More than 50 percent of US companies have either slowed or reduced investment in China as a result of the recent Covid epidemic, according to a study released Monday by the US Chamber of Commerce in China.
The study – which ran from April 29 to May 5 with 121 member companies – also details the impact of the Shanghai blockade on US companies. The city is China’s financial center and has been under siege since late March.
As many as 58% of respondents have reduced their revenue forecasts in China for 2022, compared to 54% just a month ago. Nearly half said foreign workers were either significantly less likely or refused to move to China because of Covid’s zero policy.
“We understand that China has chosen to prioritize health and safety above all else, but current measures are undermining US business confidence in China,” said Colm Rafferty, chairman of the Chinese Chamber of Commerce, in a statement accompanying the study.
“Our member companies are calling on the government to strike a better balance between pandemic prevention, economic development and opening up the country,” he added.
European companies warn China
European businesses are also worried.
About 23% of European businesses are considering relocating investment outside China – the highest share in a decade – according to a short survey published by the EU Chamber of Commerce in China late last week.
“China needs to change its strategy,” Jörg Wutke, president of the European Union’s Chamber of Commerce in China, told CNN Business in a telephone interview.
“We’ve had two good years. But now is the time to act differently. Zero Covid may not be the right tool now.”
Vutke said most European businesses were positive in January, as China’s tough approach to Covid proved successful in controlling the spread of the virus at the time and the economy continued to grow.
But Omicron’s highly contagious version has put Beijing’s policy of zero Covid under the greatest test, and massive blockades have halted economic activity in major cities. At least 31 cities are under full or partial blockade, according to the latest CNN estimates.
In April, China’s giant services sector contracted at the second-fastest pace in history as the Covid blockade hit small businesses hard. Its manufacturing sector also shrank sharply, sending the economy back.
“We have seen damage to our business,” Vutke said, adding that companies were halting investment because of what was happening in China.
The survey showed that 78% of 372 respondents believe that China is a less attractive investment destination due to its stricter restrictions on Covid.
“What really hurts the economy is the lack of visibility,” Vutke said. “No one knows when this situation will change.”
“Chinese officials are painfully aware of the economic pain [caused by Covid policy]. But in essence, it is difficult for them to change the story, “he added.
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