Portugal Colonial - China’s Covid rules batter business confidence: EU Chamber

Beijing remains wedded to its strategy of stamping out coronavirus clusters with targeted lockdowns and mass testing, even as the fast-spreading Omicron variant makes this increasingly difficult.

But the European Chamber of Commerce said in a report that the strict containment measures in dozens of Chinese cities, including the biggest Shanghai, had caused "disruption on an epic scale".

"While the war (in Ukraine) has had an impact on European businesses operating in China, Covid-19 presents a far more immediate challenge and has caused a considerable drop in business confidence," the Chamber added.

Its survey of more than 370 members was conducted in late April.

Nearly a quarter of respondents are now considering moving current or planned investments in China to other markets -- more than doubling from two months ago.

Almost 60 percent of respondents decreased their revenue projections for this year, while around a third saw a drop in staffing, results showed.

Most companies also reported a negative hit on supply chains, with struggles accessing raw materials and components, or to deliver finished products.

"The Chinese market has lost a considerable amount of allure for many respondents," the report said, adding that Covid measures have made it less attractive for investment.

The Chamber said a vast majority of firms surveyed agreed with proposals to focus more on vaccinating China's entire population, allowing positive cases with no or mild symptoms to quarantine at home, and allowing mRNA vaccines to be used.

Businesses are also being bogged down by the war in Ukraine, according to the survey, with the disruption of logistics to and from Europe.

Rail freight is no longer an option and aircraft need to circumvent Russian and Ukrainian airspace -- increasing distance and costs.

And "the susceptibility of operations to future shocks must be weighed, in particular the prospect of a deterioration in EU-China relations", said the report.

A.F.Rosado--PC