Truck drivers, such as the one pictured here in Shanghai in late April, usually have to show valid negative virus tests to move goods between cities in China. The U.S. Chamber of Commerce in China said members reported different implementation of Covid controls depending on the city and province.
Vcg | Visual China Group | Getty Images
BEIJING – More and more US companies in China are lowering their revenue expectations and future investment plans as Covid’s controls drag on, a new study has found.
Between the end of March and the end of April, the proportion of respondents reporting the impact of Covid’s restrictions rose 4 percentage points to 58 percent, according to a study by the US Chamber of Commerce in China on Monday.
While not a big increase, 4 or 5 percentage points each month could be “very significant” if Covid’s control continues for another five months, Michael Hart, president of AmCham, told CNBC in a telephone interview.
Asked what impact Covid’s restrictions would have if they continued next year, more than 70% of respondents said their revenue or profits would be reduced.
The latest survey, conducted from April 29 to May 5, covered 121 companies with operations in China. This period included Covid’s latest restrictions in the capital, Beijing.
In two, three, four years, I predict a huge drop in investment in China because no new projects are being developed, because people can’t come in and explore space.
Michael Hart
President, AmCham China
The previous study was conducted with AmCham Shanghai in late March, just as Shanghai’s original two-part blockade plan began. These measures lasted much longer than the initial week.
In the last few days, the city of Beijing has postponed the reopening of schools until further notice and has ordered all non-core businesses in a large business district to be temporarily closed or staffed from home.
“There are very few aspects of the economy that seem to work,” said a respondent in the study in a report that did not specify the name and location of the respondent. “[While] The restrictions for COVID-19 can be managed, what [will be increasingly difficult to] governance is the lack of overall economic growth and what appears to be a growing economic cross-wind. “
The companies have cut back on their investment plans for China
Covid’s continued control – as mainland China is battling its worst viral outbreak since early 2020 – further discourages US businesses from investing in the country, an AmCham study found.
The percentage of respondents who reported reduced investment as a result of the latest outbreak and restrictions rose to 26% from 17% a month earlier.
Those reporting a slowdown in investment fell slightly to 26% from 29% in the previous survey. The share of those who said it was too early to predict or did not decide on the impact on investment plans increased to 44% in the last survey, compared to 30% in the previous survey.
Official figures show steady growth in foreign direct investment from all countries in China by 31.7% year on year in the first quarter to $ 59.01 billion.
China’s Ministry of Commerce has no comment before its regular press conference on Thursday. Asked in late April about the challenges facing foreign business, the ministry said it would make every effort to ensure the resumption of work and production.
As China tightened border restrictions in 2020 to control Covid’s transfer of passengers to the country, foreign business organizations said it was difficult to recruit staff. This is because there are no international flights to China and quarantine times on arrival of at least two weeks, if not more.
“If you want an investment, you have to allow travel,” Hart said, noting that the impact will be felt in the long run.
“In two, three, four years, I predict a huge drop in investment in China because no new projects are being developed, because people can’t come in and explore space,” he said.
If Covid controls continue next year, 53% of respondents in the latest AmCham survey said they will reduce investment in China.
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By industry, technology and research and development companies report the greatest impact of Covid’s control on their investment plans, with 53% of respondents expecting delays or reductions.
On the other hand, consumer businesses are the only ones to announce plans to increase investment, although only 4% of the members in the sector. For industry, 36% planned to cut investment, while 29% said it would slow investment as a result of the latest epidemic.
The consumer sector was also the only one to report a slight increase in annual revenue forecasts despite the impact of Covid, with 3% of respondents. However, the majority of consumer businesses, or 69%, said they were lowering revenue expectations for the year.
The business has not been fully resumed
While the Shanghai authorities announced white lists that allow just under 2,000 companies to resume production, a recent AmCham survey found that 15% of respondents to operations in Shanghai said they were not yet reopened.
This does not mean that the majority are completely back at work.
Hart said anecdotally that some of the companies he spoke to last week in Shanghai were operating at 30% to 50% capacity. Many suppliers remain closed, while delivering parts and goods to customers is still a challenge, he said.
Several different cities in China have introduced some form of blocking, and truck drivers often need special passes and frequent negative virus tests to transport goods.
Only on the basis of the experience of our own companies in the United States and Europe and in other markets have we seen that other countries have taken a different strategy. We just want a little more balance.
Michael Hart
President, AmCham China
Part of the difficulty is the inconsistent implementation in provinces and cities of what China calls its “dynamic zero COVID” 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 these people are valued by economic performance,” Hart said. “When we talk to the government [a] high level, no focus on the economy. It’s a focus on health and reducing Covid. “
“Only on the basis of the experience of our own companies in the United States and Europe and in other markets have we seen that other countries have taken a different strategy,” he said. “We just want a little more balance.”
Last week, Chinese President Xi Jinping chaired a meeting stressing that the country must “fight resolutely” against any questions about virus control policies. The meeting also warned of economic consequences if China does not adhere to its dynamic policy of zero Covid.
In November, the China Centers for Disease Control and Prevention published a study warning that moving to other countries’ “coexistence” strategies is likely to lead to hundreds of thousands of daily cases – devastating the national health care system.
For Monday, mainland China reported 349 new cases of Covid with symptoms and 3,077 without symptoms, mostly in Shanghai – which reported six deaths for the day.
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