What do European businesses face with China’s zero Covid policy

Shanghai, home to the world’s largest container port, on March 28 began blocking the two parts and has not yet announced when the restrictions will be lifted.

Yang Jianzheng | Visual China Group | Getty Images

BEIJING – Chinese control of Covid has disrupted supply chains and highlighted the daily lives of workers, primarily in Shanghai and Shenyang, according to a number of anecdotes from the EU Chamber of Commerce in China.

Over the past few weeks, Mainland China has struggled to control its worst wave of Covids since the initial shock of the pandemic in early 2020. While the quick blockades then helped the country control the virus and return to growth, the latest outbreak is due to the more transmissible option of omicron.

Shanghai, home to the world’s largest container port, on March 28 began blocking the two parts and has not yet announced when the restrictions will be lifted.

According to members of the EU House, the volume of ports in Shanghai has decreased by about 40% for the week, said on Wednesday Bettina Sean-Behanzin, chairman of the Shanghai branch and vice president of the chamber.

She noted that while the port is “technically operating normally”, logistics continue to face problems due to a shortage of truck drivers who are stuck in a blocking mode or need frequent negative virus tests.

In a statement Saturday, the Shanghai International Port Group said the ability of ships to reach designated places for unloading or loading cargo was more efficient than last year as a whole. Since March 28, the average waiting time for container vessels in the port has been less than 24 hours, the port said.

“Shanghai is in an exceptional state,” Sean Behanzin said. “There is a strong sense of uncertainty all over the city. It is fueled by a shortage of supplies, endless closures and a really great fear of being sent to these quarantine camps.”

In an effort to cope with the rise in cases, Shanghai authorities have set up makeshift quarantine centers.

Sean Behanzin noted reports that people living indoors in the city had to wake up at 4am to compete for online vegetable delivery.

Companies that are licensed to maintain activities – in the food, pharmaceutical or chemical industries – must keep employees in a bubble around production facilities, Sean-Behanzin said.

“We hear more and more that some workers are no longer volunteers because they are gone [a] the end is visible and they don’t want to eat and sleep on the spot, ”she said.

Local authorities allowed a similar policy of staying in place during about a week-long closure last month at the southern technology and manufacturing center of Shenzhen.

Two days after the blockade was lifted, Klaus Zenkel, president of the EU Chamber of Commerce in South China, said the company he visited still had “many, many folding beds” that the company planned to keep on hand because they were unsure , whether they will be needed again soon.

China’s Ministry of Commerce did not immediately respond to a request for comment.

Car supply chains

In the northern Chinese city of Shenyang, locals remain closed for more than two weeks, said local branch chairman Harald Kumpfert.

He said the BMW joint venture in the city could initially support production, but had to stop indefinitely, “because the supply chain cannot be maintained.”

“Any transport stops on the road,” Kumpfert said. “You would be caught by the police if you were on the road and you don’t have a special permit.”

BMW did not respond to CNBC’s request for comment.

Volkswagen, which has plants on the outskirts of Shanghai and in a major city in Jilin province – also closed – said the two production sites would remain closed on Wednesday and Thursday.

Kumpfert also said anecdotally during a webinar on Wednesday that the member company was unable to obtain a loan because the bank said it could not issue loans due to the number of insolvencies and bankruptcies. It was not clear what the size of the loan and the bank.

Limited nationwide influence

Representatives of the EU House in the southwest and other parts of China noted some disruptions in supply chains, but overall less Covid influence on local operations. The Chamber noted that they do not know the situation with Covid in rural China.

Citi analysts said Wednesday that they see a “significant impact on consumption” but less impact on production and investment from the Omicron wave in March.

“Although Shanghai and Guangdong Province accounted for 7.3% and 23.1% of Chinese exports and 14.4% and 18.5% of imports in 2021, we believe the impact on trade can be controlled: the blockade of the semi-city in Shanghai has only just begun since March 28, and Dongguan Shenzhen was completed within a week, ”analysts said. They expect GDP growth in the first quarter of 4.7% compared to the previous forecast of 3.8%.

Last week, a survey of U.S. businesses in China found that 54% of respondents had lowered revenue forecasts for 2022 because of the latest Covid-19 outbreak.

Among manufacturers, more than 80% reported a slowdown or reduction in production, as well as supply chain disruptions. The U.S. Chamber of Commerce in China, based in Beijing, and its counterpart in Shanghai conducted a survey last week.

Long-term problems

Representatives of the EU House said that the long-term impact of Covid on China – especially in connection with the preservation of the blockade in Shanghai – is the preservation of talent. They noted that travel and quarantine requirements related to Covid, especially for entry into the country, are already preventing new foreign employees from working in China.

Shanghai has been a hub for foreign business in the country, thanks in part to urban culture and systems, including a large number of international schools and hospitals.

“Everyone is stunned that it happened to Shanghai. It’s not the middle of Hunan. It’s Shanghai,” said Jörg Wutke, the chamber’s president.

Learn more about China at CNBC Pro

Vutke estimated that the number of foreigners on the mainland has halved since the start of the pandemic and could halve again this summer. In general, he expects that the total number of Europeans in the country has declined so sharply that it would fit into the Bird’s Nest Stadium in Beijing.

The stadium has a permanent capacity of about 80,000 seats.

The number of foreigners living in Beijing and Shanghai fell by 41.5% and 21%, respectively, between the official censuses in 2010 and 2020. The total number of foreigners in the country over the past ten years has grown by about 40% to 1.4 million.

Leave a Comment