Close this search box.

For Shanghai’s Businesses, ‘Open’ Has Different Meanings as Lockdown Lifts

In post-lockdown Shanghai, “open” means different things to different businesses, and the only shared sentiment is the future is hard to predict.

Some local businesses are bustling back. Some foreign companies are taking a more cautious approach, with some even contemplating leaving China.

With the lockdown lifted as of June 1, this will be a critical month for all businesses, according to a Shanghai economist, who did not want to be named because of the sensitivity of the issue.

In an interview with VOA Mandarin, the economist said it is too early to predict the strength of Shanghai’s economic recovery, in part because the metropolis of 26 million is not yet completely reopened. The biggest variable, he said, is the possibility of authorities discovering new cases throughout the city and reinstituting a lockdown in compliance with Beijing’s insistence on a zero-COVID policy.

Ker Gibbs, former president of American Chamber of Commerce in Shanghai, echoed that it is difficult to predict what’s next for the reopened city given that Omicron variants are so contagious.

Gibbs said that “reopening the ports and transportation hubs will be very important. But that’s also where you have a lot of COVID-19 related risk. So that’s going to be something that has to be managed.”

He told VOA Mandarin he hopes Shanghai authorities will increase the vaccination rate, especially among vulnerable populations, to avoid another lockdown. Shanghai is the world’s largest port, according to World Shipping.

Gibbs also said that because Shanghai has a large population of migrant workers —people who moved from city to city throughout China doing construction work, service jobs, and factory assembly— one of the biggest challenges in the reopening will be making sure people who left the metropolis can return and that those who remained can travel to workplaces in districts other than where they live.

Complicating the return to work is the city’s continuing patchwork of lockdowns. As of Monday, thousands of residents remained locked down in scattered neighborhoods and others have been placed back under these local lockdowns, according to Agence France-Presse.

Local businesses in Shanghai had varied responses to the reopening.

Jin Lei, a brand manager with Shanghai Yuyuan Tourist Mart Co., China’s largest retail conglomerate, said some famous restaurants that operate in the group’s mall, but do not belong to the group, such as the Nanxiang Steamed Bun Restaurant and the Ningbo Glutinous Rice Ball Shop, were open throughout the lockdown, offering take-out and delivery services. While he wouldn’t reveal the extent of lockdown losses, by June 1, the first day of official reopening, almost all of the mall’s workers were on the job.

“It’s almost 80% or 90%. It’s definitely a process, but [everyone will be back] very soon, because they are all restored now, the subway and traffic, they are all restored,” he told VOA Mandarin.

Hu Peng, CEO of Shanghai Heyi Tech Co., a high-tech service company, told VOA Mandarin the company reopened after the Dragon Boat Festival, which fell after a two-month lockdown. During the lockdown, employees worked from home to handle long-term orders, but as workers return to the office, she said, “I can’t say when we turn on the computer, everything is back right away.” She’s hoping travel restrictions in the areas surrounding Shanghai will be completely removed soon to facilitate business travel so people can visit customers face-to-face.

According to the latest data from the Shanghai Municipal Bureau of Statistics, the total industrial output value of enterprises above a designated size in the city reached 128.6 billion yuan (about 19.3 billion U.S. dollars) in April, down by 60% from the same period last year. Foreign companies—including businesses from Hong Kong, Macao and Taiwan—have been hit the hardest during the two-month lockdown, and their output value is down by 70% in April from a year earlier, although they have resumed production.

Sue Yen, deputy secretary-general of the Taiwan Electrical and Electronic Manufacturers’ Association in Taipei, said Taiwanese companies in the information and communication technology sector operating in surrounding areas of Shanghai are still facing a labor shortage, with only about 70% of workers reporting for work in early June. She predicted it may take two weeks after the June 1 reopening for Taiwanese businesses in Shanghai to fully resume work and production.

Yen told VOA, “What everyone is most worried about now is the issue of dropped orders.” Buyers are asking if companies have factories in other provinces or in Southeast Asian countries, or Taiwan. If the answer is yes, the companies who place orders with you will be more at ease. However, if you don’t, they may place their orders elsewhere.”

She said the Taiwanese-funded factories are cooperating with Beijing’s determination to prevent a renewed surge by testing employees every day. Workers who test positive are moved outside Shanghai for quarantine or treatment to lessen the chances of widespread infection and factory closings, Yen told VOA Mandarin.

Darson Chiu, a research fellow at the Taiwan Institute of Economic Research in Taipei told VOA Mandarin the Shanghai lockdown was the last straw for many foreign businesses, breaking their confidence in the Chinese economy as supply chain issues brought operations to a standstill. Even before the lockdown, he said many businesses felt that China was moving away from a market economy, making it harder for them to operate.

“Despite Shanghai lifting its lockdown, if relevant restrictions remain or another wave of outbreaks occurs, foreign businesses may expedite their exit [out of China],” Chiu said.

Separate surveys released by the Beijing-based European Union Chamber of Commerce and the American Chamber of Commerce in early May showed that 23% of European businessmen surveyed are considering shifting their existing or planned investment in China to other markets this year while a whopping 52% of surveyed American businessmen said that its investment in China has been delayed or reduced.

European companies have reopened since June 1 with about 50% of their workforces, according to a written response from European Union Chamber of Commerce in China to a VOA Mandarin inquiry. Delays in reopening are being caused by ensuring the air conditioning systems are clean and complying with other similar internal policies.

According to a EU Chamber of Commerce survey released in early May, 58% of its members have downgraded their 2022 revenue projections as a result of the lockdowns, with more than a third of affected members doing so by more than 15%.

The Chamber said it hopes Shanghai authorities will add to economic recovery measures, such as its 50-policy Action Plan released May 29. The plan encompassed tax breaks, rent relief and subsidies for affected businesses.

Source: Voice of America