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

Jörg Wuttke, president of the European Union’s Chamber of Commerce in China, said in an interview with CNN Business on Thursday that his recent talks with the government had been encouraging as the pressure built on Beijing to ease measures that have stifled economic activity and kept millions of people 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, referring to a private meeting with a Chinese ministry. He declined to name the agency.

China is the world’s last major country still adopting a “zero covid” policy aimed at eradicating any sign of the virus through strict quarantine and mobility restrictions.

This week, Chinese President Xi Jinping appeared to be doubling that approach.

“We must put people and lives first, prevent imported cases and domestic flare-ups, pursue a scientific, accurate and dynamic zero policy and implement all measures to prevent and control” the pandemic, Xi was quoted as saying on Wednesday by state-run Xinhua news media.

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

Economic downturn

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

Last week, the World Bank lowered China’s growth forecast and estimated that Chinese GDP would grow by 5% this year, a marked drop from last year’s 8.1%. It is also lower than the country’s official target of around 5.5%.

“After a promising start to the year, China’s economy is now facing 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 will ultimately depend on the length of ongoing restrictions.

Since last month, full or partial shutdown has been implemented in about 45 cities, according to estimates by Nomura. These cities together have about 373 million inhabitants, which accounts for a quarter of the population and about 40% of the economy.
Shutdowns in Shanghai and other Chinese cities pose a growing threat to the economy

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

In a widely circulated letter this week, the European Chamber wrote to China’s Prime Minister and Deputy Prime Minister Hu Chunhua calls on the government to shift away from the “zero Covid” approach and towards 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 US Chamber of Commerce in Shanghai, said his current sentiment was that “the government is not prepared to change its position on this.”

Zheng sees it as “more productive” instead of his organization to stay out of the increasingly politicized debate and focus on more pressing practical issues, such as helping companies try to maintain operations. With the restrictions, logistical conditions 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 of supply chains?” he said in an interview. “That’s the biggest challenge for American companies.”

Expat emigration

But for some, it may be too late.

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

And there may be another emigration of families this summer when the school year ends, according to Wuttke. “I would not be surprised if another half of [those remaining] go, “he said.” It really depends. “

While other nations continue to reopen, some foreign companies may also consider moving their regional headquarters out of China, he added. “I certainly see discussions,” Wuttke said.

Among those leaving are diplomats. On Monday, the U.S. 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] response. “

The announcement came days after the United States had approved “voluntary departure” of staff from the city.

China accuses US of 'arming' extended shutdown of Shanghai

In Shanghai, “the mood is really dark,” Wuttke said. “Everyone knows that 2022 will be ugly.”

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

“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 shutdowns than Shanghai.

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

– CNN’s Beijing Bureau and Laura He contributed to this report.

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