Chinese officials are ‘painfully aware’ of economic fallout from lockdowns: European Chamber President
“They are painfully aware of the damage to the economy. They’re worried about unemployment. They’re worried about foreign companies putting money elsewhere,” he added, citing a private meeting with a Chinese ministry. I have declined to name the agency.
This week, Chinese President Xi Jinping appeared to double down on that approach.
However, the Chinese leader acknowledged that the country should take measures to minimize the impact “on economic and social development.”
economic fallout
Analysts have warned of the policy’s adverse effects on the world’s second largest economy.
“After a promising start to the year, China’s economy is now facing its worst disruption since the beginning of the pandemic,” Carol Liao, China Economist at PIMCO, wrote in a note Wednesday.
She added that the impact on growth would ultimately depend on the length of ongoing restrictions.
The situation has led to high levels of mental stress. In Shanghai, for example, where a massive lockdown has dragged on for weeks, residents have reported a lack of access to food and basic necessities since authorities decided to extend stay-home measures indefinitely.
In a widely publicized letter this week, the European chamber wrote to China’s State Council and Vice Premier Hu Chunhua calling for the government to shift away from the “zero Covid” approach and toward Singapore’s “living with Covid” model.
Wuttke said that officials took the recommendation surprisingly “well,” and appeared open for further discussion. “They see the damage it does,” he added.
Eric Zheng, president of the American Chamber of Commerce in Shanghai, said that his current sense was that “the government is not prepared to change its stance on this.”
Zheng views it as “more productive” instead for his organization to stay out of the increasingly politicized debate and focus on more pressing practical matters, such as helping companies try to maintain operations. With the restrictions, logistical matters that had once seemed simple, such as transporting goods from a factory to an airport, had become complex, he noted.
“In a lockdown situation, how do you continue your operations in terms of production, and… all the challenges with supply chains?” he said in an interview. “That’s the number one challenge for US companies.”
expat exodus
But for some, it may already be too late.
Wuttke estimates that China has already lost 50% of all European expats since the pandemic started.
And there could be another exodus of families this summer when the school year ends, according to Wuttke. “I wouldn’t be surprised if another half of [those remaining] leave,” he said. “It really depends.”
As other nations continue to reopen, some foreign companies may also consider moving their regional headquarters out of China, he added. “I definitely see discussions,” said Wuttke.
The notice came just days after the United States had authorized the “voluntary departure” of staff from the city.
In Shanghai, “the mood is really dark,” said Wuttke. “Everyone knows that 2022 is going to suck.”
The executive noted that while the international spotlight largely remained on the financial hub, many people throughout the nation had also been struggling.
“I think the situation is much worse in Changchun and Jilin and Shenyang,” he said, referring to other parts of the country that have endured longer lockdowns than Shanghai.
“These people are equally eager to leave and cannot.”
— CNN’s Beijing bureau and Laura He contributed to this report.
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