Shanghai business optimism hits record low as Covid controls linger

More than half of Chinese companies polled by a leading US trade group in Shanghai believe the country’s economic recovery is in decline, as prospects for the future plummet.

The American Chamber of Commerce in Shanghai has called for the introduction of China’s strict zero-Covid policy as it found that about 307 companies it surveyed are going backwards financially, mainly because of the coronavirus measures.

The call came as the appointment of Chen Jining as Shanghai’s chief executive was announced, following the promotion of former leader Li Qiang to China’s top political chief. Chen, 58, who holds a PhD in engineering from Imperial College London, is currently part of the country’s executive committee. His predecessor led a two-month shutdown of business in Shanghai earlier this year.

China should “look for a better way to manage Covid-19 based on a better balance between public health and the economy,” said Eric Zheng, president of the Shanghai Chamber, adding that these measures “have raised business expectations”.

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Although 55 percent of businesses surveyed remained optimistic over the three- to five-year period, this was the lowest percentage since the survey began in 1999.

Although three-thirds of respondents were profitable in 2021, less than half expect their income to grow in 2022, the lowest share in a decade. Only 47 percent think that China’s economic growth will outpace the growth of their global industry.

China’s economy grew by 3.9 percent in the third quarter, according to data released on Monday, a week later than expected. The increase is below Beijing’s ten-year low of 5.5 percent, and the World Bank expects China to slow Asia’s growth rate this year for the first time since 1990.

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Business activity has been affected by the two problems of the property crisis, which began a year ago with the instability of the producer Evergrande, and the zero-Covid controls that have been extended this year amid the omicron virus. .

At a time when some major economies have eliminated many measures to prevent Covid, PCR testing is required almost every day on public transport or entering public places. The government’s chief epidemiologist recently said they could conduct 1bn Covid tests a day.

Factories in China often use so-called “locked-in” machines, where workers don’t leave the site to continue working in locked-down jobs. This week, viral videos surfaced of workers claiming they could not get supplies to the Foxconn factory, which makes Apple’s iPhones.

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As well as disrupting domestic operations, the Covid measures have made it difficult for foreign businesses to enter the country. This week, the government unveiled measures to make it easier for foreign visitors to enter, and for the summer, hotel quarantine requirements were cut to 7 to 10 days from the previous 14.

Beijing has refused to give a timetable for a full reopening, and its approach was widely supported by state media in the run-up to the 20th party congress last week. The chamber’s report highlighted many other issues facing Chinese foreign businesses, saying that the Covid-19 pandemic is a “temporary” issue.

“I hope, at some point, this [zero-Covid] is over, but there are long-term challenges,” Zheng said, pointing to domestic competition, political tensions and “high labor costs”.


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