Foreign companies urge China to change course on Covid

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By Laura He, CNN Business

Groups representing Western businesses in China are urging Beijing to ease its approach to Covid, saying harsh lockdowns are hurting revenue and investment and forcing a growing number of businesses to consider moving operations out of the world’s second-biggest economy. world.

More than 50% of American companies have delayed or reduced their investments in China following the recent Covid epidemic, according to a survey published Monday by the American Chamber of Commerce in China.

The survey – which was conducted from April 29 to May 5 with the participation of 121 member companies – also detailed the impact of the Shanghai lockdown on American businesses. The city is the financial center of China and has been closed since late March.

As many as 58% of respondents cut China’s 2022 revenue forecast, compared to 54% just a month ago. Almost half said foreign workers are either significantly less likely or unwilling to move to China due to the zero Covid policy.

“We understand that China has chosen to prioritize health and safety above all else, but the current measures are strangling American business confidence in China,” said Colm Rafferty, chamber president in China, in a press release accompanying the results of the investigation.

“Our member companies urge the government to strike a more optimal balance between pandemic prevention, economic development and opening up the country,” he added.

European companies warn China

European companies are also worried.

According to a flash survey published by the EU Chamber of Commerce in China late last week, as many as 23% of European companies are considering moving their investments out of China – the highest proportion in a decade.

“China must change its strategy”, Jörg Wuttke, president of the European Union Chamber of Commerce in China, CNN Business told CNN in a phone interview.

“We had two good years. But now it’s time to do something different. Zero Covid may not be the right tool now.

Wuttke said most European businesses were positive in January as China’s strict Covid approach had proven effective in containing the spread of the virus at that time, and the economy continued to grow.

But the highly contagious variant of Omicron has put Beijing’s zero Covid policy to the test, and massive lockdowns have brought economic activity to a halt in major cities. At least 31 cities are under full or partial lockdown, according to CNN’s latest calculations.

In April, China’s gigantic services sector contracted at the second-fastest pace on record as Covid lockdowns hit small businesses hard. Its manufacturing sector has also contracted sharply, dragging down the economy.

“We have seen damage to our business,” Wuttke said, adding that companies are suspending investments because of what is happening in China.

The flash survey showed that 78% of 372 respondents believe that China is a less attractive investment destination due to its Covid Restrictions.

“What’s really hurting the economy is the lack of visibility,” Wuttke said. “No one knows when this situation will change.”

“Chinese officials are painfully aware of the economic pain [caused by Covid policy]. But they fundamentally struggle to change the narrative,” he added.

The-CNN-Wire
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