Blockade of Shanghai Covid: The city is pursuing business as usual, but obstacles remain

Authorities in Shanghai on Sunday promised to allow all businesses to open from Wednesday. Deputy Mayor Wu Qing announced the easing of restrictions at a news conference, along with a number of 50 new measures being taken to revive the city’s battered economy.

From 1 June, companies will no longer need the approval of the so-called “white list” to have employees working on site. However, those wishing to go to work will still need to submit a negative Covid test 72 hours before taking public transport.

Shanghai has been under some form of blockade since late March, leaving tens of millions locked up at home and leading to high levels of public unrest. Restrictions have turned businesses in almost every sector and brought the city to a standstill.
Major car manufacturers, incl Tesla (TSLA) and Volkswagen (VLKAF)were forced to suspend production while electronics manufacturers liked it Apple (AAPL) also reported serious supply chain disruptions in the city.
Some companies also operate so-called “closed loop” systems, which allow key personnel to continue to operate, provided they remain within certain parameters.

Authorities said Sunday they would work to ease Covid’s “unreasonable” rules. The government also plans to offer tax breaks and business rental assistance, as well as support for some construction projects.

It will also reduce the sales tax on some passenger vehicles and distribute subsidies to those who replace their cars with purely electric ones, according to the state-run Xinhua news agency. Shanghai registered zero car sales for the whole of April.

The worries remain

China’s economy has been hit hard by the zero-covid pandemic and government approach, forcing analysts to lower their growth forecasts for the year.

Last week, UBS lowered its GDP estimate for 2022 to 3%, well below China’s official target of 5.5%.

“Prolonged constraints and a lack of clarity about Covid’s current exit strategy are likely to reduce corporate and consumer confidence and prevent the release of accumulated demand,” the bank’s economists wrote in a report.

The gravity of the situation prompted senior Chinese officials to hold an emergency meeting last week, promising to introduce new relief measures to help stabilize the economy. These include small business loans, higher tax refunds and financial support for the aviation industry.

Eric Zhen, president of the American Chamber of Commerce in Shanghai, said that while he welcomed the city’s new measures, they did not alleviate all his worries.

“The number one priority for American business is to resume operations as soon as possible,” he told CNN Business.

“[But] all too often, sub-district and even neighborhood staff have prevented or delayed the resumption of business operations by imposing excessive bureaucracy. “

Investors across the region seem to have welcomed the news on Monday.

Asian markets have risen, with Japanese ones Nikkei (N225) index and Hong Kong Hang Seng Index (HSI) each increases by more than 2%. of South Korea Kospi (COSPI) jumped 1.2%.
Top trader says Chinese markets are 'near the bottom'

The response is “a clear indication that the light at the end of the Covid blockade … has become a little brighter,” Stephen Ines, managing partner at SPI Asset Management, told CNN Business.

But Chinese markets were more congested. The indicator Shanghai composite (SHCOMP) the index rose 0.6%, while the Shenzhen Composite rose 1%.

“The young response to the continent’s securities suggests that wider economic opening may be needed,” Ines said.

-— Sean Deng, Elizabeth Yee and Lauren Lau of CNN contributed to this report.

Leave a Comment

Your email address will not be published.