Truck drivers, such as the one pictured here in Shanghai at the end of April, often need to present valid negative virus tests to move goods between cities in China. The American Chamber of Commerce in China said members reported implementing Covid control measures differently depending on the city and province.
Vcg | Visual China Corporation | beautiful pictures
BEIJING – A new survey shows that an increasing number of American businesses in China are cutting their revenue expectations and future investment plans as Covid takes control.
From the end of March to the end of April, the percentage of respondents reporting the impact from Covid restrictions increased by 4 percentage points to 58%, according to a survey by the American Chamber of Commerce in China published. on Monday.
While that’s not a huge increase, 4 or 5 percentage points per month could be “very significant” if Covid control measures persist for another five months, said Michael Hart, AmCham president , told CNBC in a phone interview.
When asked what impact the Covid restrictions will have if they last into the next year, more than 70% of respondents said revenue or profit will be cut.
The latest study, conducted from April 29 to May 5, included 121 companies with operations in China. That period includes the latest Covid restrictions in the capital Beijing.
Two, three, four years from now, I predict investment in China will drop drastically because no new projects are launched, because people can’t go in and look into space.
Michael Hart
President, AmCham China
Previous survey was conducted with AmCham Shanghai at the end of March, like Shanghai’s original plan for a two-part shutdown started. Those measures have lasted much longer than the first week.
For the past few days, the city of Beijing has postponed the reopening of schools until further notice, and ordered all non-essential businesses in a large commercial district temporarily. close or let their employees work from home.
“There are very few aspects of the economy that seem to be working,” one survey respondent said in the report, which declined to name and location. “[While] COVID-19 restrictions can be managed, what [will be increasingly difficult to] mismanagement in the overall growth of the economy and what appears to be increasing economic headwinds. “
Companies cut back on China’s investment plans
The prolonged containment of Covid – as mainland China tackles its worst virus outbreak since early 2020 – further discourages US businesses from investing in the country, according to an AmCham survey.
The proportion of respondents reporting a drop in investment due to the latest outbreak and restrictions rose to 26% from 17% a month earlier.
Those who reported a delay in investment fell slightly to 26%, compared with 29% in the previous survey. The percentage who said it was too early to predict or undecided the impact on investment plans rose to 44% in the latest survey, up from 30% in the previous study.
Official figures show that foreign direct investment from all countries into China has steadily increased, increasing 31.7% year-on-year to $59.01 billion.
China’s Ministry of Commerce was not available for comment ahead of its regular press conference on Thursday. When asked at the end of April about the challenges of foreign businesses, the ministry said it would make every effort to ensure operations and production resume.
Since China tightened border restrictions in 2020 to control the transmission of Covid from travelers entering the country, Foreign business organizations report that it is difficult to recruit employees. That’s because of the lack of international flights to China and the quarantine period on arrival of at least two weeks, if not longer.
“If you want to invest, you have to allow travel,” says Hart, noting the impact will be felt over the long term.
“Two, three, four years from now, I predict investment in China will drop dramatically because no new projects are launched, because people can’t go in and look into space,” he said.
If Covid control measures persist over the next year, 53% of respondents to AmCham’s latest survey said they would reduce investment in China.
By industry, technology and research and development businesses report the highest impact of Covid control measures on their investment plans, with 53% of those surveyed in the sector expecting delay or reduce.
Consumer businesses, on the other hand, were the only ones that reported plans to increase investment, despite only 4% of industry members. For the industry, 36% plan to reduce investment, while 29% said they will delay investment due to the latest outbreak.
The consumer sector was also the only one to report some year-over-year revenue projections rising despite the impact of Covid, with 3% of respondents. However, the majority of consumer businesses, which account for 69%, say they are cutting revenue expectations for the year.
The business is not fully operational yet
While the Shanghai government has announced a whitelist allowing just under 2,000 businesses to resume production, the latest AmCham survey shows that of the respondents with operations in Shanghai, 15% said they have not yet reopened.
That doesn’t mean the majority have fully returned to work.
Anecdotally, some of the companies he spoke to last week in Shanghai are operating at 30% to 50% capacity, Hart said. Many suppliers remain closed, while shipping parts and goods to customers remains challenging, he said.
Several different cities across China have enacted some form of lockdown, and truck drivers often need special tags and regularly test negative for the virus to transport goods.
Based solely on the experience of our companies in the United States and Europe and other markets, we have found that other countries have taken a different strategy. We only ask for a little extra balance.
Michael Hart
President, AmCham China
Part of the difficulty is inconsistent implementation across provinces and cities in what China calls a “no-motivation” policy, Hart said.
At the local level, “government officials are looking for practical ways for companies to solve their problems and get back to work, because those people are judged on economic performance.” economy,” Hart said. “When we spoke to the government in [a] high level, it is not the focus of the economy. It focuses on health and reducing Covid. “
“Based solely on the experience of our companies in the US and Europe and other markets, we see that other countries have taken a different strategy,” he said. “We just asked for a little more balance.”
Last week, President of China Xi Jinping led a meeting to emphasize countries need to “resolutely fight” against any question of virus control policy. The meeting also warned of economic consequences if China does not follow through with its dynamic zero-Covid policy.
In November, The Chinese Center for Disease Control and Prevention published a study that warned that switching to other countries’ “co-existence” strategy could lead to hundreds of thousands of daily cases – devastating national health systems.
On Monday, mainland China reported 349 new symptomatic Covid cases and 3,077 asymptomatic cases, mainly in Shanghai – which reported six deaths for the day.
