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Chinese officials ‘painfully aware’ of economic fallout from shutdowns: European Chamber speaker

Jörg Wuttke, president of the European Union Chamber of Commerce in China, said in an interview with CNN Business on Thursday that his recent conversations with the government had been encouraging as pressure mounted on Beijing to ease the measures that have stifled economic activity and kept millions at home.

“They are painfully aware of the damage to the economy. They are worried about unemployment. They are worried about foreign companies putting money elsewhere,” he added, citing a private meeting with a government department. Chinese. He declined to name the agency.

China is the last major country in the world to still adopt a “zero Covid” policy, which aims to eradicate any sign of the virus through strict quarantine and mobility restrictions.

This week, Chinese President Xi Jinping appeared to double down on that approach.

“We must put people and lives first, prevent imported cases and domestic outbreaks, carry out a zero-scientific, precise and dynamic policy, and implement all measures to prevent and control” the pandemic, Xi said on Wednesday. to the official press. Xinhua press briefing.

However, the Chinese leader acknowledged that the country should take steps to minimize the impact “on economic and social development”.

Economical consequences

Analysts have warned of the policy’s adverse effects on the world’s second-largest economy.

Last week, the World Bank cut China’s growth forecast, estimating that China’s GDP is expected to grow 5% this year, down sharply from last year’s 8.1%. This is also below the country’s official target of around 5.5%.

“After a promising start to the year, China’s economy now faces its worst disruption since the start of the pandemic,” Carol Liao, China economist at PIMCO, wrote in a note on Wednesday.

She added that the impact on growth would ultimately depend on how long the ongoing restrictions last.

Since last month, full or partial lockdowns have been put in place in about 45 cities, according to Nomura estimates. These cities have a combined population of around 373 million, representing a quarter of the population and around 40% of the economy.
Lockdowns in Shanghai and other Chinese cities pose a growing threat to the economy

The situation led to high levels of mental stress. In Shanghai, for example, where a massive lockdown has been going on for weeks, residents have reported a lack of access to food and basic necessities since authorities decided to extend lockdown measures indefinitely.

In a widely circulated letter this week, the European chamber wrote to the Chinese State Council and Vice Premier Hu Chunhua calling on the government to move away from the ‘zero Covid’ approach and embrace Singapore’s ‘living with Covid’ model.

Wuttke said officials took the recommendation surprisingly “well” and seemed open to further discussion. “They see the damage it does,” he added.

Eric Zheng, president of the American Chamber of Commerce in Shanghai, said his current feeling was that “the government is not ready to change its position on this.”

Zheng instead sees it as “more productive” for his organization to stay out of the increasingly politicized debate and focus on more pressing practical issues, like helping companies maintain operations. With the restrictions, logistical issues that once seemed simple, such as transporting goods from a factory to an airport, have become complex, he noted.

“Under lockdown, how do you continue your operations in terms of production, and… any challenges with supply chains?” he said in an interview. “This is the number one challenge for American businesses.”

Exodus of expatriates

But for some, it may already be too late.

Wuttke estimates that China has already lost 50% of all European expats since the start of the pandemic.

And there could be another exodus of families this summer at the end of the school year, according to Wuttke. “I wouldn’t be surprised if another half of [those remaining] go,” he said. “It really depends.

As other countries continue to reopen, some overseas companies may also consider moving their regional headquarters out of China, he added. “I definitely see discussions,” Wuttke said.

Among those leaving are diplomats. On Monday, the US State Department said it had “ordered” the departure of non-emergency workers and their families from Shanghai, citing “an increase in Covid-19 cases and the impact of restrictions related to [China’s] answer.”

The notice came just days after the United States authorized the “voluntary departure” of city personnel.

China accuses US of 'weaponizing' Shanghai's extended lockdown

In Shanghai, “the mood is really dark,” Wuttke said. “Everyone knows 2022 is going to suck.”

The executive noted that while the international spotlight remained largely on the financial hub, many people across the country had also struggled.

“I think the situation is much worse in Changchun, Jilin and Shenyang,” he said, referring to other parts of the country that have suffered longer lockdowns than Shanghai.

“These people are just as eager to leave and can’t.”

– CNN Beijing bureau and Laura He contributed to this report.


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