Groups representing Western companies in China are urging Beijing to relax access to Covidsays harsh lockdowns are damage earnings and investments and is forcing an increasing number of companies to consider moving activities out of the world’s second largest economy.
Over 50% of U.S. companies have either delayed or reduced investment in China as a result of the recent Covid outbreak, according to a study released Monday by the U.S. Chamber of Commerce in China.
The survey – which was conducted from April 29 to May 5 with 121 participating member companies – also detailed the impact of Shanghai’s lockdown on US companies. The city is China’s financial hub and has been closed since late March.
As many as 58% of respondents have cut back on the 2022 revenue forecasts in China, up from 54% just a month ago. Nearly half said foreign workers are either significantly less likely or refuse to relocate to China because of the zero Covid policy.
“We understand that China chooses to prioritize health and safety above all else, but the current measures are hampering US business confidence in China,” Colm Rafferty, chairman of the House of Commons, said in a statement accompanying the study’s findings.
“Our member companies are urging the government to achieve a more optimal balance between pandemic prevention, economic development and the opening up of the country,” he added.
European companies are also concerned.
As many as 23% of European companies are considering moving investment out of China – the highest share in a decade – according to a flash survey published by the EU Chamber of Commerce in China late last week.
“China needs to change its strategy,” said Jörg Wuttke, President of the European Union Chamber of Commerce in China, told CNN Business in a telephone interview.
“We had two good years. But now it’s time to act differently. Zero Covid may not be the right tool now.”
Wuttke said most European business was positive in January, as China’s stringent Covid approach had proved successful in curbing the spread of the virus at the time, and the economy continued to grow.
But the highly contagious Omicron variant has put Beijing’s zero Covid policy under its biggest test, and massive shutdowns have brought economic activity to a halt in major cities. At least 31 cities are under full or partial blockade, according to CNN’s latest calculations.
In April, China’s giant service sector contracted at the second sharpest pace registered when Covid lockdowns hit small businesses hard. Its manufacturing sector also shrank sharply, sending the economy back.
“We have seen damage to our business,” Wuttke said, adding that companies are putting investment on hold because of what is happening in China.
The Flash survey showed that 78% of the 372 respondents feel that China is a less attractive investment destination due to its stricter Covid restrictions.
“What really hurts the economy is the lack of visibility,” Wuttke said. “No one has any idea when this situation will change.”
“Chinese officials are painfully aware of the economic pain [caused by Covid policy]. But they basically have a hard time changing the narrative, ”he added.