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China's zero-Covid policy: Little regard for the economy - companies are considering turning away

2022-05-20T13:46:19.611Z


China's zero-Covid policy: Little regard for the economy - companies are considering turning away Created: 05/20/2022, 15:32 By: Christiane Kuehl Leaving prohibited: In Shanghai, hundreds of container ships are stuck in the port due to the lockdown. The zero-Covid policy is weighing on China's economy © Chen Jianli/picture alliance/dpa Case numbers in lockdown Shanghai are falling; as is the n


China's zero-Covid policy: Little regard for the economy - companies are considering turning away

Created: 05/20/2022, 15:32

By: Christiane Kuehl

Leaving prohibited: In Shanghai, hundreds of container ships are stuck in the port due to the lockdown.

The zero-Covid policy is weighing on China's economy © Chen Jianli/picture alliance/dpa

Case numbers in lockdown Shanghai are falling;

as is the number of cities in lockdown.

But the future is uncertain.

Companies active in China are forced to come to terms with the situation.

Beijing/Munich – Resignation is spreading among international companies in China.

A departure from the zero-Covid policy is just as unlikely in the short term as is a way out of the cycle of recurring outbreaks.

Instead of a large vaccination campaign, the government plans to cover all cities with a dense network of "PCR test kiosks".

Without a current negative test, normal life will hardly be possible for the time being.

The future is uncertain.

International companies in the country are forced to come to terms with the situation.

But China is becoming less and less attractive for new projects and global talent.

There is no euphoria among European companies in the country.

Shenyang, which was sealed off for a few weeks, is now almost open again, says Harald Kumpfert, EU Chamber President for Northeast China.

“But there are now tests for this at least every 48 hours.

And many cities do not accept the test results from other cities.” Business trips are therefore not without risk, says Kumpfert.

"Anyone who comes by train or car through a city with a Covid case can then be quarantined." And that still means 28+28 days in Shenyang: first full quarantine and then four more weeks at home.

Zero Covid Policy in China: Four tests within 24 hours

There are similar stories from all over China.

"You need four Covid tests within 24 hours for a short trip between Chengdu and Chongqing, since there are high-risk areas in both cities," reports Massimo Bagnasco from the EU chamber for the south-west of the country.

The two metropolises are only two hours apart by high-speed train.

In the province of Jiangsu near Shanghai, on the other hand, according to the local EU chamber, truck drivers in some cities have to be in quarantine for three days after "entry".

The Yangtse delta in Jiangsu is a stronghold of production by German companies.

Transport and logistics there have shrunk to a fifth since the lockdown began in Shanghai more than six weeks ago.

The ship traffic jams off China's coast are also slowing down the delivery of goods to Europe: The last ships that were processed in Shanghai before the lockdown should have arrived in Germany within a few days.

How empty the shelves will be in Europe will only become clear in the near future.

China: Zero Covid more important than economic growth

It has been shown that even the week-long lockdown in the economic metropolis of Shanghai has not caused the government to rethink: Beijing is apparently even sacrificing growth for the zero-Covid policy.

The full impact of this strategy on the economy has been evident since April.

Industrial production fell by more than three percent compared to the same month last year, retail sales by eleven percent and car sales by as much as 48 percent.

China's export growth fell to its lowest level in two years in April.

"Everything points in the wrong direction," says EU Chamber President Jörg Wuttke.

Economists expect even more severe slumps in May.

Foreign companies were still struggling at the start of the Omicron wave.

Again and again they demanded more predictability and transparency in the measures, a vaccination campaign with international vaccines - and ideally an end to zero Covid.

It should be clear to everyone by now that none of this can be expected in the short term.

The biggest problem is the uncertainty about how things will continue, as the statements made by the EU chamber representatives suggest.

Hardly anyone is currently pushing new projects, most companies are waiting.

It's a problem, says Wuttke, that company directors can't personally look at potential locations for future projects.

"We hope that our board members can travel to China just as easily as they are currently able to do in the countries of Southeast Asia." The EU chamber has been warning for a long time against many companies reorienting themselves to Southeast Asia.

There are less mature supply chains than in China, and the costs are higher.

But zero Covid erases many advantages of China.

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Zero-Covid: Companies and expats consider moving away from China

In a recent EUCCC flash survey, 23 percent of the companies surveyed said they were considering relocating current or planned investments to other countries due to the Covid-19 measures.

An even more recent survey by the American Chamber of Commerce in China also showed that more than half of the US companies surveyed had already postponed or reduced their investments.

According to a recently published survey by the German Chamber of Commerce in China (AHK), 28 percent of the foreign employees of the companies surveyed plan to leave China because of zero Covid.

Tens of thousands of foreigners working in China for international companies and their families have left China since the pandemic began.

According to the EU chamber, another exodus is imminent this summer.

The country's isolation is getting on my nerves.

Recent announcements also do not bode well: for the time being, the Chinese are no longer allowed to travel abroad without a reason;

Passes will only be issued if there is a valid reason for travel.

"It was a huge shock for many of our employees," says Chamber Vice President Bettina Schön-Behanzin from Shanghai.

And Jörg Wuttke added: "It's ironic that we localize our management, but then this management is no longer allowed to travel abroad."

China does not want to put together an economic stimulus package

Some experts are already warning China of a “growth recession” – very slow economic growth coupled with rising unemployment.

Unemployment rose to a good six percent in April;

among 16-24 year olds it was over 18 percent.

Others believe China is in danger of a so-called double-dip recession, similar to what happened in the US in the early 1980s - a recession followed by an expansion, followed by another recession.

And Beijing does not want to react this time with a large-scale economic stimulus package.

The money is simply not there: the state and local authorities are much more indebted than in previous crises – not least because of the earlier economic stimulus packages.

In the quarterly analysis released in April, the Politburo promised tax cuts and other supportive measures.

The chamber representatives report on local support, which is quite helpful.

But as long as after the lockdown is always before the lockdown, there will be no optimism among companies.

(ck)

Source: merkur

All news articles on 2022-05-20

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