Uncertainty reigns for foreign firms

For foreign companies that operate in China, the unprecedented protests at the weekend could not have come at a worse time.

It has been almost three years of intermittent lockdowns, disrupted supply chains and rules that have made the country uninviting to international staff. The last year has been particularly painful – as the rest of the world opened up and learned to live alongside the virus.

“In my 12 years of being in China, I have never seen the levels of social and economic disruption. The extraordinary civil unrest taking place at the moment is all due to zero-Covid fatigue,” the British Chamber of Commerce’s Managing Director Steven Lynch told the BBC.

“This is the lowest level of sentiment we’ve ever experienced, certainly for British businesses.

Protests and political instability are not good for business. But it is the Covid numbers in China that are really rattling investors.

Recent days have seen about 40,000 new cases – record highs for China – and with authorities determined to stamp out infections according to President Xi Jinping’s zero-Covid strategy, that could mean more disruption to manufacturing, services and normal consumer behaviour.

The European Chamber of Commerce in China, which represents more than 1,700 members across the country, on Tuesday called for a vaccination campaign to be rolled out to the entire population, and to ease current virus control measures.

“This should be preceded by a comprehensive, nationwide education campaign about Covid-19, based on the latest scientific evidence, in order to alleviate any public anxiety and to illustrate that being fully vaccinated significantly reduces the risk of contracting serious disease,” it said in a statement.

The Chinese government says it is taking some action.

At a press conference on Tuesday, State Council health officials said they would speed up a push to vaccinate the elderly and more vulnerable members of society. They also announced a publicity campaign to combat vaccine hesitancy among the elderly and promote vaccines’ ability to protect against severe illness and death.

But they insisted any complaints about Covid restrictions stemmed from “overzealous implementation” rather than the measures themselves.

When asked if the protests would encourage authorities to reconsider the policy, a spokeswoman for the National Health Commission, said policy would be “fine-tuned” to control the impact on society and the economy.

Many companies still want to keep business in the vast market going – even as strict Covid measures have made international operations harder.

“Many companies are doing very well despite the headwinds. Look at Starbucks, Nike, and Mercedes,” Frank Lavin, former US under secretary of commerce for international trade said.

“They already have resiliency plans in place. Those who might be more vulnerable are the smaller and medium size companies doing business in China that don’t have a resiliency plan. You can’t expect the business plan that worked at home will work abroad,” Mr Lavin added.

China’s growth into the world’s second-largest economy relied heavily on foreign investment and those firms are now keen to reap the reward.

The country is a growing market for cars, clothes, luxury goods and electronics as its citizens become wealthier, and also an enormous manufacturing hub with relatively cheap labour and established supply chains.

But some executives are now wondering if their China dreams will ever come to fruition.

“China has not communicated an exit strategy. There’s no end in sight, there’s no sign of normal life returning,” Steven Lynch from the British Chamber of Commerce said.

Writes /BBC/

Reports /TrainViral/