandemic, said EUCCC President Jörg Wuttke on Thursday in Beijing when the survey was presented.

It's a sobering realization. 

According to the survey, many companies struggle with the simplest tasks.

You don't know one day whether you will still have enough staff available to keep the business running the next day - or whether your premises might suddenly be closed completely.

According to the survey, 85 percent report difficulties in accessing raw materials or components.

When it comes to distribution, the picture is the same grim: 87 percent have difficulty shipping their finished products within China and 83 percent have difficulty exporting to the rest of the world.

Well over 90 percent have problems with logistics and warehousing.

China's zero-Covid policy: a threat to world trade

According to Wuttke, companies need a new Covid policy in China.

"It's such an important market for us." In 2021, China was responsible for 19 percent of global economic growth.

The huge country accounts for 13 percent of world trade.

Therefore, according to Wuttke, German consumers will soon feel the consequences of the lockdowns.

Wuttke does the math: Seagoing ships normally need 35 days to travel from the Far East to Europe.

It is now almost 35 days since the start of the lockdown of Shanghai - and with it its ports.

Accordingly, the last ships that left there before the lockdown are arriving in these days.

Since then, a huge ship jam has formed off Shanghai.

"Three percent of global shipping is stuck off Shanghai," said Wuttke.

Logisticians confirm the problems.

“We are already seeing some bottlenecks in the US and Europe.

Goods that people need are stuck on boats that have already been dubbed 'floating warehouses,'" Chris Rogers, economist at digital freight forwarder Flexport, told Merkur.de.

“The time at sea has increased significantly.

Last week it was an average of 120 days.” According to Rogers, Shanghai handles a good 10 percent of Chinese exports in each sector for computers and car parts.

In the case of semiconductors, Shanghai's share is almost 20 percent.

"Therefore, the bottleneck for exporters of all these commodities is a serious problem." The longer the lockdown lasts, the longer it takes to catch up afterwards, according to Rogers.

"That means,

that the catch-up time in July and August will be closer to the peak shipping time.

At this time, goods will be shipped for the high season of export markets for the November and December holidays.”

The “MarineTraffic” app can be seen on a smartphone monitor, showing the positions of cargo ships (green) in front of the port of Shanghai.

© Erich Braunsperger/dpa

According to data from the Federal Statistical Office, trade between Germany and China amounted to around 245 billion euros in 2021.

The People's Republic is an enormously important growth market for many German corporations;

many owe their good business deals to the successful business in China, which is stable and constantly growing for years.

And now?

Zero-Covid: Uncertainty is the biggest problem

"We don't yet know what damage zero-Covid will do to the economy," said Wuttke.

"The predictability of the Chinese market has disappeared." As a result, China has lost one of its greatest strengths.

According to the chamber, uncertainty about the future is the biggest problem for companies.

Almost 60 percent of those surveyed now expect a decline in sales for 2021.

"At the moment it seems that China is putting its own growth course on hold," says Wuttke.

"And that's bad for the entire world."

Shanghai is by no means the only city in China where lockdowns and other restrictions apply.

China has imposed restrictions in at least 45 major cities since early 2022, according to the EUCCC — which together make up 40 percent of China's gross domestic product with a total population of 370 million people.

There is currently a threat of a lockdown for the capital Beijing, which has already sealed off several residential complexes and is testing the entire population.

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A comparison of the EUCCC survey with a similar flash survey conducted by the German Chamber of Commerce in China (AHK) at the beginning of April shows how quickly the situation has deteriorated within a few weeks.

At that time, just a few days after the start of the lockdown that was still in force in Shanghai, 51 percent of the German companies surveyed stated “a complete disruption or serious effects on their logistics and warehousing”.

46 percent reported such a disruption for their supply chains.

Now almost all of them are.

According to the new survey, 91 percent of EU companies would like a stronger focus on a vaccination campaign instead of endless series of tests.

75 percent said they wanted a different corona policy in general.

But Wuttke does not expect the zero-Covid strategy to end for the time being.

The Chinese Communist Party has devoted itself too much to this strategy, which so far can definitely be seen as a success.

Only with the highly contagious omicron variant does it no longer work.

"China risks becoming a victim of its own success," said Wuttke.

"Politicians were proud of their success story, but now China seems like a latecomer." Companies have to take the blame.