Corona lockdowns depress China’s growth & burden European companies

Berlin, Beijing China is increasingly sealing itself off due to the recent corona outbreak. European companies in the People’s Republic are sounding the alarm. The President of the EU Chamber of Commerce in Beijing, Jörg Wuttke, spoke on Friday of a “catastrophic situation”. According to Wuttke, while the world is opening up and returning to “business as usual”, China is again in an uncertain situation.

According to the analysis house Nomura, more than a fifth of the total Chinese economic output is now affected by the closures. The Chinese government only announced more targeted measures in the middle of the month, which should help to relieve the population and the economy.

But this week the number of corona infections in China has risen to its highest level since the pandemic began. Scenes in Beijing and other cities are reminiscent of the beginning of the pandemic in 2020: the streets are empty, only a few cars or people can be seen on the streets, restaurants and shops are closed.

Analysts are already warning of the consequences for the growth of the world’s second largest economy. Should the effects on the Chinese economy be of a magnitude similar to that in the second quarter of this year, when the economic metropolis of Shanghai was sealed off, according to an assessment by Oxford Economics, the growth forecast for 2022 would have to be increased from the current 3.1 percent to two to two be reduced by 5 percent.

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The analysis house Nomura lowered its forecast for growth in gross domestic product (GDP) in the fourth quarter from 2.8 to 2.4 percent year-on-year. For the year as a whole, the experts only expect growth of 2.8 percent. The Chinese central bank is therefore helping the ailing economy by easing its monetary policy. The minimum reserve ratio – a kind of mandatory deposit by banks – will fall by 0.25 points, the central bank announced on Friday. The reduction will come into effect on December 5th.

The draconian measures are causing unrest

The increasingly dramatic measures in the third year of the pandemic are causing unrest in China. Citizens have clashes with police officers and other security personnel across the country in the past few days.

Hundreds of police officers beat workers at an Apple supplier Foxconn factory in Zhengzhou, east China, after they demanded better food supplies and better pay.

More and more reports about people who have died as a result of the draconian pandemic measures are also causing dissatisfaction: The news channel CNN, for example, reports on a son who lost his father because he was not admitted to the nearby hospital after a medical emergency due to corona restrictions.

According to media reports, ten people died in an apartment fire in the western Chinese province of Xinjiang because the fire brigade was unable to reach the scene of the fire due to corona lockdowns.

>> Read here: 20,000 employees are likely to leave the iPhone factory – the manufacturer should pay a premium to get rid of protesters

Representatives of the European economy in China spoke on Friday of great concern about the newly imposed travel restrictions within the People’s Republic. According to Francis Liekens, representative of the EU Chamber of Commerce in Shanghai, many companies have postponed business trips and are preparing for the upcoming closure of production facilities.

European companies are increasingly concerned

The headquarters of European companies are also becoming increasingly concerned about the situation. “Bad memories of the lockdown in Shanghai are coming back,” Liekens said. At the beginning of the year, the approximately 25 million inhabitants of the Chinese economic metropolis were not allowed to leave their homes for around nine weeks.

In northern China’s Shenyang, where the carmaker BMW also has a large production facility, employees are once again sleeping in the factories. European firms in southern China are working seven days a week to fill their orders amid fears of an imminent shutdown.

A district in lockdown

China is rigorously implementing the zero-Covid policy.

(Photo: Bloomberg)

Interruptions in the supply chains have not yet fully taken hold due to the “soft lockdowns” in Beijing and many other cities in China, said Jens Hildebrandt, executive board member of the German Chamber of Commerce (AHK) in China, the Handelsblatt. However, German companies are already “preparing for serious effects on production”.

>> Read also: China’s corona numbers at a record high – German companies fear “serious effects”

Numerous employees are currently unable to get to their jobs due to the tightened measures. “The fact that almost three years after the outbreak of the pandemic there is still no exit strategy for the zero-Covid policy in sight is increasingly met with incomprehension in the German economy,” he criticizes.

The constant lockdowns are extremely stressful for people. Rumors of complete lockdowns of major cities, such as in Wuhan in early 2020 or Shanghai in early 2022, are doing the rounds. People avoid entering buildings because they are afraid of getting a call afterwards that a corona case has been discovered there and they have to go into central quarantine. Due to the high number of cases, temporary container and tent accommodations have been set up across the country to quarantine potentially infected people.

“Many people are thinking about returning to Europe”

“You have this nagging feeling that you will be next,” said EU Chamber of Commerce President Wuttke. “Many people are thinking about returning to Europe,” explains Erich Kaiserseder from the EU Chamber of Commerce in Shenyang.

According to insiders, 20,000 employees are leaving the iPhone factory

The reason why China is still relying on the draconian measures in the third year of the pandemic is, in addition to the still poorly equipped hospitals, the very low vaccination rate in the population. The older population in particular is de facto not protected from the consequences of infection.

Official figures show that just 40 percent of people over the age of 80 have received a third vaccination. However, since only Chinese vaccines are used in China, which are less effective than foreign vaccines, this rate should be much higher, according to experts.

The Chinese government has led the country into a dilemma. The Chinese government can “under no circumstances” relax the measures now, said German health expert Bernhard Schwartländer, who is currently working at the German Embassy in Beijing. “The vaccination rates are too low.” A large part of the population is currently not sufficiently protected.

Beijing is puzzling over why China is not ramping up vaccination campaigns or not allowing the more effective mRNA vaccines from abroad. The European economy has also been appealing to the Chinese government for months to better protect the population from infection through more vaccinations. According to Wuttke, China has the opportunity to do something.

More: Read all current developments in the corona crisis in the news blog

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